Distressed property refers to homes either under foreclosure, pre-foreclosure, or control of the lender/bank. A property becomes “distressed” when the owner falls behind on their mortgage payments and/or property tax bills. Real estate might also become “distressed” during liquidation as part of a bankruptcy or divorce. (1) Selling a distressed home involves distinct hurdles from conventional home sales.
When a house is in outstanding shape and has no financial or legal issues, home sellers can maximize value by listing it on the open market and finding buyers who use conventional financing. The definition of distressed property differs. Foreclosure, vacancy, maintenance, and violations put residences in danger, forcing property sellers to investigate alternatives to traditional home sales. When selling distressed property, avoid these common pitfalls.
Delaying the Sale
Listing on the open market is the ideal method for residences in excellent shape that are not in foreclosure or other repossession actions. The reality is that a standard sale through the local MLS might take months if not years. Distressed home sellers do not have that much time. When a homeowner fails on their mortgage, a clock starts ticking towards bank foreclosure.
Homeowners who wait too long lose their homes to the bank, and the delay precludes the homeowner from exploring alternatives to foreclosure, such as a rapid cash sale, short sale, loan modification, payment plan negotiation, deed in lieu of foreclosure, lease/rent, or bankruptcy. Similarly, unpaid taxes might cause you to lose your house in a tax deed sale.
When a residence is troubled by “problem tenants” or squatters, unwarranted delays might have serious effects. “Problem tenants” and squatters cause significant damage to the residence, costing thousands of dollars in repairs.
Property damage worsens over time. If the property remains vacant, squatters are likely to move in. Homeowners risk being sued if they fail to monitor their properties for safety issues. Cities frequently punish home sellers whose properties are in poor condition for violating municipal codes. Fines that go unpaid might total thousands of dollars.
Homeowners who are unable to manage their property (due to distance or other personal reasons) should sell my house fast Everett, WA before it becomes distressed.
Not Providing Full Property Information
When selling a distressed property, it’s critical to disclose all of the difficulties upfront. This includes any structural damage, plumbing or electrical difficulties, or any other issues that may have an impact on the property’s value. Failure to disclose these issues may result in future legal troubles. Furthermore, failing to disclose all information can break trust, causing the buyer to back out of the deal.
Not Receiving Written Records
Documenting all details of a distressed property transaction in writing is critical for clarity and security. This covers the purchase price, closing date, contingencies, repairs, and seller concessions. Selling or buying a home without a formal contract exposes both parties to last-minute adjustments or unforeseen expenditures. Therefore, ensure you have the entire process in writing.
Contracting with an Unqualified Buyer
Not just anyone can purchase a distressed property. Home sellers require a cash buyer when a distressed property does not qualify for standard mortgage financing. Ask prospective cash purchasers for evidence of finances. Additionally, not all cash purchasers are made equal. Repairs (or evictions) that accompany troubled property cause buyers to terminate their contracts when they discover they cannot handle them, wasting the seller’s valuable time and money. Cash home buyers will acquire any home in any condition, regardless of the repairs or scenario.
When determining whether a cash house buyer is capable of purchasing a property for cash, look at their testimonials and contact the buyer personally to inquire about their experience and ensure they are local (rather than a nationwide “We Buy Houses” company unfamiliar with your area). Don’t risk your property with an unknown cash bidder. Reliable cash buyers buy properties fast for cash and have the testimonials and experience to back them up.
Misunderstanding the Property’s Value
Distressed house owners frequently misjudge the worth of their property, resulting in a costly delay and failure to sell my house fast in Everett, WA. Home sellers must assess comparable houses in the local geography when evaluating their home, taking into account living area, lot size, bedroom/bathroom ratio, and other factors. However, standard valuation methodologies do not apply to distressed properties. Distressed properties frequently need substantial repairs.
Homes with uncooperative tenants or squatters cannot be “shown” to prospective purchasers due to lack of access or risk of physical harm. Regular house buyers who use conventional mortgage financing do not qualify for distressed properties, which drives down home values due to supply and demand fundamentals. Top sales values in comps are achieved when homes linger on the market for months, which homeowners cannot afford with distressed property. For these reasons, distressed home values are lower than comparable listings on Zillow or Redfin.
By accurately estimating the value of your distressed property, you can easily and quickly sell my house fast Everett to cash home buyers. This ensures it doesn’t stay in the market for longer than expected.
Ignoring the Short Sale Option
Another common mistake that homeowners make is ignoring the potential of a short sale. A short sale occurs when you sell my house fast Bothell, WA for less than what you still owe on it. Short sales appear to be a bad deal. Most homeowners see that and worry, “What if I lose my house and walk away still in debt?” Here is everything you should know about short sales.
You can complete a short sale with the lender’s consent in many circumstances. You essentially make two deals. You make a deal with the buyer to sell the house you cannot afford. You can arrange with the lender to take whatever the buyer offers and effectively cancel the extra balance owed. Lenders will frequently accept these transactions because they significantly cut the outstanding debt. Most importantly, it relieves them of the obligation to sell the residence.
Lenders do not wish to own or sell residential real estate. Any real estate that the lender directly owns is typically a financial loss for them. If they can recoup the majority of your debt, they will frequently consider it a triumph.