Effective Ways to Spot Distressed Properties

Looking to invest in real estate? Probate or distressed property can be a good bet! They are usually priced much lower than market values, offering great investment opportunities for both novices and experienced real estate investors. However, the actual process of dealing with such a property is not as easy as it sounds. You should take smart decisions and outline powerful strategies to stay persistently successful in buying and selling probate or distressed properties.

Finding a probate sale or a property in disrepair does not mean you are the only investor to spot the property or immediately found a potential buyer. Instead, there are several things to consider while looking for profitable investments like distressed properties sale. To help you learn the effective ways of identifying distressed properties, we have come up with this blog. Read till the end to understand what are distressed properties, how to identify them, and how to turn them into profitable deals.

What are distressed properties?

Distressed properties are generally referred to the properties that are no longer in a good state or may be in the process of getting foreclosed due to unpaid taxes or mortgage loans. These are homes where the owners are incapable of keeping up with the financial or physical costs of owning the property.

Particularly for homes that are not primary residencies, it’s common to find owners neglecting them and letting them fall into disrepair due to severe financial distress. While a house in disrepair is a prominent cue for identifying a property in distress, it’s not the only one to rely upon. There are several other cues for finding distressed properties.

What are the ways to spot distressed properties?

  1. Physical Distress

The most obvious signs of a property being in distress are – the property is being neglected for a long time since the owner lives out of state, the owner is too old to manage maintenance, or the owner is financially distressed to pay maintenance costs. If you find a property associated with any of these factors, consider it to be a great investment opportunity.

However, distressed owners are not always willing to sell their properties. Having that said, it is not a good strategy to approach an owner for a distressed property sale just because you noticed disrepair in a property. This is more relevant when a property owner is going through a foreclosure. So, if you want to avoid buying a property that is later on taken away from you or forced to sell, ensure to approach the property owner after understanding his/her plight.

  • Unpaid Dues

You may often come across properties with debt-related issues. The monthly mortgage payment associated with a property can determine whether the owner is producing income or losing money. As a result, many homeowners’ default on mortgage payments of their properties. This leads to debts and the property is finally acquired by lenders due to huge unpaid dues.

Properties that fall under pre-foreclosure and foreclosure categories impart genuine signs of distress. If you find an owner of pre-foreclosure or foreclosed property who needs to come out of financial distress, you may approach to buy such property to earn lucrative profits.

  • Historical Sales Data

Real estate investors commonly make use of historical sales data to spot a distressed property or probate sale. Knowing the property’s recent sale price, the current market value and the current income-producing capability gives an insight into whether or not the homeowner should sell the property.

However, in case the property owner has paid a very high value during the initial purchase and eventually struggling to pay the monthly mortgage payments, it could be a sign that the owner needs to sell the property. Approaching such an owner can help you fix a lucrative deal.

  • MLS

Another valuable resource for finding probate or distressed properties is local MLS (Multiple Listing Service). You may ask your real estate agent or agency to list down aged properties that are listed in the market for a longer period than usual.

You may even look for properties that are listed multiple times or ones that are still open for sale while the listing has expired. Usually, properties going through a short sale or foreclosure are listed on the renowned property listing websites. You may easily browse those sites for finding a distressed property before partnering with a real estate agent.

Bottom Line

Investing in a distressed or probate sale can help you earn huge profits, for sure. But, the process of finding a property in disrepair is not as simple as you might think. You need to know how and where to find such properties. So, you may consider following the strategies discussed in this blog. All the above-mentioned ways of finding distressed properties are designed, based on extensive market research and experience. Hopefully, this guide helped you learn different ways of spotting properties that are priced much lower than current market prices.

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