”Distressed property” encompasses homes in foreclosure, short sale or that are REO (Real Estate Owned). Usually, such properties can be bought at a price that are 15-35 percent less than the market value and it essentially relies on the home’s condition. Below, we have defined various kinds of distressed [city] real estate, to ensure that you become acquainted with the terms.
Foreclosure: In case a homeowner defaults on their mortgage for a particular period of time, the [city] real estate is taken into possession by the bank.
Short Sale: A homeowner who is facing foreclosure might request a short sale from their lender for selling the property for less than the actual price that is owed.
REO: Real Estate Owned properties have undergone foreclosure and the bank holds them, increasing the likelihood of buying these homes at discounts since the maintenance of an REO can be expensive for a lender.
The three scenarios provide opportunities for significant savings, but come with stipulations in terms of the contract as well as terms of purchase. When this kind of property is purchased, you are essentially looking at a financial institution as opposed to a private seller. Thus, it could take more time to close. Typically, there is very little room for negotiation on the asking price or other terms of contract.
The National Association of REALTORS® stated that foreclosures and short sales contributed to about 16.2 percent of housing sales as of December 2016. Obviously, the numbers are quite low when compared to the peak of the real estate crisis that occurred several years ago. However, there are several of such properties around and they may end up acting as great opportunities for gaining equity in a property quickly.
In case you do not mind being patient, a distressed property can actually pay off. The majority of buyers witness an increase in the value of their [city] real estate within a very short span following their purchase. We recommend buyers to work with an experienced property expert if they want to invest in distressed properties, since there is additional paperwork and requirements when it comes to completing the transaction.
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