A distressed property can be defined as a property that can no longer be maintained by its owner due to various reasons.
For real estate investors, distressed properties are also known as pre-foreclosure properties for the reason that the owner is unable to keep with mortgage obligations and is at risk of falling into foreclosure.
It should be noted that pre-foreclosure refers to being at risk for foreclosure and does not necessarily imply that it’s currently in that process.
There are also some homes which are found to be in extremely poor condition because of neglect or simply because it is about to be foreclosed and the owner finds it unnecessary to spend money on maintenance.
Distressed properties are the target of investors because chances are that the deals are undervalued which therefore increases the prospective profit margin.
How to Find Distressed Properties
Every realtor or investor has its own strategy in finding distressed properties. It doesn’t take a genius to do so but it takes a great deal of hard work and patience. Here are some things you can explore with;
Drive around neighborhoods and do the leg work
Real estate investing is for people who love to deal and interact with people. If you want to look for distressed properties, do the practical method of asking around town.
Drive along a neighborhood and look for signs (poorly maintained yard, broken windows, junk mail left uncollected, etc.), interact with the people, ask shop owners, visit their homeowners’ association quarters, reach out to the people and make an effort to introduce yourself while making inquiries.
With proper introduction and rapport with the right people, you can score some great leads.
Look for homes which are in a state of neglect
You can easily recognize a distressed home based on its physical appearance. Neglect and poor condition are always the telltale indicators that you must keep in mind.
Oftentimes, a neglected property means the owner had already given up on trying to maintain and keep the property. It could be due to financial reasons or the owner simply wants to dispose of the property.
If it’s due to financial constraints, you may find a motivated seller who’s willing to give up the property for a discounted price. A lot of distressed homes can be found in MLS systems.
Find homes with delinquent mortgage payments
Homes with delinquent mortgage payments are classified as distressed properties. Homeowners who can no longer afford to pay the mortgage are at great risk of foreclosure.
Given the situation, they may decide to sell their home at a discounted rate if it would mean that they can avoid foreclosure and the other financial problems that go along with it.
The good thing is that delinquent mortgages are often disclosed publicly and may be accessed at the local courthouse.
Check out probate real estate opportunities
Probate properties are those which are left behind due to a significant life event or changes in the circumstances. These include life-changing events such as divorce, migration or death in the family.
Such situations can present opportunities for investors. In addition to that, those who are inheriting the property may not want to keep it. This could serve as a chance to take the property off their care for a good price.