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How to Find Distressed Properties

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An auctioneer's gavel used to close the bidding on a distressed property. 

How to Find Distressed Properties in Your Market Right Now

Real estate investors often search for fancy new residential or commercial units in new communities that can make a quick buck. These properties can sometimes generate lucrative real estate income and quickly skyrocket in value when more people want to move to that area. 

However, distressed properties in existing communities might provide investment opportunities that are equally as attractive. These units — undergoing foreclosure or owned or controlled by a bank or the government — are cheaper to buy than other properties and can be purchased quickly in most scenarios. This post tells you how to find distressed properties in your area and add them to your portfolio.

What Are Distressed Properties?

Before you discover how to find distressed properties, it’s important to define these investments. A distressed property is one that is:

  • Undergoing foreclosure
  • On the brink of foreclosure
  • Owned or controlled by the bank that provided the property owner with finance, or
  • Controlled by the government

For one reason or another, the owner didn’t keep up with repayments on their mortgage (or property taxes) and has forfeited possession of the property. Perhaps the owner lost their job or couldn’t afford the interest on a home loan. 

A distressed property will usually fall into one of the following categories:

  • Pre-foreclosure (or short sale)
  • Currently undergoing foreclosure
  • Owned or controlled by the bank (known as an REO foreclosure)
  • Controlled by the government because of unpaid property taxes (known as a tax lien sale)

What Are the Benefits of Distressed Properties for Investors Like You?

Many investors overlook distressed properties. There’s a misconception that it can be hard to secure these units when a bank or the government gets involved. However, distressed properties can be easy investments if you know where to look for them. 

Here are some of the benefits of distressed properties for investors:

  • Distressed residential and commercial units sell for cheap. You can purchase an inexpensive property, sometimes in an expensive or hot market.
  • Many distressed properties are in a good state of repair. The owner might only have had the unit for a short time before defaulting on their mortgage payments. 
  • Distressed properties in the pre-foreclosure stage tend to sell extremely fast. That’s because owners want a quick sale before a bank takes control of their home. 
  • Distressed properties in the post-foreclosure stage also sell fast, often at auction. 

There is an important caveat to buying a distressed property. Many units that have undergone foreclosure — and are now owned or controlled by a bank — go to auction and require an all-cash payment. That’s because it’s difficult for lenders to assess the true value of a distressed property and offer finance. Investors who don’t have the funds to purchase these units outright will need to add conventional properties to their portfolios instead. 

How to Find Distressed Properties Now

Distressed properties don’t hang around for long. Neither are they advertised on conventional websites like Zillow and Trulia. So you’ll need to be quick when looking for the best investments. Here’s how to find distressed properties in your market:

Search the Internet

Websites specializing in distressed properties are your first port of call when looking for lucrative investments. These sites list both residential and commercial units in the pre- or post-foreclosure stage:

You can also visit bank and credit union websites and find distressed properties now under the control or ownership of these financial institutions. For example, Bank of America has a dedicated site that lists properties in the post-foreclosure stage.

It’s also a good idea to check with local banks and credit unions about properties now under their control or ownership because of foreclosure. These institutions might not publish properties on their websites, so you’ll need to phone them and make an appointment with an advisor.

Talk to Local Real Estate Agents

Sometimes local realtors and real estate agents publish pre-foreclosure properties on their websites. However, you might want to contact these professionals directly and ask about the latest distressed property investments. You might be the first to hear about new distressed properties if you have close relationships with real estate agents in your market. 

Talk to Local Attorneys

Many real estate investors know how to find distressed properties when they network with local attorneys. These attorneys might tip investors about homes undergoing foreclosure in exchange for other information. An attorney will almost always be involved in foreclosure, especially when a bank or the government takes back control or ownership.

As you can see, learning how to find distressed properties is a process of trial and error, and there’s no guarantee you’ll find the right investment using the above methods. There is another way to uncover these types of properties.

Use ProspectNow to Discover Distressed Properties

ProspectNow is a database for every property in America that uses the latest predictive analytics to identify distressed residential and commercial units in your area before anyone else finds them. You can use access property ownership data and contact owners about buying their properties and why you are the best person to do it. ProspectNow also lets you view comparables, market fit, property sale history, and loan origination data in a single system and simplifies searching for property-related information in your target market. 

Final Word

Distressed properties are those that are undergoing foreclosure, on the edge of foreclosure, or owned or controlled by a bank or the government. Finding the latest distressed properties can be a case of trial and error. However, a service like ProspectNow can speed up the process and help you unearth the best investments to add to your portfolio. 

ProspectNow has helped over 33,000 real estate companies worldwide since 2008. Identify distressed properties before your competitors do, and contact leads for more profitable investment opportunities. Start your free trial and learn how to find distressed properties in your market.

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