Should You Buy a ? Some Issues to Consider

What is a distressed property? Basically, a distressed property is a property the owner can no longer afford to keep. They are often in a state of disrepair, and might have even been foreclosed. However, many properties are sold for what is called a "short sale," which means that the owner and the bank have agreed to sell the property for below the balance of the mortgage. These properties are viewed as being potentially profitable investments, since they can ultimately be sold at a markedly higher price once they've been restored.

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There are several advantages to distressed home purchase, but there are also several potentially problematic factors to consider. Here are a few things to keep in mind if you are in the market for a distressed home.

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Tenant Disputes 

The purchase of a distressed home can lead to ugly eviction procedures if the residents are still occupying it. This is generally not the case in short sale situations, since the owners have already agreed with the lender to sell the property in order to avoid foreclosure. But foreclosed properties often still have residents occupying them, and the new owners have to initiate sometimes lengthy eviction processes before they can proceed with home renovations.

Extreme Disrepair 

While it is possible that a foreclosed or short sale property is still in good, habitable condition, very often they are in a state of neglect. "Many inexperienced buyers fail to recognize the extent to which the properties are damaged, and this can lead to major problems very quickly," says Realtor and Certified Distressed Property Expert Melissa Yardy. "It is crucial to work with a Realtor so that you know exactly what kind of property you are getting, and what steps you have to take."

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In order to mitigate the possible headaches from distressed property acquisition, a buyer should work with a Realtor who will conduct the necessary research on the buyer's behalf. "There are innumerable issues a Realtor can address for the buyer," continues Melissa Yardy. "Since the goal is to acquire a potentially valuable piece of property, a wise buyer should use all the tools at his or her disposal, and one of those tools is definitely a dedicated Realtor."