Distressed Properties

What does that really mean?  In speaking to friends of mine that are not “in the business” or Realtors, their interpretation of this term means that the property has been abandoned, is in disrepair or has been trashed.  Where that may be true in some cases, it is important that the public understands that in these economic times the term “Distressed Property” actually refers to the Seller that is in financial difficulty and either is currently in the process of foreclosure or will soon be.  The property itself may be in perfect condition, well maintained and spotless.

Because of the state of the economy, the numbers of “distressed properties” are high now, but these numbers may only be the tip of the iceberg.  The reason I say this is because there were a lot of loans that were issued in 2006 & 2007 and as late as early 2008 that may have either adjustments or balloons that will come due in 5, 7 or 10 years.  This will bring on a new crop of borrowers that may not be able to handle those adjustments, therefor potentially creating new foreclosure and short sale inventory.  That quality of inventory brings everyone’s property values down.

Enough of the negative – the POSITIVE  is: 

1) Interest rates are at an all time low, re-finance if you can to avoid problems in the future

2) The mortgage holders are not in the business of owning properties – they don’t want them back – they would rather re-negotiate the terms of the loan or negotiate for a short sale. 

3)  Currently a short sale alone will not show up on your credit history – the loan will typically be reported “paid in full” or settled

4)  If the financial difficulty is temporary – you may be able to avoid foreclosure through forbearance.

And there is much more that a trained licensed Realtor can do to help “Distressed Properties”.  BEWARE of companies that claim to be able to help.  Almost always there are fees involved that are not necessary (it’s just another way for someone to get into your $ pockets).  We as Realtors are paid by the lender as part of the negotiated sales price.  Why pay fees to a company that you don’t know when you can deal with someone that is familiar and has your best interest at heart.