Buying a home can be a long and difficult process, especially if you have a limited budget. Nothing is worse than finding the perfect home and not being able to afford it.
However, there are situations in which you may be able to find a great home for below market value. Distressed properties can present great opportunities for buyers to buy a home for less than its worth. There can be downsides, though, so it’s important to be informed before buying a distressed property.
Let’s take a look at what distressed properties are and whether or not you should consider buying one.
What is a Distressed Property?
Essentially, distressed properties are properties that must be sold urgently due to special circumstances. This often happens when the homeowner is longer able to make their monthly mortgage payments and opts to sell their home in order to pay their mortgage.
In addition to foreclosure, distressed sales may happen when the owner needs to relocate for a new job. In this case, the homeowner may need to sell as quickly as possible in order to start their job on time.
Divorce can also lead to distressed sales. During a divorce, a homeowner may need to sell their home in order to liquidate assets to be divided between the divorced parties.
In any case, a distressed property can offer a fantastic opportunity for buyers to purchase a home at a discounted price.
Is a Distressed Property Right for You?
While distressed properties can be a great choice for buyers, there are still downsides. Let’s take a look at the pros and cons of purchasing a distressed property.
The number one benefit of purchasing a distressed property is that it offers the chance to purchase a home below fair market value. This is great for buyers with limited budgets as it widens the pool of potential properties for them to purchase.
Additionally, these homes can be great for real estate investors. Distressed properties purchased at a discount can often be flipped for great profits after renovations.
Lastly, in some cases, you’ll be able to close the deal faster as the seller is motivated to finalize the transaction as quickly as possible.
Ultimately, these benefits make distressed properties a very appealing option for home buyers and real estate investors alike.
So, what are the downsides to purchasing a distressed home?
Primarily, the downside to buying a distressed property is that they often require substantial renovations before being move-in ready. Distressed sellers often don’t have the time or money to complete renovations before selling. So, as a buyer on a limited budget, buying a distressed home may be difficult as renovations may be too costly. This may not be an issue for investors, however, assuming they have accounted for the costs of repairs.
Ultimately, distressed properties can be a great option for buyers and investors looking for inexpensive homes. However, as there are downsides, it’s important to know what you’re getting into before purchasing this type of home.