6. Court Records
Some court records are available in the public domain and can provide information on properties due for foreclosure. This information can be sourced through default or foreclosure notices served to delinquent homeowners that can be found online or at your local courthouses.
7. Reaching Out Personally
Aside from looking at physical signs, you can contact people to know if a property is distressed. While online listings and auctions can help you find an investment-worthy distressed property, keeping in touch with local real estate agents who can share potential options for distressed properties is one of the best ways to find great deals. This takes the pressure off of you, especially if you don’t want to undertake the cumbersome job of finding and evaluating a distressed property.
Other Potential Sources
Other than real estate agents, contacting attorneys dealing with foreclosures and settlements within a divorce or family might be a great alternative way to find distressed properties. Lawyers who deal with probate cases—when a person with debt or assets dies—can often guide you to finding distressed properties, especially when the owner does not want to invest time and money into mending a distressed property. Even if you find a probate property for sale through your contacts, you will need a lawyer for the proceedings.
Certain websites, such as Successorsdata.com and USprobateleads.com, specialize in guiding you through investing in probate properties.
Contacting distressed property owners directly is an option, but it’s a tricky process that requires a delicate approach. Some might be open to discussion, especially if they sell their properties actively. However, some owners might not be as welcoming, which could ruin your chances of a good deal.
Furthermore, there are some ethical implications here, so weighing every situation before jumping the gun is best.
8. Surf Around the Block
Walking or driving around your target neighborhood scouring for properties in your area can be a time-consuming but effective method to spot available distressed properties. This good old-fashioned method, known as “driving for dollars,” is what full-time real estate investors often do when looking for properties they can flip or help sell at a commission.
You can often reach out to the owner of a property when you see “For sale” signs on or around it. If you’re lucky, you will run into an owner eager to sell their house to avoid foreclosure. One of the biggest motivators in cases like these is the desire to avoid being barred from getting loans and mortgages for several years when a property is foreclosed.
9. Search for City Code Violations
Public records around city code violations can be the goose that lays the golden egg. While reviewing city violation records for each country and district individually can be challenging, the result can be rewarding if you are persistent enough.
Distressed properties can be easily identified through repeated violations, indicating that the homeowner may not pay adequate attention to the property.
10. Contact Out-of-State Owners
Maintaining a property remotely can be extremely challenging for anyone who has moved out of a particular city or state. As a result, the property may deteriorate, even without an impending foreclosure. If you are a real estate agent, you might get a good deal by facilitating the sale of a property whose owners do not live nearby and cannot regularly visit for inspections and periodic maintenance.
How to Close on a Distressed Property
When you find a distressed property that interests you enough to invest in, keep a few things in mind to ensure you make money instead of losing it. First, you must ensure you act promptly, especially if you need to apply for a mortgage for payment. Distressed properties may involve roadblocks from a legal or city code’s purview.
Secondly, getting an inspection before committing to distressed property is imperative. Besides apparent signs of the property being neglected and abandoned, more concerning issues might cost you much more than you had previously anticipated.
“Always get a property inspection done before purchase,” said Rick Wallace, founder and CEO of LLC Dojo, which specializes in incorporating limited liability companies (LLCs). “Don’t go too downmarket as these properties are difficult to manage. Avoid properties with Section 8 tenancies, and always invest via an LLC. This corporate structure protects your assets if you are sued for any reason relating to the investment property.
Additional Tips
It is also recommended that you make a straight-up offer for a full upfront payment if you can afford to. This will give you higher leverage if others want to buy a specific property. You might move higher in the seller’s priority list and cut a better deal because you cut out their waiting period.
“A final suggestion is to not get too greedy in terms of rate of return,” said Wallace. “ [I]f it looks too good to be true on projected figures, it probably is, and real returns will be eroded by maintenance, vacancy and damages.”
Making this calculation as accurate as possible is key. “You will also need to make sure that you know how much the property will be worth after you complete the repairs (ARV = After Repair Value) so that you can determine if the property is listed for a good price or not,” said Samuel.
Sale of Regular vs. Foreclosed Properties
In case of a foreclosure, properties are often sold through banks in an auction, and there is always a chance of being outbid or bidding to pay more than you wanted. It can be difficult to strike a good deal without an expert who works with distressed properties.
Consider Buying Distressed Real Estate For Investor Growth
Distressed properties can offer plenty of returns if you make the right decision at the right time. But it is equally important to note when and at what value to buy a distressed home. There are several ways to spot the right deal, but you must act swiftly yet cautiously.
Always have a legal and financial aide by your side, and use various tools to determine the correct value for any distressed property you want to buy. Lastly, be prepared to deal with unforeseen circumstances or late resale if you want the correct value from selling a distressed property.♦
How have you bought distressed properties in the past?