In your hunt for a new house, you may have come across some properties that seemed to be priced well below market value. While it's possible that you happened to find the deal of the century, more often than not what you're seeing is a distressed property. These homes are put on the market either by owners who are trying to avoid a foreclosure or by the bank when foreclosure proceedings have already started.
So, should you buy a distressed property? Here are a few factors to consider:
Additional costs – Homes involved in short sales are priced so low because the seller wants to complete the transaction as quickly as possible. Buyers must usually agree to purchase the property "as-is," meaning that they will be responsible for any additional repairs. The amount that you may have to spend on renovations could negate whatever money you saved during the purchase.
Increased competition – Who else wants a home in possible disrepair? Institutional investors with cash. These companies intend on selling these homes in the future to make a profit.
The National Association of Realtors (NAR) suggests that individual buyers put themselves in the best position to compete with investors.
"If you don't have the cash yourself, you can work with a lender to secure a strong loan prequalification," the NAR states on its website. "To be an even stronger bidder, you may want to increase the size of your down payment or your earnest money deposit."
Longer wait time - Yes, this is a short sale, but distressed properties often require complex paperwork before the exchange of ownership. Be prepared to wait longer than you would have to during a traditional sale.
If you're interested in buying a home, contact Rehoboth real estate agents to begin the process!