A buyer can lock a deal on a distressed property only if they have a solid strategy, as fix-and-flip real estate investors are always looking for good deals to renovate and resale. Rather than going through dreaded auction wars or ending up with a haunted house, successful house hunting can lead to a pre-foreclosure bargain, including the prospects of price appreciation in the future.
To uncover these hidden-in-plain-sight distressed houses, prospective buyers must follow a plan incorporating personal connections, experts and online solutions. Mortgage originators who work with the clients can help them understand strategies to find these homes while also generating a solid base of repeat business.
Tell-all signs
The old “driving by a neighborhood for unloved residential properties” trick lets people find off-market houses without searching for legal and financial traces. A drive around a community lets distressed home seekers find homeowners who suddenly left for another country, seniors who are too exhausted to go through the sales process and tenants who are paying the mortgage as rent after the landlord stopped contacting them.
Mortgage originators should suggest to clients that there’s still a place for this shoe-leather tactic even in the modern world. Going through a personal house-searching trip means the buyer has the liberty of checking out their desired neighborhood, snatching a short sale from a homeowner fearing a foreclosure and saving on the commissions of professional help.
The tell-all signs of properties the owner would love to get rid of are overgrown bushes, overflowing mailboxes and a shabby exterior. Another great way of finding such a home is checking out the property at night; if the house is dark, sans porch or security lights, it might be abandoned by the landlords. Besides the visible markers, prospective buyers should check the smell, such as dead animals, leaky sewers and trash to pin a home as neglected.
Personal connections
When advising clients, originators should emphasize personal connections or work their own contacts for their clients. Being proactive with personal networking and doing extensive research to strategize distressed-property hunting can bring in lucrative properties. From senior housing residents who want to sell their former home to acquaintances at the county legal team, code compliance department and home renovators, anyone can lead a buyer to a distressed home.
Obituaries, neighborhood newsletters and networking with Realtors, friends and family members can also be a great way to get a hint about off-market houses. Buying from personal networking increases the chance of higher return on investment as the investors can inspect, discard a ruined house and bargain unlike an auction where the house is sold as it is without any room for negotiation.
By casting a wide net among friends and family members, a buyer or an originator can locate inherited properties where the new owner wants to sell as soon as possible — leading to a chance of price cuts. Similar to networking, researching past trends and locations of distressed properties can make a buyer notice one unwanted house way before their peers. For instance, a town after a natural disaster is more likely to have distressed residential and commercial properties than a bustling one.
Online platforms
Online platforms can be a game changer for your clients for finding abandoned properties as they cover pre-probate assets, off-market properties and homes not in the pre-foreclosure stage but needing significant repairs or renovations. Specific distressed property websites such as Fannie Mae’s HomePath or foreclosure website RealtyTrac can be a great way to find unloved houses without experts.
Also, lending organizations update their websites with lists of foreclosed houses before they hit the auctions. If investors are looking for dirt-cheap rural farmlands, for example, the U.S. Department of Agriculture features a website (https://properties.sc.egov.usda.gov/resales) that is a legitimate option for gaining acres of plots.
For meticulous buyers, paid subscription services such as PropStream can be an excellent alternative for an expert; the subscribers get to check the property status, delinquency detail, and tax filings to make an informed decision. Apart from conventional sites for distressed properties, investors can find great pre-foreclosure houses on Facebook marketplace, Craigslist and multiple listing services, as well as Zillow, Redfin, Homes.com and Realtor.com. Prospective buyers can find hidden unloved properties by searching cash only, for sale by owners and fixer properties.
Worthwhile ally
Current U.S. housing issues with overbearing inflation and high mortgage rates have become impossible for many homeowners; 2023 saw a 9% rise in foreclosures compared to the previous year, according to Attom. Mortgage lawyers possess all the insider information about homeowners nearing foreclosure and have enough connections to access and sieve through courthouse documents — making them worthy allies in finding a distressed property.
A local mortgage lawyer can pinpoint delinquent mortgage payments and tax filings in arrears to find homeowners leaning toward selling their properties. Thanks to the records, an investor might end up with a property in pristine condition, but with maintenance and taxes that went beyond the owner’s financial capabilities.
For instance, the New York-northern New Jersey-Long Island area has $951 million in distressed multifamily home debt, and an area-savvy mortgage lawyer can help a buyer bag a great deal with less than the market price. Also, they can connect their struggling clients — homeowners failing to cover mortgage payments or who have left the U.S. — with potential buyers.
Trusted adviser
An investor can secure versatile distressed assets (commercial properties, vacant lots and buildings, and relatively new homes) by collaborating with a Realtor. Such high-yield investments are possible as the Realtor can access the Realtors Property Resource (RPR) maintained by the National Association of Realtors, which holds millions of listings with details about tax filings, mortgage payments and code violations.
A Realtor finds the ideal properties before flippers come into play or the landlord gets better offers. Thus, a buyer can find a property of their liking in any state while the expert takes care of the hassle of multiple lenders, primary home value estimation and other disputes.
Getting assistance from a Realtor opens the door to real estate-owned (REO) homes, or homes owned by banks, as well as inherited homes. Since lenders don’t want to hold on to the REOs, a well-connected Realtor grabs them first and passes them to their clients — presenting the investors with great properties at minimal cost. Hence, the chances of getting a better financial deal and repairable houses are higher.
The allure of a high profit margin from a distressed house can bankrupt a careless buyer. Even though the competition has skyrocketed for foreclosed homes, newbies can still generate a sizeable income from finding distressed homes before they reach the foreclosure stage and buying and selling these homes for top dollars. ●
