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Types of Distressed Properties


Generally, distressed properties are attractive to property investors, as they are priced below market value. There are several types of distressed properties. Here are the most common situations that can cause distress in properties.

1. A death in the family

If death happened in the family, that can lead to a distressed property. However, here we have two options.  If the property has one owner and he/she passes away, then the property is put up for sale. The main reason for this is to sell the property quickly. The other option is when the property has two owners, one of which expires;it is possible that the second owner may not be able to pay the mortgage on his/her own.The property can again put up for sale.

2. Spouses getting divorced

When spouses, who own a property, are getting divorced, usually the house is often put up for sale. These types of properties usually are put for sale with such prices, so that the couple gets rid of it as soon as possible.

3. Workplace relocation

The house owners, who find a new job, usually tend to sell his/her house as soon as possible, so that not to pay two mortgages. So, here as well, the owner puts the house for a sale at a lower price

4. Bad financial conditions

There is another condition because of the property is distressed. If there is some financial loss or strain, like pay cut, job loss, health issues etc., the owner is no longer able to pay the mortgage, so he/she decides to sell the house at a reduced price.

5. Conditions : Sometimes, the condition of the house can reduce its sale price:

  1. When the property needs extensive renovation: Some house need through changes, additional square footage, electrical work, etc. The properties, which need extensive updates, are often discounted.
  2. When the property needs some renovation: This is about not huge, but minor updates. So, the price may be a bit reduced.
  3. When property needs updates in mid-construction: For instance, when a developer buys a property and start updating it, but in the process has no money to continue. He puts the house for sale, in order to recover some money from it. This time again the property is put to sale

6. Dispute in Partnership – A distressed property can be the result of a dispute or falling out between two parties who own a property for any future joint venture. They may have to unexpectedly sell the property once their relationship goes bad so an interested buyer can benefit from their necessity to sell.

7. Bank Owned – Properties that have been foreclosed on and are now owned by the bank can often be obtained at steep discounts. The lender’s goal is simply to unload the property at this point. Beware because many of these properties need extensive renovations as they have been abandoned for a long period of time.