Top 5 Tips for Buyers of Distressed Properties
Managing the expectations of our customers in the process of buying a distressed property is crucial in today’s market. I found these tips in the Wall Street Journal and have added my thoughts on each.
(read Today’s Talking Point below where I discuss the opportunity that will exist in this category.)
1. Distressed-property listings can be obtained from local real-estate agents, classified ads and Web sites such as RealtyTrac.com, Foreclosure.com, Trulia.com and Zillow.com, as well as bank Web sites.
If you are going to make selling distressed properties part of your business model for the remainder of 2009 and 2010, make sure you know which sites your customers are using to find listings.
2. Work with experienced real-estate agents and brokers with special training in foreclosures and short sales.
The Journal is telling the buyer to come to you! But, there is a caveat. You must have “special training in foreclosures and short sales”. There are several designations available. Make it a goal to acquire one by year’s end.
3. Get pre-approved by a lender, or certify that you have sufficient cash available, before bidding on properties. Auction buyers must be prepared to put down a cash deposit of 5 to 10% cash and pay the balance within 30 days in many states—and in some states, on the same day.
The mortgage piece is extremely important. Make sure you have a trusted lender that understands the process of distressed sales.
4. Be prepared for a long wait to hear back from the bank on a short sale, but be prepared to move quickly on a foreclosure; banks often set strict timetables on foreclosures.
If we know the process of anything, we are better prepared to deal with it. Set reasonable expectations with the buyer.
5. First-time buyers with minimal cash and little time or aptitude for repairs probably should avoid foreclosures, and inexperienced purchasers should avoid auctions.
Know your clents and their strenghts and weaknesses. That will enable you to counsel them on the best options for them and their families.
Sources: RealtyTrac.com; Distressed Property Institute; HUD; WSJ research
Any other suggestions are welcome. Let everyone know what you think.