Troubled Real Estate
The present economic disaster has produced huge problems in the real estate market
. What is "distressed real estate"?Any property that is under foreclosure or is advertised for sale by its mortgage holder can be described as distressed property, or distressed real estate. When distressed property is sold, its selling prices is usually much below its market value in a normal sale.
In today's market, a property is said to be distressed when a homeowner gets behind on their mortgage or tax payments and the lender or appropriate debt collector begins to start the necessary proceedings to sell the home in order to collect the outstanding debt. The process for selling these properties varies from state to state depending on your local jurisdiction, and therefore the period of time a home may fall under this category can last anywhere from a few weeks to a year, more recently as long as 18 months.
As there are many types of homes, there are many types of distressed homes. The range of distressed real estate covers the gamut from commercial space to apartments and apartment buildings. The term applies to homes and other properties at any stage of the foreclosure process, or even if the property has been foreclosed and abandoned for some time. Ofen, distressed properties may be left vacant or boarded up, and in many parts of the country large numbers of these properties have turned many communities into eyesores. Any property that is under-maintained can be characterized as distressed real estate.
In most cases, distressed real estate can provide great opportunities for investors to buy these properties at tremendous discounts, often ranging anywhere from 30 to 60% off their actual market value.
Typically, owners of distressed real estate grow tired of the hassles of their financial problems and the upkeep of the property. Frequently, a deterioration in the owner's financial stability has led to this problem. As we all know, the present economic circumstances have produced many such changes. Distressed real estate includes the situations described above, as well as those properties marketed as Short Sales and REO/Bank Owned. Short sales are those properties in which the owner attempts to sell, with the bank's approval, for less than what is owed on the property in order to avoid foreclosure. Bank Owned or REO properties are those that are already owned by the bank, which means they were acquired through foreclosure action.
As a result of the most recent economic disaster, the quantity of distressed real estate has dramatically increased and it will continue to do so over the next five years.
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