Selling distressed property always presents unique challenges. Doing so after COVID-19 will provide both challenges and opportunities.
What is distressed property?
To a real estate agent, distressed property is defined as any property under foreclosure or being sold by the lender. A property becomes distressed when the owner can’t make mortgage, tax, or other payments.
Most people have a broader concept of distressed property. To them, distressed property focuses on the property itself, and could include a home that:
- Is owned by a person with hoarding tendencies and is now–literally–overflowing with stuff.
- Has fallen into disrepair because the owner is elderly or ill and can no longer care for it.
- Faces legal condemnation because the home is no longer structurally sound.
- Sits vacant and has been vandalized.
- Is a “legacy” home that’s been in the family for generations, but is no longer desired.
Why selling now may be very attractive.
Now may be a wonderful time to sell your home, regardless of the situation that is causing it to be distressed. COVID-19 is causing great uncertainties in the housing market, and no one can say, with any degree of certainty, what will happen to home values.
If your home is distressed due to unpaid bills
COVID-10 has affected the finances of almost ⅓ of American families. As the number of unemployed increases, the number of distressed properties will likely increase. Selling now, before the market is glutted with properties, has merit. Here are our suggestions for selling financially distressed property.
- Work only with cash buyers. Commercial lenders don’t finance a mortgage on a distressed home. So, you need a cash buyer, preferably one who has ready access to actual cash, rather than one who is using private funding or who needs a few days to convert liquid assets into cash. These buyers aren’t as plentiful as buyers financing the purchase with a mortgage.
- Be prepared to act quickly. If you’re facing foreclosure because you lost your job when COVID-19 hit, or you’re behind on your tax payments, you need to sell quickly to avoid further financial hardship. Waiting a few weeks for a better offer is rarely wise, especially since buyers expect a home’s price to drop the longer it’s on the market.
- Get a reliable estimate of your home’s value. The best way to determine your home’s current value is to have a professional appraisal done on your home. An appraiser uses similar homes in similar condition and in similar neighborhoods to determine what your home is worth right now.
An appraisal costs a few hundred dollars. If you simply can’t afford an appraisal, you may get a reasonable estimate of value by researching recent home sales in your community. This is less reliable, but should help you prepare for a value that may be considerably less than you anticipated.
- Disclose any home issues that your state requires. States vary on what they require homeowners to disclose about known issues with their homes. You need to know your state’s requirements and provide all the necessary information. Failure to do so can result in stiff penalties.
- Clean and straighten your home as much as feasible. You’ll make your home attractive to more buyers if you clean and declutter. This allows buyers to “see” the house itself and appreciate your home’s best features.
- Don’t appear desperate, even if you are. Purchasers–especially seasoned investors–can recognize obvious desperation. Desperate sellers are likely to get lower offers. It pays to be calm.
If your home is distressed due to hoarding, disrepair, vandalism or condemnation
Under these circumstances, you may or may not feel the financial pressure to move as quickly as possible. You may have owned your home “free and clear” for several years. While most of the suggestions above are valid, you may want to consider using the services of a transition company, especially if your home bears the effects of significant hoarding or years without routine maintenance.
At LifeCycle Transitions, we specialize in rescuing homes that are truly distressed and facing condemnation or foreclosure. We are expert at decluttering, packing, sorting, organizing, hauling debris, and moving your possessions. Coordinating our efforts under the guidance of a Transition Specialist, we complete your entire transaction within 30 days, help you locate alternative housing in the situation that fits your needs, and assist with moving and unpacking.
If you have questions about your home–distressed or otherwise–contact us at (877) 273-7810 or at lifecycletransitions.com for a free consultation.