10 Tips for Buying Distressed Properties


Be Patient

There are all kinds of delays, frustrations and red tape that you will have to endure if you are buying a distressed property. Unlike a normal sale, where you deal primarily with the homeowner, distressed sales involve dealing directly with the lender, who has to approve the final sales agreement. That can take a long time, since you are dealing with the bureaucracy of a large institution, not just an individual seller. It can take weeks or even months of waiting for the bank to respond to an offer [source: McQueen]. You might be able to get help from the government to speed up the process. Check to see if the house is eligible for the home affordable foreclosure alternatives program (HAFA). If it is, you can force the bank to reply within 30 days [source: Gibbs].

Closing the deal can also be held up if the owner had a secondary mortgage or was refinancing. That second lender will have to sign off on the deal, too [source: Re/Max]. You could hit another speed bump if the loan was sold through securitization [source: Gibbs]. During the real estate boom that came before the housing crash of the late 2000s, lenders sold off large bundles of their loans to investors, who then traded them as securities similar to stocks. Whatever investment manager currently owns the securitized loan will have to approve the deal, adding a fourth (or possibly fifth or sixth) party to an already crowded negotiating table [source: Gibbs].