What is a Distressed Property?
Distressed property is a term used to describe property that is in foreclosure proceedings. It is not a description of the actual property, land, or buildings, but of the financial situation for the property. Foreclosure is a legal proceeding where the bank or financial institutions that provided the money to purchase the property have seized it due to non-payment. There are three possible causes for a distressed property: foreclosure, bankruptcy, and estate sale. When a home or property is purchased, a bank or financial institution usually provides the actual money. The money is loaned to the people who have purchased the property and this loan is called a mortgage. The expectation is for the bank to receive monthly payments of principle and interest over a specific period of time. If the payments are not made, the bank has the right to file legal papers to foreclose on the property. In a foreclosure proceeding, the bank demonstrates to a judge that the mortgage payments have not been
At first light it may seem that a short sale and a distressed property are the same thing. This is actually not the case. A distressed property is when homeowner B is behind on monthly mortgage or has a high risk of defaulting on payments and is forced to sell the property; not necessarily selling for less than the mortgaged amount but it can be both distressed and short sale. In this case a seller is looking for a low market time and pricing is critical to get the home sold with the seller netting zero or having to bring money to the table at time of closing. What is the Foreclosure Process? Foreclosure is a process and not necessarily a property. To better understand the foreclosure there are specific dates in a timeline when actions take place. The very first part is: when is a property in default? Technically, it is on the 1st day the mortgage payment is late but banks usually have grace periods built into payment terms. This is when the foreclosure process begins and, technically,
A ‘distressed sale’ is a catchall phrase for any home that is being sold under market value. Examples would include properties that are bank owned, foreclosures, corporate owned, HUD owned, REO owned, auctions, estate sales, sheriff sales, short sale, pre-foreclosures, etc. Much of the time these properties are sold “as is, where is” and require additional addendums.
