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Understanding Distressed Situations in Alpharetta
Hello, thanks for joining me, today we are defining DISTRESSED REAL ESTATE SITUATIONS.
I want to talk through the kinds of properties I purchase as a local home buyer and the property owners that are looking to sell them. The first thing I want to do is provide three points of clarification.
Clarification 1, a distressed property isn’t always owned by a distressed seller.
Clarification 2, a distressed seller doesn’t always have a property in distress.
Clarification 3, sometimes distressed properties are owned by distressed sellers. Those are the people that need help the most but are generally the least likely to ask for it.
Let’s describe four distressed property situations.
Distressed property situation 1: Lack of Maintenance. This is the situation people picture when they think about a distressed property because it’s usually visibly obvious. You might see broken windows, a failing roof, maybe the landscaping is out of control. In this situation, owners might have chosen not to devote the time and finances to proper maintenance. Sometimes it’s the result of a poorly managed rental situation.
Distressed property situation 2: Functional Obsolescence. This is when a property doesn’t match the current standards or expectations of the market. Imagine homes that have 3 bedrooms and only 1 bath, or older homes with tiny hallways and miniature closets. Obsolescence can also occur in homes that are well maintained, have the right mix of bed and bath, but the 1980’s style just isn’t going to bring the buyers running.
Distressed property situation 3: Economic Obsolescence. This occurs when factors in the surrounding area cause the home to have a lower value. You might have a house in good condition with modern improvements that is worth less than what has been invested into the property. The home value distress is due to a declining area and unfortunately is outside the control of the homeowner. This happens when a school system declines or loses accreditation, or perhaps a major employer moved, and the nearby residents are now unemployed.
Distressed property situation 4: Catastrophic Situations. Sometimes life has plans that don’t match your own and it doesn’t matter how well you maintain a great home in a great area. Properties might be in distress because of fire damage, flood/water damage, maybe a tree fell through the roof. These situations happen but hopefully a good insurance policy will buffer the financial losses.
Those are the four distressed property situations, let’s look at some scenarios where the seller may be in distress.
Distressed Seller Situation 1: Financial. This is the primary scenario people think about with a distressed seller. Some of the reasons a seller might be financially distressed include divorce, injury, illness, or loss of income. These financial issues often result in Foreclosure, Short Sale, Liens or Bankruptcy.
Distressed Seller Situation 2: Timeline. Occasionally a seller has a timeline that can’t be met with a traditional listing. They have a job transfer or their next house is ready to close and they need the money quickly. Sometimes the opposite is true. The timeline isn’t short, it’s long or unknown, but the seller wants the security of knowing they are under contract and when they need to close, the buyer is ready.
Distressed Seller Situation 3: Convenience. The desire to avoid the traditional list, negotiate and close process is certainly growing among sellers. Convenience includes a family selling an inherited property, a tired landlord wanting to cash out of rental properties, or a busy family that can’t accommodate showings. Some sellers don’t want a parade of potential buyers coming through the house because of personal reasons that may include addiction, signs of abuse, hoarding and more.
Those are the three distressed seller situations I encounter the most.
Now, here is an unfortunate reality; Distressed Sellers with Distressed Property are the least likely to reach out for help. Neither an iBuyer nor most traditional agents are going to be able to help in these situations. You need someone who has experience and can craft creative solutions. Too often we get calls looking for help but with no time left for us to do anything. If you or someone you know might be dealing with any of these distressed situations, please reach out immediately. I am here to help!