The dream of homeownership runs strong in America. Of course, that dream often exists without a lot of consideration for economic changes.
For example, inflation is no longer riding at the 40-year peak of 9.1 percent it reached in 2022. Yet, it’s still riding a lot higher than the approximately 2 percent that the government aims for.
That inflation has put a serious damper on budgets. It’s also led to a lot of people losing jobs in high-paying sectors, such as tech. Going from a good-paying job to no job can leave you with a distressed house fast.
If you’re looking to sell a distressed house, keep reading for five mistakes to avoid.
What is a Distressed Property?
The term distressed property can mean a few different things. Its usual meaning is any property this is already in foreclosure. In other words, the lender has started the legal process in a given state to take the property from the mortgage holder.
A distressed property can also mean that a property owner is in default on the mortgage. In these instances, the property is generally in pre-foreclosure. The property owner has received calls or official mail regarding the possibility of foreclosure.
The term distressed property can also refer to properties that a lender already controls and means to sell.
For those outside of the real estate business, distressed property often has other meanings. For example, people will routinely refer to an old or rundown property as a distressed property. In those cases, people often mean that a property looks like it will need a lot of work to repair.
Selling an old home can create challenges. It’s typically not as complicated for the homeowner as selling a house that’s in foreclosure because you’re not on a clock.
Why Sell Your House To TX Cash Home Buyers?
1. You Pay Zero Fees
2. Close Quickly or the date of your choice
3. Guaranteed Offer
4. No repairs required, we buy as is
5. Less Hassles!
Call Now (281) 595-7550 Send Text
Can You Sell a Distressed Property?
Many homeowners in pre-foreclosure worry that they can no longer sell their property. Here’s the good news. You can sell a distressed property.
A bank may eventually seize the house to recoup its assets. However, the house is still under your control until the lender actually forecloses on the property.
That means that you can alter or sell the property if you want to do so. That does give you some time to make a deal on the house with a buyer. It’s not a huge amount of time, but you do have some wiggle room.
The thing that you should keep in mind is that you still owe the lender. So, if you do sell the property before the bank forecloses, they get first dibs on the money.
With those preliminaries out of the way, let’s look at the mistakes that can derail a distressed property sale.
Other Articles You Might Enjoy:
- How to Sell a Condemned House: Understanding Condemnation
- Sell a Fixer-Upper House: Tips for Selling a House That Needs Work
- Selling a House with Storm Damage: Guide To Selling After a Natural Disaster
- 6 Things You Need to Know About Selling a Property That Needs Repairs in Houston
- How Do You Determine If A House Is A Tear Down? Signs to Look For
1. Pricing Too High
Selling a house is often an emotionally charged event for homeowners. That’s true for regular home sales. It’s even more true for distressed properties.
With a distressed property, you typically owe a lot of money on the house. That can put a lot of pressure on you to try to wring every last cent out of the property when you sell.
If you go into the selling process with that mindset, there is a good chance that you’ll set the selling price too high. With the real estate market cooling courtesy of high mortgage interest rates, people aren’t as eager to buy as they once were.
The higher the price of the house, the less eagerness to buy you will see. You might eventually sell the house for the price you want. It likely won’t happen within the timeframe that you want it to happen.
You must balance a level of practicality with your need for money. Ideally, you can set a price for the house that will pay off the existing debt and still leave you with something after the dust settles.
2. Considering the Wrong Buyer
Another thing that many distressed property owners often disregard is that not all potential buyers are the same. What makes things worse is that they might look similar on paper.
After all, someone who has a pre-approval on a mortgage can seem like a safe bet. Yet, loans are underwritten. Lenders often attach a lot of strings to their mortgages.
Those strings exist for legitimate reasons. In most cases, they exist as a protection for the lender. If your house doesn’t tick every box for the lender, though, it can turn an otherwise good deal into no deal at all.
When you’re selling a distressed home, you primarily want buyers who can pay cash for it. Yes, that does limit the buyer pool quite a bit with house prices still running high. The upside is that cash buyers don’t have any lenders inserting hoops that everyone must jump through to close the deal.
Once they close on the house, you just get paid.
3. Waiting Too Long
Another all too common mistake in distressed home selling is that the homeowner waits too long. The time you miss that first mortgage payment until the bank actually forecloses varies from state to state. Depending on where you live though, it may be as little as nine months.
That sounds like a long time, but it’s really not when you’re trying to sell a house. Prepping a house for sale takes time, even if you’re not making any huge repairs.
Then, there is the marketing process. It can take a little while to get a house listed and for people to see the listing. If people want to tour the house, you have to add in scheduling those visits.
It all adds up, and that’s before anyone even makes an offer on the house. Once someone makes an offer, there is the closing process to consider.
At best, you’re looking at about a month for the deal to close. Depending on exactly how things go, you could find yourself waiting for a month and a half or more to pass before the deal closes.
4. Selling It Yourself
When you have a distressed property, every penny takes on way more significance. You look for any way you can to reduce costs.
You may find yourself looking at the fees that agents charge for selling a home and think that selling it yourself is a better option. While selling it yourself is an option, it’s probably not the best option.
Selling it yourself makes everything your responsibility. You become responsible for taking pictures, writing the copy for the listing, and scheduling viewings of the house.
You must also negotiate with the potential buyer’s agent over things like repairs. Unless you work as a seller’s agent, that will put you at a real disadvantage. You won’t know if demands or concessions are reasonable.
Plus, this is all happening while you get ready to move out of the house and continue working. Moving is a complicated enough process that most people struggle to balance it with their other responsibilities.
5. Ignoring the Short Sale Option
Another key mistake that homeowners often make is that they ignore the possibility of a short sale. A short sale happens when you sell the house for less than the amount you still owe for it.
Short sales look terrible on the surface. Most homeowners look at that and think something like, “I lose my house and walk away still in debt? Hard pass.”
Here’s what you should understand about short sales. In many cases, you conduct a short sale with the lender’s approval. You essentially cut two deals.
You cut a deal with the buyer to offload the property you can’t afford. You cut a deal with the lender to accept whatever the buyer offers and essentially cancel the remaining balance owed.
Lenders will often take these deals because it dramatically reduces the outstanding debt. Just as importantly, it frees them from selling the house.
Lenders don’t want to own residential real estate or sell it. Any real estate the lender directly controls is generally a financial loss for them. If they can recoup most of your loan, they’ll often take that as a win.
Selling Your Distressed Property
Selling your distressed property can come with a lot of pitfalls. For example, you can price the house too high and reduce interest. You can focus on the wrong buyers and waste a lot of time.
You can also wait too long to think about selling. The faster you get the house on the market, the better your odds of selling it before the lender forecloses.
You can also fall into the trap of selling it yourself, which can waste time and energy. Some homeowners also discount a short sale without talking with their lender.
TX Cash Home Buyers buys distressed properties in Texas. For more information, contact TX Cash Home Buyers today.
Disclaimer:
The content provided on this blog is for informational purposes only. We are not attorneys or tax professionals. For personalized legal or tax advice, please consult with a qualified professional.
About The Company
TX Cash home Buyers is a dedicated real estate team specializing in assisting homeowners with burdensome houses and complex situations. The team provides valuable guidance and solutions to homeowners navigating challenging real estate circumstances. Their commitment to delivering efficient and professional assistance makes them a trusted partner in helping homeowners find optimal resolutions for their property challenges.