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What is a Distressed Property?

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By : John Cutts    99 or more times read
Distressed property is any kind of property that can be bought for a discount because it has not been neglected or not properly cared for. Many distressed properties are what you might call fixer-upper homes, properties that may be in disrepair, but as a result, can be bought for a substantial discount.

Whether you're looking for handyman specials to fix up yourself or you're an investor looking to hire contractors to fix up a property for you to sell, distressed properties can be very valuable. Some of these cheap property opportunities are even available for sale by owner, so you can cut out the agent as a middle man. They are almost always sold for discounts that are well below what their actual market value would be in prime condition. It only takes a little effort and work on the part of the buyer to get foreclosure properties or a distressed REO to a state where they could sell on the open market for full price.

It's important to take several factors into account when buying a distressed property. First, you should determine how manageable the repairs will be. Some distressed properties will be in better condition than others. Determine what you think the property could sell for on the open market in good condition. Also take into account factors like surrounding land and neighborhood statistics, because these can have an effect of the potential value of the home.

Many distressed properties are available as foreclosed realty or REO homes available from banks. Even new foreclosure property sells at a considerable discount, so buying distressed properties as new foreclosures can set you up to get rock bottom deals, which increases your margin for profit.

As long as you make sure to forecast all the potential costs of buying a distressed property, you'll often find some terrific deals on some hot property or a discount house in foreclosure.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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