A distressed property is a home facing financial or physical issues, like foreclosure, tax liens, or major repairs. Selling a distressed property can be a more challenging experience than a traditional sale due to financial strain, emotional stress, a more limited buyer pool and the urgency to sell in order to avoid foreclosure or other legal consequences.
But with the right knowledge and approach, you can get the outcome you want and deserve. In this guide, we’ll walk you through your options when selling a distressed property, helping you maximize your chances of a successful sale.
One route to consider is selling through a cash buyer, like Florida Cash Home Buyers. We can close the deal quickly, often within a few weeks, so you can sell your house fast, helping you avoid foreclosure and providing immediate financial relief. Plus, we’ll buy your property as-is, so you don’t have to worry about repairs or renovations. And since cash transactions don’t rely on financing, the sale is a lot less likely to fall through. Contact us today for a fair, no-pressure cash offer.
Types of Distressed Properties
You may think of a distressed property as a home in bad condition, but that’s not necessarily true. A distressed property is a home that’s in financial or physical trouble. Often, the owner can’t keep up with mortgage payments and faces foreclosure. The home might also need extensive repairs or have tax liens. Because of these factors, the seller may consider accepting a lower price to sell quickly and avoid getting further into debt.
The main types of distressed property sales are:
- Short sales: This happens when the homeowner owes more on their mortgage than the home is worth. The homeowner sells the property for less than they owe with the lender’s approval. This can help the homeowner avoid foreclosure.
- Tax & bank foreclosures: Foreclosure happens when the homeowner fails to make mortgage payments or pay property taxes. The lender/county usually takes back the property in what’s called a repossession. Sometimes the lender will accept a deed-in-lieu instead and assume ownership of the property that way. The home is usually sold through a foreclosure sale or at auction.
- Real estate-owned (REO) properties: These are homes that didn’t sell at a foreclosure auction. Lenders often don’t want the responsibility of maintaining or repairing these properties and are trying to sell them quickly, usually at a discount.
- Significantly damaged homes: A homeowner may not be able to afford maintenance or repairs on their home, leading to an as-is sale. If the property is in poor condition, lenders may not provide financing to traditional buyers, making cash home buyers or investors a desirable option.
If you need to sell a distressed property, Florida Cash Home Buyers is here to help. We have experience purchasing all types of homes. We work with a team of real estate pros and experts in short sales who can guide you through the process, even if your home is facing foreclosure.
Limitations of Selling a Distressed Home
Selling a distressed home can be difficult due to many factors. These are some of the difficulties you might face if you’re trying to sell a distressed home:
- Lower market value: Distressed homes often require repairs, making them less attractive to buyers and leading to lower offers.
- Risk of foreclosure or debt creates time constraints for sellers: The risk of foreclosure or accumulating more debt can put pressure on sellers to sell quickly, potentially limiting their options.
- Limited buyer pool: Most buyers are deterred by the challenges associated with buying or owning distressed homes, like repairs and legal issues.
- Financing challenges for buyers: Traditional buyers may not be able to get financing due to the property’s condition or financial state.
Given these challenges, selling your distressed home for cash can be a good option. Cash sales through an experienced buyer offer a quick and hassle-free process, allowing you to close the deal without worrying about repairs or financing contingencies.
Distressed Home Selling Options
Understanding your options is key to any successful sale, and especially when you’re dealing with a distressed property. Let’s go over some of the most common ways to handle it and the pros and cons of each.
Cash Buyers
A cash buyer pays for a property outright without their own money, not a loan. This can make the closing process much faster and simpler. Cash buyers are often investors or people looking for a quick deal.
Selling to a cash buyer can be a good option for distressed properties, especially if you’re facing foreclosure, because they usually close quickly. Cash buyers often buy properties “as-is,” so you don’t need to make repairs or any further investment.
Pros of selling to a cash buyer:
- Fast closing: Deals often close within a few weeks.
- No need to handle repairs: You don’t need to repair anything before the sale.
- No appraisal required: A professional assessment of the property’s value usually isn’t necessary.
- No financing contingencies for the buyer like needing to obtain a mortgage: The buyer doesn’t need to get a loan, so the sale is less likely to fall through.
Cons of a cash buyer:
- Lower offers to factor in the cost of repairs: Although you’re offered a fair price, offers are typically 20% less than the market value, because they’re buying the property as-is.
- Limited negotiations: There might be less room for negotiation compared to traditional selling methods.
Before working with a cash buyer, do your research on the company to make sure they are not a scam and ask them to show you proof that they have the funds to close the deal.
At Florida Cash Home Buyers, we’re transparent about how our process works and how we calculate legitimate cash offers. If you’re curious about how much you’ll lose selling a house as-is, read our in-depth article which breaks down different scenarios and covers the pros and cons.
Short Sale
A short sale is when a homeowner sells their property for less than what they owe on their mortgage — with the lender’s approval.The homeowner works with their lender to sell the property and the lender accepts the sale proceeds, even if it doesn’t cover the entire mortgage debt. A short sale might be a good option for selling a distressed property because it can help you avoid foreclosure.
Pros of a short sale:
- Avoid foreclosure: You can keep foreclosure off your record.
- Debt forgiveness: The lender might forgive part of your mortgage debt.
- More control: You have more control over the sale process than you would in a foreclosure.
Cons of a short sale:
- Negative impact on credit: While less damaging than foreclosure or accumulating debt, a short sale can still hurt your credit score, making it more difficult to obtain credit in the future.
- Tax implications: The forgiven debt in a short sale might be considered taxable income by the IRS, so you could owe taxes on the amount of the mortgage that you didn’t repay.
- Longer process: Short sales can take longer to complete than traditional ones due to the need for lender approval and complex negotiations.
If a short sale sounds like a good option for you, contact us today. We work with a team of short sale negotiators and real estate professionals who specialize in these transactions. Even if you’re right up against a foreclosure auction, there’s still time, and we can help you find a better solution.
Auction
This option is typically used by banks or lenders who are foreclosing on a property, but there are also platforms for homeowners to sell their home at auction such as: Hubzu, Xome, and Auction.com.
In a real estate auction, properties sell to the highest bidder. Auctions can be held in person or online and usually attract buyers looking for deals on distressed or foreclosed properties. Bidders usually need to provide proof of funds or a deposit, and the sale can get finalized fast, often within 30 to 45 days.
An auction sale can be a good way to sell a distressed property because it’s fast and can attract cash buyers. The competition between bidders might also increase the sale price. However, if the sale price doesn’t cover your mortgage debt, you’re still responsible for the difference.
Pros of an auction sale:
- Fast sale: The sale can usually be completed fast.
- Competitive bidding: Multiple buyers can compete for the property, potentially increasing the sale price.
- As-is sale: Buyers usually purchase the property in its current condition.
- Pre-qualification criteria ensures successful sale: Bidders must meet certain criteria to participate, ensuring you’re working with serious buyers.
Cons of an auction sale:
- Limited buyer pool: There might be fewer potential buyers than in a traditional sale.
- Lower selling price: Auctions often attract bargain hunters, which means you might get lower offers.
- Auction fees: You might need to pay auction fees to participate.
- No control over the final sale price: You can’t set the final sale price — it’s determined by the bidders.
Work with a Real Estate Agent Who Specializes in Distressed Properties
Working with a real estate agent can be helpful when selling a home, especially something more complicated like a distressed property. Agents have expertise in navigating the process of selling, from market analysis and pricing strategies to marketing and closing. They can help you prepare your home for sale, create a marketing strategy to draw in potential buyers and handle negotiations.
Agents who specialize in distressed properties have experience and knowledge tailored to these challenging sales. They can accurately price your property based on its condition and current market demand, attracting the right buyers like investors or cash buyers.
Pros of working with a real estate agent:
- Accurate pricing: They can help you set a fair asking price.
- Targeted marketing: They can market your property to the right buyers.
- Negotiation expertise: They can help you negotiate with buyers effectively.
- Handling of complicated paperwork: They can manage the complex paperwork involved in the sale.
Cons of working with a real estate agent:
- Commission: You typically must pay an agent commission, usually around 5 to 6% of the sale price.
- Potential conflicts of interest: In some cases, an agent might prioritize their commission over your best interests, pushing for a higher sale price that could delay the sale or complicate negotiations.
- Longer selling time: Selling through an agent might take longer than selling directly to a cash buyer or through an auction due to steps like marketing.
How to Sell Your Distressed Property
Selling your home can be an overwhelming process. Here, we’ll break down the necessary steps — you can use this section like a checklist to ensure you cover all your bases.
And remember, you can skip all these steps and get the ball rolling today by contacting Florida Cash Home Buyers. We pride ourselves on offering quick, simple and fair transactions to homeowners in need. Reach out anytime to see how we can help you.
Choose Your Selling Method
We’ve laid out the most common selling methods above, along with their pros and cons. Weigh the upsides and downsides for your situation to see which one works best for you.
If you choose to go the more traditional route and work with a real estate agent, reach out to them as early as you can. If you want to skip the hassle and go right to a fast sale, a cash home buyer might be your best bet. Contact us for a no-pressure offer today.
Gather Documentation
Before you even list your home, track down all the paperwork related to your homeownership as well as any changes you made to the property during the time you lived there. These will include:
- The deed and any other documents related to your purchase of the home
- Homeowners insurance policy documents (keep your coverage until the sale is closed)
- Homeowners association (HOA) documents, if applicable
- Home improvement and repair records, including home inspection report, if applicable
While it isn’t required, it’s customary for sellers to give the buyer manuals for the home’s major appliances and systems, plus any warranty documentation you might have.
Determine the Price
Now, the biggest question — what’s your home worth? The short answer is, it won’t be worth the same as you paid for it when you moved in years ago. If you’re dealing with a distressed property, you’ll have to account for wear and tear too, anything that could affect the property value.
Factors that influence your home’s value include:
- Home size (square footage)
- Age
- Location
- Local market conditions
- Comparable homes that have sold recently
- Necessary repairs and renovations
To accurately price your distressed property, research recent sales of comparable properties in similar conditions that sold in your area. If you’re feeling lost, reach out to a professional with experience in the real estate market selling homes like these. Also, remember that Florida law requires you to disclose any known material defects to the buyer before the sale closes, so keep it transparent.
Stage and Market the Home
Even if your home’s a fixer-upper, it’s still important to present it in the best possible light. All types of property, distressed or not, benefit from a bit of tidying up:
- Spruce up the yard. Minor landscaping tasks can go a long way. Mow the lawn, trim overgrown bushes, remove weeds and add fresh fertilizer for the lawn and plants.
- Tidy outdoor spaces. Wash the deck, driveway and patio. Fix any broken fence panels and put away any outdoor equipment, like tools and garden hoses. Homes in disrepair only highlight their poor condition when outdoor spaces aren’t neat.
- Brighten up the front porch. Paint the front door, put out a new doormat, clean the light fixtures and put in new bulbs. The porch is part of that first impression, so you want to project a positive look.
- Clean the home interior. Inside the house, go for a deep clean. Dust vent covers, touch up any paint where needed, address any visible water damage and replace any burned-out light bulbs to keep everything looking sharp and well-maintained. Clean out and organize closets and drawers, put away appliances, tighten loose door knobs and organize furniture.
Once your home is ready, market the property online or through a real estate agent. If you’re selling at auction, prepare a property packet to attract buyers. You can also promote your property to real estate investors.
Negotiate the Sale Price and Close the Deal
Negotiating the sale price can be challenging for distressed properties. Be prepared to counter offers strategically, emphasizing any improvements you’ve made. But try to be realistic, too. Know when to accept an offer or walk away to avoid feeling seller’s remorse.
Once you’ve reached an agreement, the closing process involves transferring ownership to the buyer and receiving payment. You’ll need to settle any outstanding debts, pay closing costs and commissions and ensure any promised repairs are completed. The closing can happen in person or online, and you might not need to attend if you pre-signed documents. After you close, vacate the property by the agreed-upon date.
Seller’s Responsibilities After the Sale
After you’ve completed the sale, make sure to report it to the IRS and handle any tax implications. You might need to consult with a financial advisor or tax professional to make sure you know the legal requirements and to help you manage the sale proceeds in the best way.
Cancel your property insurance and transfer utilities to the new owner. Keep detailed records of these transactions for tax purposes and for your own security.
Finally, don’t forget to take care of yourself. Selling a distressed property is a huge undertaking and can be an emotionally challenging experience, especially when it takes place under urgent circumstances. Don’t be afraid to seek out emotional support from family, friends, or even a counselor or support group. The hard part might be over, but the next phase is a big adjustment, too.
Get An Offer On Your Distressed Property
At Florida Cash Home Buyers, we work with sellers in difficult situations all the time. We know how hard it can be to move a distressed property, especially when you’re facing foreclosure or your options are limited.
You don’t have to go through this alone. Whether you’re dealing with foreclosure, relocation, property repairs, or just need to sell fast, Florida Cash Home Buyer has your back. Our fair, no-obligation cash offers provide a quick and hassle-free solution to help you move forward on your own terms, often in as little as 15 to 30 days. Contact us today and see how we can help.