real estate

Are Distressed Homes Worth the Hassle?

Lured by the prospect of a spectacular deal, many buyers start their search with short sales and foreclosures, only to discover that those properties come with more baggage than they bargained for.Distressed properties may be concentrated in undesirable areas.

Lured by the prospect of a spectacular deal, many buyers start their search with short sales and foreclosures, only to discover that those properties come with more baggage than they bargained for.

Distressed properties may be concentrated in undesirable areas. They are often in poor condition because strapped owners either couldn't afford to maintain them or stripped them before moving out. Lenders have learned to low-ball prices on short sales and nicer bank-owned foreclosures, known as REOs, in order to attract a frenzy of bids that ultimately jack up the price. Investors nabbing deals with cash often beat out buyers who require financing and protective contingencies in their contracts.

Short sales can take months to gain lender approval and close, and banks often won't start the process until they have an offer. Some multiple-listing services now require sellers to indicate whether the lender has yet to approve the short sale ("pending approval") or has approved the short sale and price, which spells a much quicker closing. Beginning in April, lenders participating in the federal Home Affordable Foreclosure Alternatives program must respond to offers on "price approved" homes within ten days of receiving an offer.

Looking for a deal on a condo? Be careful. For example, in Miami, so few owners are paying up that association fees are skyrocketing and condo associations are going bankrupt. Buyers who need financing are all but locked out because Fannie Mae, Freddie Mac and the FHA won't back loans in buildings dominated by investors and delinquent owners. You'll have lots of competition to buy in buildings that do qualify. If you decide to shop for a condo anyway, look for buildings with high occupancy (how many lights are on at night?), and talk to current residents.

Most Popular

Yes, You Can Collect Social Security from an Ex-Spouse: Here’s How
social security

Yes, You Can Collect Social Security from an Ex-Spouse: Here’s How

It’s always smart to maximize your Social Security benefits, and if you are divorced, one way to do that might be to take them based on your ex’s earn…
May 13, 2021
Refunds for $10,200 Unemployment Tax Break to Begin This Week
Coronavirus and Your Money

Refunds for $10,200 Unemployment Tax Break to Begin This Week

The IRS will start issuing automatic refunds in mid-May to people eligible for the unemployment benefit tax exemption.
May 14, 2021
Updated Exclusive Social Security Benefits Forecast: COLA Likely to Jump to 4.5% in 2022
Economic Forecasts

Updated Exclusive Social Security Benefits Forecast: COLA Likely to Jump to 4.5% in 2022

This would be the largest cost-of-living adjustment for Social Security benefits since 2008.
May 12, 2021

Recommended

11 Places That Will Pay You to Live There
real estate

11 Places That Will Pay You to Live There

Working remotely? You may want to check out these places that'll pay you to move there.
April 23, 2021
12 Cheapest Small Towns in America 2021
real estate

12 Cheapest Small Towns in America 2021

Affordable small towns aren't necessarily the best places to live for everyone, but each cheap small town on our list has its charms.
April 15, 2021
This Hot Housing Market with Daniel Bortz
Becoming a Homeowner

This Hot Housing Market with Daniel Bortz

Home sales and prices have been on a tear and are forecast to continue to rise in 2021. Whether you're hoping to sell, buy or refi, contributing write…
March 31, 2021
Home Buyers Loving the Suburbs Again
Becoming a Homeowner

Home Buyers Loving the Suburbs Again

Urban condos found little love as telecommuting home buyers bid up prices far from city centers.
January 27, 2021