HGTV has turned flipping houses into a romantic way to build your dream home. A lot of people dream of flipping a house, either to resell for a profit or live in.
Distressed houses make for great fixer-uppers because you can purchase them cheap. That gives buyers more money to make their vision come to life.
If you’re done dreaming and you’re ready to make it a reality, then the first step is to find a house with potential. But you may wonder how to find distressed properties.
What Is a Distressed Property?
A distressed property is a house that’s either in financial or physical distress. Many times these homes are foreclosures or bank-owned.
Some ways a house is considered distressed include:
- The property has delinquent taxes
- Unpaid mortgage payments
- Properties that have to be sold for legal reasons (divorce, bankruptcy)
- Properties sold out of probate
- Bank-owned properties
- Government-owned properties
Typically, the owner of distressed property is in a situation where they’re motivated to sell for a lower cost than market value.
Pros and Cons of Distressed Properties
You’re drawn into a property because of the price. But don’t let a seemingly good deal fool you. Most of the time distressed properties are not move-in ready. And they may have some unwelcome surprises.
The pros include:
- Cheaper than average market costs
- Fixer-upper could bring in a profit
- Get into neighborhoods you wouldn’t otherwise be able to afford
- Bank-owned properties have easy financing
The cons include:
- The home may need more renovation than you initially thought
- It could end up costing a lot of money to fix
- Competitive buyers market
- It may not sell or you may not get your money back
Buying a distressed property is an investment. Like most other investments, it poses risks. Make sure to weigh the risks for each property you’re interested in.
Thankfully, if you end up buying a property and ending up over your head, you can always just get rid of it.
How to Find Distressed Properties
Finding a good fixer-upper is sometimes like finding a diamond in the rough. Your best option for finding a promising property is to comb all your sources.
Property Auctions
Keep an eye on your local paper and online for home auctions. Distressed houses are often sold at an auction.
Distressed Property Websites
Many real estate websites focus solely on distressed property listings. Some of these websites are Auction.com and Foreclosure.com. It doesn’t hurt to do a quick google for distressed properties listings.
Drive-Bys
Sometimes your best option is to drive around the neighborhood you want to buy in. Look for houses with overgrown lawns, lights turned off, broken windows, or piled-up mail.
Tax Assessor
Check your local tax assessor’s website for a listing of all the foreclosed houses in your area. This may be hard to find at first, but a Google search should send you there.
Government Agencies
Occasionally the government will seize properties for various reasons. The US Marshall and the IRS often seize properties for illegal taxes or other activities. You can check government websites for a list of their properties for sale.
There are a lot of sources for distressed properties. You may have to get creative when searching. Don’t give up if you don’t find a house right away.
Get More Helpful Content
If buying a distressed house sounds like a good idea for you, then go for it! Finding and restoring a house to resale or live in is a very rewarding process.
If this article helped you learn how to find distressed properties, then check out our other blog posts!
