However, there are mechanisms for a systematic search for owners whose financial problems are related to the inability to pay off a mortgage loan. Information about those who delay loan payments can be obtained for free or bought, and such real estate itself falls into the category of distressed properties, which literally means "property in difficulties". It is clear that it is not the property itself that is experiencing difficulties, but its owner.
Problems and their solution
In a broader sense, distressed properties are properties either sold by the owner under the influence of financial problems, or put up for sale by the mortgage holder – most often by a bank or mortgage agency. The selling mechanism can be an auction or an open offer. Two more possible scenarios are the sale of real estate as a result of the bankruptcy of the owner or due to repayment of tax arrears.
It is not necessary to wait for the auction. You can directly contact the problematic owner and find out if he wants to sell his house. If his situation is really hopeless, he will gladly agree and can give a good discount, because he is interested in not bringing the matter to default on a mortgage loan and thus preserve his credit rating, which is very valued in the West.
Defects and their fans
What exactly should be done to buy a "crisis" property abroad? Here, alas, everything is not so simple. Most of the companies operating in our market do not work in this segment and generally do not advise buying such "defective" real estate.
However, you need to understand that distressed properties, in fact, can be sold in any area and in any price category. It is no coincidence that this segment has thousands of fans among foreign private investors. And do not confuse such houses with drowned cars, bought cheaply at American auctions and resold at exorbitant prices in Russia.
The auction procedure is very simple. All documents are in perfect condition. It is enough to make the highest bid, pay the money and become the owner. However, there are scenarios when you can not do without a realtor. Firstly, the agent can advise what and for what money it makes sense to buy in this area. Secondly, already seized real estate can be sold not only through an auction. And finally, you can't do without an agent if the owner decides to sell the house himself, without leading to default.
For foreigners – green street
Such sales are now very common in Spain. According to Natalia Smola, director of the real estate agency Al Marjane XXI, the procedure for buying "embarged" objects, the renewal of ownership of which has already been completed, differs from the usual one only in that the seller is a bank, as well as an attractive price. Interestingly, when buying such real estate, foreigners can get a loan for 80% of the cost of housing, whereas when buying from a developer or owner, they do not have to rely on a mortgage for more than 60% of the cost.
You can contact real estate agencies, which are the official agents of banks for the sale of real estate, or the banks themselves. The latter is somewhat more difficult, according to Al Marjane XXI, since employees of bank offices cannot provide detailed information about the facilities themselves. "There are enough agencies in Spain that offer distressed properties, provide legal verification and transaction support,– says Natalia Smola. "Russians may well take advantage of this opportunity and purchase a piece of the sunny coast as their property."
The purchase of real estate from the owner, in respect of whom the procedure for "taking away" housing for debts has just begun, has other features: "In this case, it is necessary to enlist the support of an experienced lawyer who will check the status of housing, the possibility of its renewal and calculate expenses, since at this stage, as a rule, in addition to the principal amount of debt, there are also interest for non–payment, legal costs, etc.," says Natalia Smola.
The biggest sale in the world
In a conversation on the topic of distressed properties, it is impossible to bypass the United States, where this "segment" of the market has reached an astronomical magnitude – 2 million objects, that is, about half of the total market volume! In the United States, real estate falls into this category when the owner begins to delay or stop monthly mortgage payments to the bank, or at the request of the tax service or collection agency. This also includes housing that has already been put up for sale by the lender.
Lists of such objects are publicly available, but it is much more convenient for an investor to use paid services that allow you to receive complete information about all such listings in real time via the Internet. For example, you can find out which auctions are planned in a certain area, as well as study the profile of a given territory: local taxes, infrastructure level, crime index, etc. Through the same service, you can find out the contacts of specialized agencies. The portal is considered to be the leading service providing such listings in the USA www.bankforeclosuressale.com . The
purchase of real estate seized by the bank from the borrower is considered an almost risk-free operation in the United States, since by the time of the sale under the hammer all debt obligations have already been settled, including to other parties, and the bank has a clean title. Many houses are sold at a time when the foreclosure procedure has already begun, but the object has not yet been alienated by the bank or the state. At this time, the owner retains the right to sell the house himself, for which he has to make substantial discounts. Experts assure that at this stage it is possible to buy a house 30-60% cheaper than the market. Therefore, experienced private investors "attack" the owners from the moment the foreclosure procedure begins until the day of the auction.
Flip That House
When buying distressed properties, you need to keep in mind that these are most often houses that are not in the best condition. Therefore, they are often bought by small investors who earn money by repairing houses and quickly reselling them. In the USA, such people are called flippers, and how this is done can be found out from the program Flip That House with Tommy Walsh on the Discovery Travel & Living TV channel.
Anyway, if the purchase is made "for yourself", then it is necessary to take into account the cost of repairs. Moreover, for a foreigner, repairs can generally become a problem if he cannot constantly monitor the process. Therefore, most experts are cautious about distressed properties, believing that this is the most difficult market and that finding a pearl in a pile of "garbage" is a very difficult task.
There are other possible surprises hidden behind the attractive prices of "crisis" real estate. For example, in some countries (including the USA), after the auction, the buyer must evict the family himself, who most likely still lives in the house and who may have nowhere to go. Although the law and the police will be on the buyer's side, but the situation, you must admit, is not pleasant!
Nuances sing romances
In fact, you can find very interesting offers on the distressed properties market, but their selection must be carried out professionally. The professionals themselves are in no hurry to reveal their secrets, but explain that the choice should be made not so much by the physical characteristics of the objects or their location, but by financial nuances that determine how much sellers are ready to "fall" in price. In general terms, the more of the loan is paid off, the more flexible they turn out to be.
But the main caveat is that prices "below market" do not actually exist. If a good object is sold very cheaply for some reason, then most likely there will be several buyers for it, and as a result, the price may rise significantly. It is no coincidence that American realtors call distressed properties the most illusory and elusive segment of the market. The good news is that at the moment of crisis, quantity turns into quality, since the total amount of free money from investors is simply not able to absorb all the offers that have flooded into the market related to the ruin of former owners.
