Distressed properties - Is it a good time to buy?

If you are in the market for a new home now is a great time to buy distressed and repossessed properties. This comes as a result of the low interest rates and available stock in the property market. While not every home will be a bargain, you can stand a chance to cash in on a great deal. The key is to spot a worthy investment and see the potential of the property. 

Taking into account the recent Coronavirus pandemic and an increase in unemployment, many homeowners were not financially able to continue paying off their loans. This caused their properties to go into distress. 

There are three types of distressed properties to keep an eye out for:

Bank assisted sales

Bank assisted sales are possible when the homeowner enters into a voluntary program with the bank to market the property with an approved estate agency. The seller may still reject your offer to purchase if they find it unsuitable. However, in some instances, the seller can accept a lower offer in order to prevent the property from being auctioned.

Auctions 

An auction or sale in execution is the next step if a property is taking too long to be sold. The bank will then need to obtain a High Court approval in order to sell the property at an auction. 

This is where you as a buyer can score a great deal. Property sold in this stage is often at a much lower value. However, there may be other expenses attached to the sale such as outstanding rates and taxes. 

Bank repossessed properties

If a home did not sell during an auction it becomes a bank repossessed property. An estate agent is tasked to re-market the home. At this stage, the bank has a final opportunity to recover any losses. 

In most cases, the property is priced below the market value to secure a quick sale. You will need to evaluate the situation as determine if the property is worth purchasing since many of these bargains come with high renovation costs attached. On the plus side, you will not be required to pay any transfer duty on a bank repossessed property.

Tips for buying a distressed or repossessed property

If you have no experience with purchasing distressed properties, you may meet a few challenges on the way. Conduct as much research as you can about the area and the property you wish to acquire.

Here are some key points to consider:

• Get pre-approved finance. Some banks do not offer pre-approvals and you would need to sign an offer to purchase before applying for finance. Other banks have special distressed divisions that deal with pre-approvals. 
• Ensure your documents are in order - such as proof of funds or a pre-approved financial status. It comes in handy when trying to secure a deposit as a firm offer to the bank.
• Once your finance and the agreement to purchase is in order then the purchasing process becomes pretty similar to buying a normal house.

Is it a good time to buy?

Buying a distressed or repossessed property can be the right move for you if your timing is good. Just as purchasing a normal property, you need to analyse your situation and evaluate your purchasing power.

Consider the following:

• Do you have the financial stability to take on the extra costs that are attached to a distressed or repossessed property?
• Do you have the time and drive to renovate a property if it is in a bad condition?
• Are you looking for a family home to move in straight away? Will the desired distressed property give you this freedom?
• While the property comes with a bargain price tag, do you see yourself living here? Will the area attract tenants?
• Is this a great investment that will have positive results in 5-10 years?

Are you looking for the perfect property to call your home or help build your real estate portfolio? Contact Knight Frank Properties today and we will help you make your property dreams a reality.