Understanding the types of Distressed Property before Investing

Understanding the types of Distressed Property before Investing

You may have heard a little about distress property. This is often heard amongst investors who are trying to find asset sold in below market value. However, there various types of distressed property you need to know before deciding to invest in. The main reason why many investors buy distressed property is lower price. Besides, they also have more opportunities to add the property value to increase they income or profit. There are also many reasons why a property in distressed. Immediate needs in cash are one of the most common reasons. Other reasons include separation, relocation, disrepair, and financial problem.

Types of distressed property you need to know


Investing in distressed property is considered to be promising. You can buy the property in owner price while still maintaining to increase its value. However, you need to know as well that adding value means you need steady finance to cover all the expenses caused by renovation, improvements or repairs. It is also important for you to know exactly the type of distressed property you can buy. Here they are:


  • There is short sale property in which homeowner has difficulties in solving their financial hardship. Thus, they sell the property after having mutual agreement with the lending institution. This is like an alternative route against foreclosure which benefits both homeowner and the lending institution. This type of distress property also allows the lender to avoid some losses.
  • Vacant home is also one of types of distressed property you can find in property listings. There are many reasons why a property is vacant. One of the reasons is because it is abandoned by the owner due to many reasons. You can even identify yourself a vacant property without searching it in the listings. Common characteristics of a property being abandoned are garbage, overgrown weeds, broken windows, etc. You can invest in this type of distressed property and gain opportunity to negotiate the deal in short deals.
  • Next type of distressed property is REO (real estate-owned) in which the property is under the possession of the bank. In simple term, you can call it as bank-owned property. This type of property is often sold in auction. It is also sold via property agent. REO property usually has been through foreclosure. As the result, the property will be vacant. That is when the bank decides to sell it to gain money instead of spending money for expensive maintenance.


There are more types of distressed properties you can find and try to invest in. It is important that you know the type of distressed property you invest in so that you can decide further steps in building your business. There are also many ways you can find property in distressed. You can go search distressed property via public records or drive around a neighborhood to identify it by yourself. You can also visit a bank or visit websites to find your ideal distressed property. Decide one of the types of distressed property you are going to invest in for easier searching.