Distressed Real Estate

Distressed Real Estate: What You Need to Know Before Selling

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Distressed real estate refers to a home or real estate property that is on the verge of foreclosure or has been seized by the lender. A property going into foreclosure could happen due to a lack of finances, deferred maintenance, inheritance issues, unemployment, divorce, medical bills, or increased home expenses.

Selling distressed real estate can be overwhelming, but rewarding for those in need of urgent funds. If you’re on the brink of foreclosure, it’s advisable to know the ins and outs of selling a distressed property. 

In this guide, we’ll give detailed information about distressed property, from what constitutes a distressed property to strategic planning for selling the home, and many more.

What Constitutes a Distressed Property (large rehabs)?

A distressed property usually comes with repair or renovation issues. If a property requires a large rehab, it can impact how long the home would be on the market. But with real estate investors like Buys Houses, selling your distressed home quickly won’t be an issue. 

Large rehabs can involve large mechanical upgrades and structural modifications such as updating electrical wiring, altering the floor plan, plumbing, HVAC, adding walls, or fixing or changing the building’s foundation. If it’s a small rehab or the repair on the property is minor, it can involve renovations such as upgrading the kitchen countertop, repainting the walls, upgrading the lighting, fixing minor electrical problems, painting, replacing outdated carpet and rugs, or improving the entire home’s curb appeal. 

If you don’t have the funds for a small or large rehab, finding a good home-buying company or real estate investor to sell the home to is essential. Real estate investors or home-buying companies usually buy houses even with very large rehabs needed.

Common Reasons Homes Become Distressed

There are several reasons why a home may become distressed. Let’s explore the common reasons.

Financial Difficulties

Homeowners who are experiencing financial difficulties may struggle to pay their mortgage. For this reason, they end up defaulting on their mortgage loan, which can lead to foreclosure. A homeowner can avoid foreclosure by selling the home in its distressed state. This would mean that a buyer buys the home as-is (or in any condition) to help the homeowner receive quick cash for their needs. If you’re selling a distressed property, expect to receive offers lower than market value. 

Deferred Maintenance

When a home isn’t in good condition due to neglect or a lack of upkeep, major issues begin to occur, which makes the property distressed and reduces its appeal to potential buyers. In this case, a home-buying company comes to the rescue, as these companies buy distressed real estate properties in any condition.

Inheritance Issues

Some new homeowners who inherited real estate properties may not have the finances to maintain the home or continue paying the mortgage. In this case, they would decide to sell the house quickly to rid themselves of the stress of taking care of the property. At times, the property may not fit the new homeowner’s lifestyle or there may be conflict with other family members, and selling the distressed property would be the best option.

Implications of Selling a Distressed Property Compared to a Standard Home Sale

Selling a distressed property differs greatly from a standard home sale. We’ll consider how it differs in this section.

Low Price

If you want to sell a distressed property, you need to be open to receiving a discounted price or offers lower than the market value due to the price of a rehab.  The cost of labor and materials continues to rise and this needs taken into consideration.

Longer Time on the Market

Finding the right buyer to sell the home to can take a much longer time especially when the house needs to be renovated. If you want to sell a distressed home quickly, you have a better chance of selling through a home-buying company than hiring a real estate agent or listing the property on the MLS.

Disclosure Requirements

Compared to a cash-buying company like Buys Houses, a standard house selling on the MLS requires more paperwork and disclosures. When selling to Buys Houses, we buy property as-is, meaning the buyer understands it’s bought as-is, making this process much easier.  Also, cash home buyers do not complete inspections when reviewing the house on-site since they are experts at renovating homes.

Checklist to Get the Home Ready for Sale

Preparing a distressed home or property for sale involves good planning. Use this checklist to guide you through the process:

1) Conduct Assessment

Do a thorough inspection to identify all the areas of your property that need repairs.

2) Improve the Visual Appeal

You can do minor upgrades like repainting the walls, rearranging the furniture, adding more accessories, or updating the light fixtures to enhance your home’s outlook.

3) Do the Important Repairs

Since potential buyers are more likely to buy a house that is in good condition compared to one that isn’t, it would be a great idea to focus on vital repairs that can improve the appearance and comfortability of the home. Repairing leaks, fixing broken windows, improving the property’s safety, or replacing damaged door handles are just some of the necessary repairs you can do.

4) Maintain the Landscape

Mow the lawn and lay fresh mulch to protect the soil and of course, enhance the outdoor appearance.

5) Do Deep Cleaning

Who doesn’t like a clean home? No one! A clean house is inviting and comfortable. You can hire professional cleaners who will give your home a thorough cleaning. The last thing you want is for a potential buyer to see a dirty pantry, unclean kitchen, or other areas of the house that are unkempt.

Factors That Affect The Pricing of a Distressed Home 

Some of the major factors that influence the pricing of a distressed home include its location, condition, or market trends. We’ll discuss them here.

Location / Location / Location

The location of a real estate property can affect how much it would cost. The pricing of distressed property in urban or more desirable areas tends to be higher than those in less desirable places.


The state or condition of the home would also affect the pricing drastically. If a distressed property needs a lot of repairs or renovations, it would likely only receive cheap offers or prices way below the market value. If your home is in great condition, there’s a higher chance of getting better offers.

Market Trends

Market trends can also significantly affect the prices of real estate property. If there are more available real estate properties than buyers in the real estate market, then house prices would need to drop to attract potential buyers. However, if there are more buyers than available real estate properties, sellers can increase the real estate prices to get more profit.

How to Determine a Fair Price That Attracts Buyers While Still Meeting the Seller’s Needs

To determine a fair price, research the prices of similar properties in the same location (both distressed and non-distressed homes). You can also consult a home-buying company to get advice. 

Avoid having unrealistic pricing expectations. Distressed homes usually sell quickly at a price well below the market value due to the rehab needed. Be transparent about the home’s condition whether it is descent shape or still needs major repairs. 

Selling Fast: How to Expedite the Sale of a Distressed Home

Strategies to Speed Up The Sale Process: Working With a Real Estate Investor Or a Cash Buyer

Selling a distressed home quickly can be very helpful for homeowners dealing with a difficult financial situation or other important issues. In this section, we’ll discuss effective ways to expedite the sale of your distressed home.

If you want to partner with a real estate investor or a cash buyer, selling your home won’t be a hassle. Real estate investors or cash buyers buy houses in any condition or as-is. They close the sale quickly, offering you a fair price for your home. With a cash buyer, you don’t need to go through the headache of lengthy paperwork.

Benefits of Quick Sales for Distressed Properties

There are several benefits of a fast sale for distressed properties. Here they are:

Financial resolution for financial issues. A homeowner going through a difficult financial situation can benefit from selling their distressed home to help them with funds quickly.

Reduces carrying costs. Quick sales for distressed homes reduce ongoing carrying costs such as maintenance expenses, mortgage payments, and utilities since you would lose ownership of the property and wouldn’t need to pay those costs.

It prevents the property from depreciating on the market. A quick sale reduces further depreciation of the already distressed property. With a quick sale, a property doesn’t need to be listed as it can be sold quickly through real estate investors or a cash buyer.

Financing Options for Buyers of Distressed Homes: What Sellers Need to Know

There are different financing options available for buyers of distressed homes. Let’s discuss them here.  Note, the loan options below can take time to get approved and you will need to handle the renovations with competent contractors in your area.

Financing Options Available for Buyers Interested In Distressed Properties

Renovation Loans 

This type of loan provides funds for purchasing the property and for renovations that need to be done. Renovation loans are ideal for properties that need a big or significant improvement to improve the living standards of the home.

FHA 203(k) Loans

This loan combines the home’s purchase price plus renovation cost into a single mortgage. It is also backed by the FHA (Federal Housing Administration). The qualifications of FHA 203(k) loans are more lenient than renovation loans since they’re insured by the government.

How These Options Can Help Sellers Market Their Property More Effectively

When sellers have a sound knowledge of the different financing options, it will help them improve their marketing strategy. As a seller or homeowner, you could renovate your home to gain market price but remember this process can take a lot of time.

How to Work with Real Estate Investors When Selling a Distressed Home

The Process of Selling to a Real Estate Investor

Selling a distressed property to a real estate investor can be a great option for homeowners with financial difficulties. Selling to a cash buyer or real estate investor is different from the traditional home sale. Let’s explore the process.

  1. Look for a reputable home-buying company like Buys Houses (cash home buyer or real estate investor) in your city. Ask your trusted contacts or use a search engine like Google to gain recommendations.
  2. Check the website for reviews to assess their credibility.
  3. Contact them to discuss the property you want to sell.
  4. They will go to the location of your property to assess its value.
  5. If the real estate investor is interested in buying the property, they would give you a fair price offer that works for you and the investor. With Buys Houses, it takes only one day.
  6. Then close on the home and receive a fair cash offer and rid yourself of the rehab burdens.

Benefits of Selling a Distressed Home to a Real Estate Investor

Selling As-Is. Investors typically buy houses in any condition, which saves time, money, and energy needed to do repairs.

Reduced Stress. Selling your distressed property to a real estate investor is less stressful.

Fast Sale. Selling to a real estate investor is fast. You can close on the sale quickly, allowing you to receive cash fast.

Cash Offer. Investors usually pay in cash, which makes it a fast process as you avoid the hiccups associated with financing issues.

Expertise. Investors are experts in dealing with distressed homes, making them ideal buyers for distressed homes.

Hassle-free Selling Process. Selling through real estate investors is straightforward. No need for long paperwork or delays.

Prevent or Avoid Foreclosure. If you want to sell a home on the verge of foreclosure, real estate investors are the best buyers to sell to. They understand how stressful foreclosure can be for homeowners, making them ideal buyers.

No Repair Costs. Sellers are not required to pay for repairs. The real estate investors pay for any repairs that would be done on the property.

No Staging. Since you can sell your home as-is, you don’t need to go through the hassle of repainting, rearranging furniture, or making other changes. Real estate investors buy the houses even if they’re not attractive (or in a poor state).

Homeowner Resources: Where to Find Help When Selling a Distressed Property”

Several resources would help you easily navigate the selling process for a distressed property.  Let’s highlight and briefly discuss some of these organizations or resources.


The U.S. Department of Housing and Urban Development (HUD) offers helpful resources through its HUD-approved counseling agencies. These counseling agencies provide homeless counseling, mortgage advice about avoiding foreclosure, and recommend other mortgage options for you. Their counseling services are usually free or at a low price. You can find local HUD-approved counseling agencies by visiting HUD’s website.

Local Housing Authorities 

Local housing authorities may offer programs for distressed properties, such as rehabilitation loans without interest or financial assistance for rent to prevent eviction or foreclosure. Contact your local housing authority to know the necessary programs and their eligibility requirements. Depending on the location, some housing authorities offer different housing offers or benefits. Through the local housing authority, affordable housing is available for low-income earners. Here is the link to the Local Housing Authority in Pennsylvania.


NeighborWorks America is a non-profit organization that assists homeowners facing financial hardships. They offer housing rehabilitation grants and loans to homeowners, provide foreclosure counseling, give financial education, and offer other helpful programs. You can find nearby NeighborWorks organizations by contacting them through their website.

Distressed Real Estate: What to Do Today!

Selling distressed real estate can be daunting if you don’t know what steps to take. If you list your property for sale on the Multiple Listing Service (MLS), you may not find a buyer or be able to sell it on time. But with a home-buying company like Buys Houses, selling your distressed property won’t be an issue. We don’t mind what repairs still need to be done on your property. If you want to sell your distressed property, we are ready to buy it. Contact Buys Houses today to sell your distressed property quickly and hassle-free.