Welcome to our buyers page devoted to finding and purchasing distressed properties. Distressed sales may include foreclosures, short sales, estate sales or other situations where the seller may be forced to sell their home. Browse the article tabs for subjects that interest you or simply scroll down to start viewing some distressed properties in the Portland area right now.
If you need to sell a distressed property home, see our Portland short sale specialist page.
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Should I Buy a Short Sale or Foreclosure?
Short Sales Foreclosures May Offer Big Savings (If You’re Up To The Challenge
As a Portland real estate agent who has personally negotiated over a hundred short sale (pre-foreclosure) mortgage settlements over the course of the Great Recession, people frequently ask me about how they can save money by buying a distressed property. Like many home buyers, you probably want to save a bunch of money by purchasing a distressed property like a short sale or foreclosure. It’s true, I’ve helped many clients get great deals on distressed properties but you have to make sure can deal with adversity such as bank bureaucracy, longer closing time, possible repairs and limited buying options. As a reference, the chart below shows recent RMLS sold property data that compares short sales with non short sales, with an average savings of around 8% off based on price per square foot. Do you have what it takes to save thousands by buying a short sale or foreclosure? Call me today and let’s get started.
Another factor to consider is that distressed property sellers don’t usually consider “contingent offers.” A contingent offer is when you can’t complete your purchase of the new house without selling your old house first. Banks, estates and short sale sellers will steer clear of contingent purchases because if the buyer is unable to sell their old house then the entire deal unravels. Lastly, if you’re looking for a very specific home in a hot neighborhood it may be less likely that a distressed property will become available within your time frame.
When I was selling dozens of short sales at a time during the Great Recession I once wondered why I had so few listings in Laurelhurst or Ladd’s Addition. The answer was because those neighborhoods were still in high demand and the owners of houses in those neighborhoods are often so well-heeled that they own their property outright or only have minimal mortgage debts. As a result, while they do come up on rare occasion, you don’t see as many short sales and foreclosures in those areas. As a home-buyer looking for a house to live in yourself, the two biggest challenges you’ll often face are time and criteria.
If you have the patience and fortitude to take on one of these unique and challenging real estate purchases, you’ll join an elite group of buyers who get exceptional values and at times even buy into equity. Call me to get started.
Narrow Buying Criteria Lowers Your Chances of Saving Big
Being Picky About Features Location Moves You Toward Luxury, Away From Savings
When buying a home it’s important to clearly define your goals. If your top priority goals are high-end amenities and a prime location then you may find it difficult to save big on a property. On the other hand, the more you’re willing to compromise on location and features the easier time you’ll have finding a good deal. You may decide to look at a potential home as something that you could be okay with living in for the next five years and then either selling or converting it into a rental. Or, it may simply be a matter of a house outside of the prime area being more affordable and thus giving you increased financial freedom. Narrow buying criteria makes a lot of sense when your top priorities are your exact desired area with your must-have features. But, the more must-haves there are on your list, the less chance you have of getting the best deal. For example, in today’s hot Portland real estate market, the best deal on a home in the metro area may be in an outlying area or in a neighborhood that still seems a bit rundown.
The bottom line is that properties priced below market value are rare and there may only be a few that come up in a season. Your chances of buying one of these rare properties become exponentially more rare as the list of must-have features grows and the location map shrinks. While these properties are often described as “up and coming” it is not a 100% guarantee that an area will experience gentrification. Real estate can also be a risk if you don’t have a stable income and the market cools. At other times, new home owners may not plan ahead for costly repairs and deferred maintenance items. That said, over the years I’ve seen many buyers end up saving big on short sales and foreclosure properties that may meet some but not all of their criteria. And, by compromising a little on location or features some buyers are able to make their dollars go much further.
Time is Money When Considering Foreclosures, Short Sales
Short Sales Offer Savings, The Trade-off is Usually Time
When trying to get a good deal on a home, the old adage “time is money” often proves very true. For the buyer, one of the biggest drawbacks to making an offer on a short sale is that the process can take several months. If you’re in a position where you have high pressure to move fast then you not be able to wait long enough to take advantage of the saving of a short sale. Another drawback is that not all short sales close. Although, I do know of a local short sale specialist with an excellent closing record (hint: it’s me). If you have the time to wait out a short sale and the sellers are well-organized and have a good negotiator on their side, a short sale can really pay off in terms of savings. For short sales that fall under federal housing guidelines, it’s common for buyers to see a discount in the 5-10% off of the bank’s assessment of value. In some instances, the discount can be even bigger in those cases where the bank valuation comes in low to begin with. But, before you make a decision to write a short sale offer we’ll pull up comparable listings so you can make your own judgments as to what represents a value to you.
On the foreclosure side of things, if you’re on a tight time constraint, there may not be any available foreclosures in your target area when you need to buy. In today’s hot real estate market, most homes are sold before they go to foreclosure and the few that do end up getting repossessed by the bank often end up with a long line of interested buyers. As a result, you might only see a foreclosure come up in your desired neighborhood a few times a year. In general, banks will start foreclosures at what they consider a higher price and periodically lower the price until someone buys the property. How low will the foreclosure price go? The only way to find out for sure is to wait until someone else buys it and it drops off the market. In this way, watching the price of a foreclosed home is kind of like playing chicken; at any time another buyer could buy the property or you may see the price reduced several thousand dollars in a few weeks.
Despite the drawbacks, buyers who have time, patience and a little bit of luck can and do often realize significant savings when buying short sales and foreclosures. Call me to see what I currently have in inventory and also to learn how my experience can help you know what to expect when you’re involved in one of these fascinating transactions.
Is House-Flipping Right For You?
Big-Dollar House-Flipping Comes With Big Risks
Banks won’t write mortgages on high-risk properties with extensive damage because it’s a dangerous risk that may often result in a bank losing big money. And, when a property won’t qualify for a mortgage the value falls through the floor because very few buyers can/will pay all cash for a house covered in toxic mold or one that doesn’t have basic features like walls, doors or a bathroom. However, at times there are opportunities to buy these broken-down homes and restore them in such a way that one could resell them and (potentially) make a profit. Enter the house-flipper. House flippers buy these fixer-uppers in hopes that they will be able to purchase and rehabilitate the property for much less than the retail price. Once the house is rehabbed, the flipper would presumably be able to sell the house to an eager buyer getting a normal mortgage and the flipper would profit greatly. House flipping can make financial sense for experienced individuals like building contractors, real estate brokers or sophisticated investors with the necessary funds and connections.
However, those epic short sale and foreclosure deals that seem to be falling off trees according to late-night “$$$foreclosure millions$$$!!!!” infomercials can be rare and often come with significant financial risk. I frequently get calls from eager home buyers who see a listing that’s priced hundreds of thousands below other properties in the neighborhood. A little research into the property usually reveals that the seller is only considering cash offers and that even after the purchase the house needs a crew of contractors with a six figure rehab budget in order to get it up to basic, humane living standards.
How To Double Your Risk Reduce Your Profit: Flipping Houses on Credit
House flippers that don’t have enough money to simply buy homes with their own cash and/or can’t pay for repairs out of pocket have to resort to expensive investor-loans, often with interest rates over 20%. To make matters worse, finance companies that write these high-risk investor-loans generally cross-collateralize on the flipper’s personal assets. This means that if the house-flip goes over budget or the work doesn’t get completed, the finance company could take back both the investment property AND foreclose on the flipper’s personal residence. For the flipper operating via finance company funding, they’re frequently one investment mistake away from financial ruin. Not only this, but with the ever-increasing popularity of home-rehab shows on cable TV, more and more people want to get into the property investment game. As Portland, Oregon home prices rise, there seems to be more hungry flippers competing to buy from a shrinking pool of potential properties. This reduced supply and increased demand for fixer-uppers means flippers have to pay higher prices and work on smaller profit margins, thereby increasing their exposure to risk if they go over budget.
It Is Still Possible to Profit on House-Flipping
None of these statements should be construed as promising future profits or losses in Portland real estate. If you are purchasing homes in the hopes of rehabbing and flipping them for profit it is assumed that you have retained expert building and financial advisors to help you make your decisions. If none of the above has scared you off and you want to buy an investment/rehab property I do get inventory in periodically during my practice as a Portland short sale specialist. As mentioned elsewhere, the less picky you are about location and property specifics the better chance you have of getting into a property with the flipping potential that you’re looking for. Call me and tell me about your budget and what types of projects you’re open to and I’ll keep you in mind as inventory becomes available.
Estate Sales: The Overlooked Distressed Property Category
Buying An Estate Sale Can Be Great Deal, If You Can Find One
One of the better opportunities for buyers looking for saving money on a purchase can often be an estate sale. The “estate-sale-proper” generally involves the death of one or more of the home owners, after which the remaining relatives sell the property to wrap up the affairs of the estate. Family members faced with the many expenses involved with wrapping up someone’s estate frequently need to make a deal and are thus motivated to sell. You generally have to make all of your own repairs after closing and since it’s likely the previous owner lived their for many years there are often fixtures, appliances and other features that may be in disrepair or functionally obsolete.
For best results write a very simple, clean offer at a fair price and avoid complications like asking buyer to pay for repairs, closing costs or anything else that may scare a seller into thinking they would have a financial liability. This transaction is one where making it easy for the seller pays off big time. Showing that you have a large down payment and a very healthy earnest money deposit will assure them that you mean business and won’t jerk them around. If you want a home warranty, make sure that it’s very clear that you’ll pay for it yourself and if possible use a higher down payment conventional loan. FHA, USDA or VA loans may be tempting (or even necessary) but listing agents also know that these low/zero-down mortgage have more hoops to jump through and that an estate seller needing to close fast would rather not have to deal with a more high-maintenance buyer or loan.
There are also similar situations that offer some/most of the same benefits as an estate without some of the complications. One of the situations that’s similar to an estate sale is when a home owner needs to sell their property in order to transition into living with a relative or an assisted-living center where their social and medical needs can be addressed. These sellers generally have looming costs and need to close a deal fairly quickly and are thus often willing to negotiate. At times, the owner is wrapped up in a reverse mortgage where the note has been called due and there is a looming foreclosure date. Much like an estate sale, these sellers need to make a deal at a fair price, but are often willing to accept a lower purchase price in favor of making your offer very simple with a high assurance of success.
In summary, higher down payments, more earnest money, swift closing time line and an “as-is” sale with no repairs will all help you have success if you can find one of these estate, reverse mortgage or other “have to move now” distressed sale scenarios. Call me when you’re ready to make your next offer stand out from the pack.