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No doubt about it, great real estate bargains are out there these days – but there’s more to cutting the best deal on a distressed home than meets the eye – and the pocketbook. With one-third of all home sales coming from the foreclosed property market, it’s time to get smart about getting the best deals.

First, let’s study the pros and cons before you even consider getting involved in a distressed property deal.


Cost. On the sell side, anyone involved with a foreclosed property just wants to cut their losses. That means homeowners and lenders, specifically. So you’ll likely have leverage to go low when buying a distressed property.

Volume. It’s a supply and demand world, and foreclosed homebuyers are living large in it. Besides the millions of foreclosures already on the market, there are more – lots more – on the way. According to Amherst Securities Group LP, more than 7 million homes that are on the way to foreclosure will hit the real estate market soon. The “huge shadow inventory” as Amherst calls it, will ensure that the glut of distressed homes on the market will only grow more abundant – thus bringing prices down even further.

Cheap labor. Even if you buy one of those “unique fixer uppers” on the market, you’ll likely save money on contracting help and home maintenance supplies, given the weakened state of the economy.


Tough resale market. If you’re in the market for a distressed property with the intent to “flip” it for immediate resale, don’t expect much. Home prices in most U.S. markets are flat – and expected to remain so for the next year or more.

No Patience. In most cases you just can’t walk up to the lender and cut a check for a foreclosed property. For example, many foreclosures are sold at auctions (giving the lender a larger crowd of potential buyers). That can take time to roll out, and also present more competition that could drive up prices.

The “flypaper” syndrome. Some foreclosed properties come with stubborn owners who just don’t want to let go. If the homeowner remains in the house, even after the house has gone into foreclosure, you might be dealing with an evictions headache.

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Time. Distressed properties can mean a lot of elbow sweat, and a lot of sweat equity, for new owners. If you don’t like wielding some wainscoting, or have a full-time job that leaves little time for home maintenance, maybe a distressed property isn’t for you.


If you still want to proceed, your “to do” list should include the following priorities:

Get help. Right off the bat, pick up the phone and get help from a real estate specialist on how to bid on distressed properties. Better yet, hire the specialist to bid on foreclosed homes for you.

Be direct. If at all possible, buy from the seller directly. Keep an eye out for sale signs in your area, and engage the seller right away. It’s a filtering process, but it’s also your best way to get in the front of the line on a distressed property. Again, having a local real estate “insider” is invaluable here.

Scour the Web. To augment your hunt, check online for distressed properties in your area. has a nice foreclosure finder. Just type in the pertinent zip code in the “Search Foreclosures” box and a list of distressed properties pops right up.

Get a good home inspector. To save time and trouble, make sure you have the distressed property inspected. Lenders normally sell foreclosed properties “as is” – so you won’t have any legal leeway if you sign on the dotted line and find problems later.

Done right, a distressed property purchase is like finding a diamond in the rough. Done wrong, you’ll find that jewel to only be made of cubic zirconium.

The rest is up to you.

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