What Is a Distressed Property?

A distressed property is in disrepair or facing financial hardship for various reasons. These properties may be going through the beginning stages of foreclosure. They may have also received a default notice. They could also be up for auction. These properties may have a shortfall in value.

They may also be foreclosed, in REO (real estate owned) status, or sold through a short sale. Distressed properties are often caused by a homeowner’s delinquency in making their mortgage payments, resulting in the lender repossessing the home and liquidating it for asset recovery.

When a home is distressed, it may need significant repairs, have damages from long-term neglect, or be in a state of property deterioration. It can make it difficult for you to sell your house fast in Kansas City for the price you want. In many cases, they may need to seek out a cash home sale or even a distressed property buyer to sell their home for a fair price quickly.

How Do Properties Become Distressed?

There are various reasons why a property may become distressed, including financial hardship, bankruptcy, or long-term delinquency in making mortgage payments. In some cases, the homeowner may have taken on too much debt or may have been unable to keep up with their payments due to a change in their income or other unforeseen circumstances.

The house may have suffered from long-term neglect or damage that has caused it to become a fixer-upper. Regardless of the cause, a distressed property can be difficult for a homeowner to navigate.

Types of Distressed Properties

• Pre-foreclosure: This is when the homeowner has fallen behind on mortgage payments, and the lender has initiated the foreclosure process, but the property has not yet been sold at auction.
• Notice of default: This is a formal notice sent by the lender to the homeowner, indicating that they have fallen behind on mortgage payments and that legal action may be taken if the payments are not up to date.
• Auction: This is a public sale where the distressed property is sold to the highest bidder. A court or a trustee typically conducts it.
• Bank-owned or REO (Real Estate Owned): This refers to properties that have been foreclosed upon and are now owned by the lender or bank.
• Short sale: This is when the homeowner sells the property for less than the amount owed on the mortgage, with the lender’s approval. It can be an option for homeowners who cannot keep up with mortgage payments.
• Repossession: This is when a lender takes back possession of a property due to the homeowner’s failure to meet the terms of the mortgage agreement.
• Damaged house: Distressed properties may have significant damage due to neglect, natural disasters, or other factors that require repairs or renovations.
• Underwater mortgage: This occurs when the amount owed on the mortgage is higher than the property’s current value. It can make it difficult for homeowners to sell the property or refinance.

Challenges and for Homeowners or Home Sellers

Whether you are trying to keep your property or sell your house, distressed properties present some challenges:

Lower Sale Price

One of the main challenges is that distressed properties are often sold at a lower price than non-distressed properties. Homeowners may not receive the full market value for their property. 

Home Repairs

Additionally, distressed properties may require significant repairs or renovations, limiting the pool of potential buyers. Traditional homebuyers may be less interested in purchasing a property that needs extensive work.

Lengthy Sales Process

Another challenge of selling a distressed property is the lengthy sales process. Selling a distressed property can take longer due to additional paperwork, negotiations with lenders, and potential delays in closing. Homeowners or home sellers need to be prepared for these extra steps and be patient throughout the process.

Despite these challenges, distressed properties also offer opportunities. The discounted price of distressed properties can attract buyers looking for fixer-uppers or investment opportunities. These buyers may be willing to invest time and effort to renovate the property and increase its value. Additionally, some distressed properties may qualify for special financing or government programs to help homeowners navigate financial hardship.

What Is the Best Way to Sell My Distressed House in Kansas City?

When selling a distressed house, homeowners have several options to consider. Here is a comparison of three common ways to sell a distressed property: traditional home sale, short sale, and cash home sale.

Traditional Home Sale

A traditional home sale involves listing the property on the market and finding a buyer willing to purchase it at market value. Here are some key points to consider:

Pros:

• Potential for a higher sale price compared to other methods.
• More time to market the property and find potential buyers.
• Opportunity to negotiate the terms of the sale.

Cons:

• Longer selling process, as it may take time to find a buyer.
• Additional costs associated with repairs and preparing the house for sale.
• Buyers may request contingencies or negotiate the price.

Short Sale

A short sale occurs when the homeowner owes more on their mortgage than the property is worth, and the lender agrees to accept less than the full amount owed. Here are some key points to consider:

Pros:

• Opportunity to avoid foreclosure and potential credit damage.
• Possibility of selling the property for less than the outstanding mortgage balance.
• A chance to negotiate with the lender to forgive any remaining debt.

Cons:

• Requires the lender’s approval, which can be a lengthy process.
• Potential impact on the homeowner’s credit score.
• Limited ability to negotiate the terms of the sale.

Cash Home Sale

A cash home sale involves selling the distressed property to a buyer who can provide cash upfront, eliminating the need for mortgage financing. Here are some key points to consider:

Pros:

• Quick sale process, as there is no need for mortgage approval.
• Eliminates the need for repairs or renovations, as cash buyers often purchase properties in as-is condition.
• Provides a guaranteed and hassle-free transaction.

Cons:

• Potential for a lower sale price compared to the market value.
• Limited pool of potential buyers who can offer cash upfront.
• Less opportunity to negotiate the terms of the sale.

Homeowners should evaluate their options and consider their specific circumstances when deciding on the best way to sell their distressed property. Seeking professional advice from real estate agents or property experts can help you navigate the process and make informed decisions.

Sell Your House Fast in Kansas City, Missouri

If you need to sell your house fast but don’t want the hassle of a traditional home sale, contact KC Real Estate Buyers. We buy houses as-is. No repairs are needed. Avoid closing costs and realtor commissions. Close in as little as seven days. Call 816-895-2999 and get a fast cash offer from our local home buyers in Missouri.