Updated: Jun 20
The pandemic has had a massive financial impact on most of the London population and the world. Some had no choice but to quickly sell assets to keeps their heads afloat. For some, it means using these quick sales as future investments.
The concept of a distraught family essentially having to “lose” their home because of something that was not in their control might be up to our emotions. But prospective buyers must not overlook the lucrative bargains of low house prices available in the property market in this season of the world.
What are the primary reasons for a distressed sale?
Properties that are under foreclosure or being sold by the lender are known as a distressed sale. It is usually the result of a homeowner unable to keep up with mortgage payments and the mortgage lender endeavours to repossess and sell the home. These houses are usually sold at a price much lower than the actual property valuation because lenders are willing to sell at incredibly low prices to ensure they get their money back.
Other reasons include circumstances such as divorce, death, job relocation, condition of the house or a shared ownership disputes. Whatever the reason might be, if you are looking to purchase property in the UK, finding distressed homes for sale is not difficult.
Advantages of purchasing a distressed property.
The main reason to buy these properties is their prices. Often with foreclosure or short sale, the house purchase price will be below market value because sellers are in a hurry to complete the sale or they do not want to spend money to repair the property and bring it to a higher price.
If you want to invest in real estate or are interested in flipping properties as a first-time buyer, this could be a good place to start, provided you know what you are doing. Experienced real estate agent that offers the relevant property services will assist in making sure that you find and purchase a home that will eventually increase in value.
It is also a great opportunity for you to buy in a nicer area than you would usually be able to afford.
Disadvantages of purchasing a distressed property.
The main risk with this type of property investment is the: condition.
If you are buying a house that is in bad shape, you will need to set aside funds to hire a contractor or materials for improvement. There are many that are in good shape, but there is also an entire lot that lack appliances, have damaged walls, or need extensive electrical and plumbing repairs. It might take some extra cash to create your dream home or create a buy to let investment.
Also, keep in mind that when you apply for a mortgage the lender will have a list of requirements that the property needs to meet regarding the condition. You will need an appraisal and many lenders will need to assess the property to make sure it can be lived in and has value.
Tips when purchasing a distressed property.
Property investors tend to buy homes in cash. So, if you do not have cash, arrange with the lender to secure a loan prequalification. To become a stronger bidder, increase the size of your down payment or your deposit.
The distressed property requires complex paperwork to be completed. Be patient in the process.
Our most important piece of advice would be to work with professional property managers. They will recognize the value in different properties. Avoid sitting with a property that needs too much work or with a property in the wrong area that is detrimental to your investment in the long term.
If you have trustworthy contractors or have experience with renovations buying a distressed property that is not in a good condition, might still be visible.
Stick to your renovation completion dates to avoid unplanned expenses.
Hacks for finding distressed properties.
Peruse REO and bank-owned property listings.
Simply drive around in your preferred area and look for houses in bad shape. Take note of the houses with an overgrown lawn, mail still in their mailbox and paint peeling off the walls. These indicators are worth giving that address some investigation.
Look for properties online that says "properties for sale by owner".
If you are looking for a profitable investment opportunity in London real estate, contact 87 Property Services located at 74 Southbridge Road, Croydon. Experienced personnel can draw upon their extensive knowledge and market intelligence to find you, your best deal.