01/18/2023
Distress properties, are they around the corner?
For those who don’t know what distress properties are, these properties are the ones in the process of foreclosure or already repossessed by the lender (REOs). Short sale properties are also part of this concept. Now, are they coming soon? They are already here. The amount of foreclosure properties has more than double within the last 6 months. Although, this amount is significantly marginal to the rest of the properties in the open market (less than 0.8%), the trend continues to grow fast. This situation reflects what is going on in our economy and what’s coming. The question becomes, how high this amount of distress properties is going to get? No one knows for sure, but due to the type of mortgage loans issued after the last market crash (2007–2010) this amount should not even come close to those years.
Since mid-June 2022, property value has dropped close to 10% and is expected to drop another 10% or more this year depending on interest rates levels and the performance in the economy. This might seem quite a loss in property value, but it really isn’t as bad as it looks. If property appreciated in value over 40% in 2 ½ years (2020 to mid-2022), losing 20% of that still a win. Now, those who bought properties 15 months ago, at full value with a mortgage and little percent down payment (5% or less) could be underwater now or even-in-value (mortgage principal = actual property value). Don’t panic as long as you still making your mortgage payments on time, but if you don’t you could be joining that list of distress properties in the nearest future. If this is your situation and can’t afford making your payments, you not only will be meeting foreclosure process but a possible short sale.
Managing distress properties (foreclosures, Short sales or REOs) requires a highly experienced realtor because there are a lot of aspects and hidden details that are needed to be handled accordingly to avoid a failure in the sale’s process. Selling a distress property requires expertise and experience as time is of the essence.
If you have any questions or are in a situation like this or know someone that is, give me a call or text me at 602.413.0997, and I will assess your situation commitment-free.
