March 13, 2023

Selling Distressed Property [How to Sell a Distressed Property]

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Selling Distressed Property

selling distressed property

Many property owners struggle financially due to job loss, medical bills, and unexpected emergencies. This leads to a shift in priorities, and taking care of a house is not typically high on the to do list. Distressed homes don't become distressed overnight. However, selling a distressed property can be done quickly depending on how you sell.

If you own a distressed property and plan to sell it, you have three main options— sell with a real estate agent, sell independently, or ask for a cash offer. Among these options, the most hassle-free is selling to a cash buyer. These buyers won't ask you to make repairs or pay fees, so you can sell conveniently and move on. Moreover, their process is faster since they don't have to wait for a mortgage lender's approval. 

Selling a distressed property doesn't have to be difficult. With the right strategy, you'll be able to land a potential buyer and get yourself out of financial trouble. Continue reading this blog to learn more!

What is a Distressed Property?

what is a distressed property

Most people think of distressed properties as fixer uppers or condemned houses, but in actuality, they can also be properties on the brink of foreclosure or being auctioned. 

In other words, when a homeowner fails to fulfill all their financial responsibilities connected to the house (monthly mortgage payments, taxes, etc.), their property would be considered distressed.

To elaborate further, here are the four main types of distressed homes.

A House in Foreclosure

As mentioned, if a homeowner fails to pay the monthly mortgage of a property in three consecutive months, their house would become a candidate for foreclosure.

This means if the owner couldn't settle the missed mortgage payments and penalties, they would eventually be evicted, and the lender would assume the legal ownership of the property.

In most cases, the mortgage lender sells the house in an auction to recoup their losses if the owner wasn't able to sell the property before their auction date.

An REO Property

Real Estate Owned (REO) properties are foreclosed homes that weren't sold during the initial auction.

These REO properties are tagged as distressed because they haven't turned into profit yet. In other words, their legal owners (lenders, banks, or investors) are still burdened by maintaining or repairing them.

A House Approved for Short Sale

When a house becomes underwater, its market value is less than what the owner owes in the accumulated monthly mortgage payments. In other words, even if the house is sold, the owner would still have to pay for a balance deficiency in the mortgage.

Distressed properties that are underwater and are sold via a short sale or at a foreclosure auction are considered distressed. They prove to be a burden to both the lender and the homeowner because they'll sell at a low price.

A Fixer Upper

A fixer upper is also labeled as a distressed property. This could be due to structural damage, fire damage, water damage, or mold. Many fixer upper houses are sold below fair market value because they require repairs from cosmetic work to a full gut.

A fixer upper is a classic interpretation of a distressed property. Most retail buyers cannot purchase a fixer upper through a lender due to lender required repairs. However, cash buyers who don't require a loan, can purchase these distressed properties.

Can You Sell a Distressed Property?

can you sell a distressed property

Yes. You can sell a distressed property through the local real estate market or a cash home buyer. However, it is important to clarify that as a homeowner, you can only sell the house if you're still facing foreclosure, you own a fixer upper, or your property is approved for a short sale. 

If your property is already foreclosed and your lender or bank owns it "legally" as an REO, you don't have any right to claim ownership and deal with its sale.

Considerations When Selling a Distressed Property

Before choosing a way to sell your distressed property, you should first look into several aspects of a home sale. Since distressed properties are meant to be sold faster than other real estate, there are three things you should consider.

Property's Market Value

Many potential buyers will take advantage of the fact that you're selling distressed property.

To avoid this, make sure you do a comparative market analysis (CMA). This calculates home value based on similar properties (comparable properties) in your area. You may ask a real estate agent to do this for you, but you can also do it independently. 

If you have more budget, you can also pay for a home appraisal. This is a more accurate way to understand your property's market value.

Set your expectations based on the condition of your distressed property. Take into account not just the money offered, but the additional benefits such as an all cash offer, buyer paid closing costs and repairs, no fees, fast timeline, etc.


If the distressed home you're selling is a fixer upper, you have to calculate whether you'll gain more from repairing or renovating before putting it on sale. This can help you decide whether to sell your property as-is or not. 

However, if the property is distressed due to foreclosure, you are on a tight deadline to sell. You may find that even doing minor repairs will take too long. Receiving a cash offer may be your only option.

Selling Timeline

Choosing a way to sell would also depend on your selling timeline. If the property is considered distressed due to being a fixer upper, you can set the timeframe of the sale around your schedule. 

If the property is being foreclosed, you don't have any time to waste. Act with urgency to ensure you can complete the sale before your auction date.

Selling to a real estate agent or going FSBO may not be your best option since you would have to repair the property and market, which can lengthen the distressed sale.

How to Sell Distressed Properties

how to sell distressed properties

Since we've already covered the types of distressed houses as well as your considerations when selling, let's now focus on your different selling options. This has a huge impact on the success of your distressed sale.

Sell to Cash Buyers, House Flippers, or Buy and Hold Investors

The fastest and easiest way to sell your distressed property is by asking for a cash offer. Cash buyers, house flippers, and real estate investors who provide cash offers don't have to wait for the approval of a lender or bank because they have cash on hand.

Sell Distressed Property As-Is

This means they can buy your house fast to help you avoid foreclosure or skip the costly house repairs.

Moreover, if your property is distressed due to major structural repairs or being underwater, house flippers won't ask you for any repairs that can put you in a further financial crisis.

They would gladly buy your distressed property as-is. That said, you'll save on maintenance and repair costs and get cash at the closing table.

The process of selling distressed property to a cash home buyer or house flipper is relatively easy. You just have to visit their website or give them a call to get an offer. A cash buyer will then do a walkthrough to see the state of your property and give you a more accurate offer.

If you are happy with their offer, they'll send you an electronic contract that you have to review and sign to finalize the transaction. This will make the deal official and signal the closing of the sale.

Sell with a Real Estate Agent

sell with a real estate agent

Selling your distressed property with the help of a real estate agent is also an option if you have more flexibility in the timeline of the sale. However, if you are facing foreclosure, this traditional route may not be for you.

Note that selling with an agent and listing on the traditional housing market means you have to do an appraisal, make repairs, stage your house, list and market your property, and schedule showings and open houses. Negotiation can also take a few weeks.

Selling a short-sale home with a real estate agent also wouldn't benefit you since, from the beginning, you're at a loss. The real estate agent fees or commissions would only be an additional burden.

We would only recommend selling with a real estate agent if your distressed home is a cosmetic fixer upper or you are willing to make repairs in order to get a good deal. Real estate agents offer expert advice that can help you land high offers for renovated homes, but they come at a price.

4 Mistakes to Avoid When Selling Distressed Properties

mistakes to avoid when selling distressed properties

A lot of distressed home sales are unsuccessful because sellers are new to selling real estate. To ensure that you'll be able to sell your distressed property, here are some common mistakes you should avoid.

1. Setting a High Asking Price

While getting enough money is one of the goals of selling a distressed property, setting a very high asking price can turn off distressed property buyers when selling on the real estate market. 

If you've evaluated comparable properties and identified the estimated fair market value of your home, make sure that you price your property according to it. You may even go a little below the market price if you are trying to sell fast.

Alternatively, if you don't want to worry about setting an unreasonably higher value on your property, sell to a cash buyer since they'll take care of pricing your property.

2. Waiting Too Long to Sell

waiting too long to sell

Distressed properties facing foreclosure should be sold immediately to motivated buyers. If not, the mortgage lender will take its rightful ownership.

On another note, if you delay the sale even with the help of real estate agents, the interest rate of your monthly mortgage payments can shift upwards, burying you in much more debt. This can also affect the purchasing power of the buyer. They may not qualify for a loan due to high-interest rates.

3. Not Verifying Buyer Credentials

Selling distressed property can be pretty complicated since it involves many financial decisions. It even becomes more difficult when you're dealing with a fraudulent buyer

As a good measure, conduct research to ensure that your buyer has enough money to buy your property and avoid negative surprises when you're already at the closing table.

Even better, sell your investment property to a reputable cash buyer.

4. Not Disclosing Issues to the Buyer

If your house is under foreclosure or needs a lot of repairs, disclose this to your potential buyers. Don't let them find out on their own because this may cause the sale to fall through. 

The main worry of many property owners is that when they disclose the issues of their house, it will prevent a home sale. In most cases, though, the buyer appreciates the honesty. Of course, while disclosing the repairs or legal issues of your house, talk about the property's strengths, too.

Final Thoughts: Selling Distressed Property

The process of selling a distressed property is not the same for everyone. Determining how to sell and who to sell to depends on the type of distressed property you own. 

In most cases, however, a home sale is possible. If time is of the essence, homeowners can prioritize cash buyers and real estate investors who are quick to process house sales.

Here at Sell My House Fast, we buy distressed properties no matter what state it's in. We give fair cash offers and move fast to ease your burden of owning distressed property. 

If you are interested in a no-hassle offer, fill out our form below or contact us at (844) 207-0788.

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catherine mack
Author: Andy Kolodgie

Andy Kolodgie is an experienced real estate investor with a network that expands nationwide. As owner of Sell My House Fast, Andy’s goal is to provide home sellers with more options to their real estate problems than a traditional home sale. 

He’s been featured on multiple publications including Amazon, Yahoo Finance, MSN, HomeLight,, Apartment Therapy,, LegalZoom, Zolo, and

Sell My House Fast has been a cash home buying company since 1999. We buy houses nationwide! At Sell My House Fast, we offer cash for houses and connect sellers with local buyers. If you want to sell your house for cash, fill out our short form to get fair all cash offers for your house!

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