Distressed property sale guidelines

To avoid getting taken advantage of, you must get an idea of the true value of your home. There are a few different methods you can use to determine value before selling distressed property. 

One of the easiest and least expensive ways is getting a Comparative Market Analysis (CMA). This method calculates the value of your home by looking at other comparable properties in your area. You can perform your own CMA by looking up real estate listings online or requesting one from a real estate agent. 

If you can’t find very many comps, try spending a bit of money on an official home appraisal. Appraisals look at everything your house has to offer as well as places for improvement. They are performed by a licensed RE Agent, who provides their opinion on a fair market price.

You can also use a free home value estimator to find out what you might get from a iBuyer or other cash buyers option. This usually involves filling out a short survey on their website.

If you’re dealing with a problem property due to lack of upkeep, then you need to consider the return on investment before doing any major upgrades. The question is: are you going to make back on the sale what you’re spending on the repairs?

Repair completion time is also a factor when deciding whether to sell “as is.” If you are also working against a foreclosure deadline, then dealing with major construction and 4 to 6 month delays might not be feasible. These are some of the most common issues seen in distressed homes and an idea of what you might be looking at in repairs. 

Although the price of treating a termite infestation can be relatively low, the repairs could cost you a pretty penny. Termites can cause serious structural damage to your property. You might be looking at having to replace major support beams, flooring, rafters, and foundational features. 

Other things to think about:

If you are planning on selling distressed property to investors, online buyers or other cash-in-hand business, then a retrofit might not be the best route for you. Countless things can go wrong during the remodel, including the discovery of additional issues, such as lead and asbestos. 

Home improvement costs in Oregon vary depending on the type of project:

• Kitchen remodel: In 2022, the average cost of a kitchen remodel in the Portland area was $84,846. A major kitchen remodel is considered to be a complete gut job, down to bare studs. The average cost of a minor kitchen remodel in Portland is estimated to be $19,672.
• Home addition: In 2022, the average cost to build a home addition in Portland was $382,000. Small additions, around 300 to 400 square feet, typically cost in the $115,000 range.
• Bathroom or kitchen renovation In Northern  Oregon, the average cost for remodeling a bathroom or kitchen is $30,000–$35,000.
• Whole house renovation: On average, whole house renovation costs $15 to $60 per square foot. Remodeling a kitchen or bathroom costs $100 to $250 per square foot.

With any distressed home, if you find yourself thinking, “My house needs a bunch of work,” then a cash in hand situation is often the best option.

Even when your home is in perfect condition, listed home sales can easily take months or more. If your home is distressed due to a default on your mortgage you don’t have any time to waste. Start now to look at your best options for foreclosure are mostly private investors.

One important thing to remember when selling distressed property is that it cannot qualify for a mortgage. That means anyone who buys the property, even though a private transaction or real estate agent, has to be able to pay cash.

You will want to look at a buyer’s track record. If you are selling to a company, such as a flipper or buy and hold investor, you need to consider their reputation. Check through their testimonials or directly contact the buyer. 

It’s important to ask buyers for proof of funds. Keep in mind, selling your problem property to someone who has their cash tied up in investments could cause delays. If they have trouble selling off stocks or getting money out of their investments, you could find yourself waiting for your funds.

Regardless of who you are selling to, you need to make sure that you disclose everything before the sale. This covers all your bases and prevents you from having to deal with a nasty lawsuit a few months down the road.

Remember, it doesn’t matter if you are selling to a cash buyer or through a real estate agent, you must disclose all information relevant to the property. 

If you are working with an agent or a cash buyer, then you can sit back and let them handle all the paperwork. When you sell independently you will have to do the dirty work yourself.

You alone are responsible for making sure all forms are completed with the correct information. Failure to submit the proper paperwork could lead to delays and even the loss of a buyer. 

These are typically bigger organizations such as We Buy Ugly Houses. They offer you cash in hand and accept your property as is, no renovations necessary. You can receive an offer on your home in as little as a few days.  

There's usually a catch. House flippers rarely pay you a fair market value on your home. Their offers can be negotiable but they have to sell to e rehabber who absorb the repair, financing and retail sale costs. and can take over a month to close, which means you still have to wait to get your money. 

If your distressed home doesn’t require a lot of repairs or renovations and you’re looking to close in as little as two to four weeks, this might be an option for you. These companies purchase homes to rent out to others. Since they place a higher value on the property, they will often pay closer to the market value of the home. 

Their high standards make them picky about which properties they chose to purchase. Buy and hold investors tend to gravitate towards move-in-ready homes in nice neighborhoods. 

These hedge funds investment groups are the newest and quickest of all the cash buyers on the market. You can receive an instant offer on your home and close within as little as 14 days. 

They pay quite close to the market value of your distressed property. They take properties “as is,” which means you don’t need to put money into any repairs, renovations, or property clean-up. Some companies do have stipulations on age, location, and property size. They can be the best option if speed and home value are your biggest concerns.  

If you are in no big hurry to get rid of your distressed home, then you could always sell it yourself. You should start with a home inspection, which will give you a clear outline of mandatory repairs and renovations. If the inspection reveals your home requires tens of thousands of dollars in repair costs, this might not be the right direction to sell.. 

You’ll save money on agent fees with this method, but you will also have to do all the leg work. This means advertising, hosting open houses, negotiating with potential buyers, and filing paperwork. FSBO’s usually end up selling to an investor anyway.

Going the more traditional route will probably get you a better offer on your home. When you sell with an agent your property will have to pass safety inspections and regulations. This means you will have to invest on renovations to get it out of its distressed state. 

There is also a chance you could get caught in an escrow limbo, and be waiting for months to close. In addition to escrow fees, you will end up paying your agent a percentage of the sale. For most realtors, this fee can be negotiated.