Got a Distressed House? Read For More Options!

Posted by Rochelle Markov // May 15, 2022 // Blog

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According to Merriam-Webster, the term distressed states “of, relating to, or experiencing economic decline or difficulty.” When real estate is distressed, that indicates the value is being depreciated instead of appreciated. Let’s go over what a distressed house could look like. Keep in mind this is a broad term, and every situation is unique.

What makes a distressed house could range from lack of updating to a natural disaster causing damage to not seeing the value of updating to the surrounding neighborhood is changing to many other reasons.

Lack of updating: Let’s say someone bought their first house newly built in 1950. Since then, the roof was reshingled once, has original windows, original kitchen, original bathroom, strong foundation, well cared for exterior, but the homeowners never saw the value of updating anything beyond what was absolutely needed. The distressed house here is the original components that need to be replaced. Beyond a new kitchen and bathroom, what if there was a drippy pipe that caused rotting wood or mold? What if the electric was in a fuse box which most ideally should be a circuit breaker? This updating may seem simple, but with a deeper look, would be more costly than first thought.

Natural disaster: If there’s ever a question about why a homeowner should carry homeowner’s insurance, this is why! Minnesota can have temperamental weather patterns including but not limited to: high wind speeds, severely cold temperatures, freezing/thawing soil that expands/contracts on the structure’s foundation, and many other scenarios to be watchful of. In the event of high wind speeds- perhaps a tornado- this could break apart pieces of the structure such as blow off the roof creating a distressed house. Instances like this are reasons why it’s important to stay in touch with your insurance agent regarding policy coverage. A lower monthly payment more than likely means your deductible is higher. For example, what if your monthly homeowner’s insurance payment is $100 with a $10,000 deductible but your roof costs $9,999 to fix? You still have to pay the insurance payment AND the cost of the roof. Now what if your monthly homeowner’s insurance payment is $300 with a $1,000 deductible but your roof costs $9,999 to fix? You still have to pay the monthly fee which is $3,600 yearly with the deductible of $1,000 totals $4,000. Insurance pays the huge majority of the roof repair without such a hard upfront hit. Contact your insurance agent for more information. Again, remember these are examples ONLY. I am not quoting any rates for anyone.

Not seeing the value of updating: Some people are very comfortable in their homes and think others will view the same way. If a person is in a time of life where renovating would be too much commotion or not afforded, then there could be little to value in updating. Also, perhaps there’s long term or maybe even lifetime guarantees on products or services, therefore no value of updating. When the next person comes along to purchase the property, this could be seen as a distressed house to the buyer even thought it does not appear distressed to the seller.

Neighborhood is changing: A common site here in Rochester, Minnesota is a block of real estate is purchased for the specific reason to have the structures knocked down, land cleaned up and then a different structure built. Apartment buildings, hotels, and medical buildings are the most popular reasons. This is part of a project for Destination Medical Center due to the world renown Mayo Clinic expanding at vast rates.

Whenever selling any piece of real estate, the decision makers should consider various options for the transaction.

What are the pros/cons of updating the property before selling?

*Increase property value.

*More desirable for more buyers.

*Finding licensed professionals to do the work, complete, and need to manage the renovation could take more time, money, and patience than anticipated.

*The need to move items out and finding storage could be overwhelming and costly.

What are the pros/cons of keeping the property in the current condition then selling in a private transaction?

*Might not need to prepare the property for a traditional sale. Sometimes an investor may request to have the belongings stay and be conveyed with the transaction.

*Most likely selling in a private transaction would be with someone who knows the seller or was personally referred.

*Could have the documents prepared and executed by a title company or real estate attorney. Always ensure that everything is done properly since there is no guidance from a real estate agent representing the transaction.

*Buyer and seller work together to obtain all the necessary steps in completing the sale.

What are the pros/cons of keeping the property in the current condition then selling with a real estate agent?

*Real estate agent can market property as the seller would like.

*Many more buyers.

*Factor in commission fees for the transaction.

*Most times the agent has a representation agreement that may have repercussions if cancelled early.

With the various options for how to deal with a distressed house, there are pros and cons. Ensure everyone part of the transaction is properly educated to make the right decision for them.

Reel Property Solutions, LLC is brokered by eXp Realty. This means if someone with a distressed house reaches out to us, there are many options. First, Reel Property Solutions, LLC might want to buy the property to fix up. Our extensive education with how to be real estate investors comes from Fortune Builders. Second, Rochelle, who has a real estate license with eXp Realty, can represent transactions in Minnesota. (Also connect for other types of real estate transactions in Minnesota, the United States or around the world!) Either way of working with Reel Property Solutions, LLC or Rochelle at eXp Realty, there are many connections to the professional resources needed to complete your transaction.