Foreclosure
In the state of Virginia the foreclosure process will begin when an owner receives the “90 day notice of default” or in other terms the owner has missed three (3) consecutive mortgage payments.
Forbearance
Owners can forestall the process by declaring bankruptcy or enter into negotiations to obtain forbearance. It is difficult to receive forbearance once the foreclosure process has started and usually will only be granted with an offer to buy by a third party.
Short Sale
Owners have an additional option to forestall the foreclosure process, the short selling of the property. Lenders will accept in lieu of foreclosure a short sale which is generally the preferred option. The lender will allow the property to be sold for less than what is owed on the mortgage with several possible outcomes.
Regardless of the choices made. It is recommended sellers meet with a tax professional to discuss options. It would also be advisable to speak with an attorney who specializes in this field.
Distressed properties
A property that is defined as distressed is either a function of condition, ownership in default, or both. We see allot less distressed properties where as 70% of properties on the market in 2007-2008 were distressed due to default which results in property condition problems. When an owner is financially stressed, all maintenance is deferred and the property begins to suffer from “wasting” a technical appraisal term used to describe a condition.
Many of the properties on the market today, not only suffer from wasting but also for several forms of obsolescence. As the market shifted towards the buyers market in 2005/2006 many investors were caught in the late stage of the boom and were not able to acquire and renovate aging homes effectively. Leaving many unfinished renovations which often just sat for months or were rented out in desperation. The flip quickly became a financial burden for some investors. We have see a shift in 2010 - 2011 as the market has stabilized and now see many investors returning to acquire distressed property. This can be a risky business and does require a strong finical balance sheet and the time to execute. Flips are time consuming!
Buying Distressed Properties
Buying distressed property can be quite rewarding but MUST be approached with caution. It is easy to be caught up in the process with out realizing the pitfalls, so if interested in learning more please contact me directly. Try my flip analysis spreadsheet.
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