Locating distressed properties

This is just a collection of quotes from other authors about various ways to locate distressed properties. Pretty much all of the info is a repost.


For those wondering how to find distressed properties other than driving around, there are multiple methods to searching online. However, it should be noted that distressed properties come in many forms, and are not always called “distressed” outright. Look for ‘distressed properties for sale by owner’ that are delinquent in taxes and mortgage payments, properties that must be sold legally due to bankruptcy or divorce, probate deals, and properties that are owned by the banks or the government.

Starting with the first example, finding properties with tax delinquencies is luckily a straightforward process. The hardest part will be finding your local tax assessor’s web page that lists these properties. After you have found the site, simply search the listings until you have found a property you’re interested in. Another type of property that might be in distressed is one for which the owners have been delinquent on their mortgage payments, also known as “underwater.” These properties are usually in “pre-foreclosure,” and can be found on multiple listing sites such as your local county website or paid sites such as Foreclosure.com.

Properties that must be sold legally, such as through bankruptcy or divorce, may also be in distress. When looking through your county foreclosure listings, you may have already noticed listings that are listed as being auctioned for bankruptcy or divorce. Although not every county is required to list such properties, you can at least find properties that are up for auction. The probate court is yet another creative space to find distressed properties. A probate property is one that was owned by someone who has passed, but without leaving the property to anyone in their will. It should be noted that making an offer on a probate sale requires a special process, as the property is being sold through an attorney or an executor. Finally, investors should search through REO (real estate-owned) and government-owned properties that have already been foreclosed upon. When a property owner fails to make mortgage payments, the provider of the mortgage loan (in this case the bank or the government) retains the rights to reclaim the property. Many local and national banks have their own property listing sites, as do government entities such as Freddie Mac and Fannie Mae.

Other suggestions from the same article:

Driving For Dollars
If you’re wondering where to find distressed properties, there is a traditional method that transcends time: hopping in the car and driving around. Assuming you already have a target neighborhood in mind, simply drive around and look for properties that stand out from others due to a state of neglect. Telltale signs to look out for include an overgrown yard, broken windows and shutters, exterior paint that is faded or peeling, notices that are posted on windows and doors, and junk mail and newspapers that are left uncollected. If you find a property that meets any or all of these descriptions, be sure to write down the address so you can start investigating.

Expanding on some of those suggestions, here is the article from BiggerPockets by Drew Sygit  called “6 Ways to Locate Distressed Properties Online

Finding properties with delinquent taxes is fairly straightforward if you can find the local tax assessor’s website. Depending on where you’re looking, you might need to Google for “[City Name] Tax Assessor” or “[County Name] Tax Assessor”

The best “underwater” properties are the ones that are right on the verge of foreclosure — they’re the most motivated sellers. In many parts of the United States, you can find an official publication of these houses by Googling for “[County Name] Legal Notices,” but you can also find reliable, easy-to-browse listings at RealtyTrac.comForeclosure.com, and HUDForeclosed.com

Another option is to cultivate relationships with local bankruptcy and divorce attorneys, so they call you when they encounter a motivated seller.  

Real estate-owned a.k.a. bank-owned properties aren’t just “distressed”; they’ve already been foreclosed upon. Most of them are just sitting empty, slowly costing the companies that own them money. On the downside, 100 percent of them are sold as-is, so if you don’t have a good reason to be confident that a particular home is solid, they can be a gamble. The best way to find REO properties is right here on BiggerPockets: a well-maintained list of REO searches that covers the entire country.

When the HUD, FreddyMac, or FannieMae insures a mortgage and that mortgage fails, those entities foreclose on the mortgaged homes just like a bank would. And when they do, they turn around and try to sell those homes, just like a bank does. Furthermore, properties are also frequently offered by several other government entities, such as the Department for Veterans Affairs or the FDIC. While every agency has its own rules and methods, you can start your research into this vast arena at the HUD Single-Family Homes for Sale webpage, which has links to each government department’s relevant webpage. There are also several solid links on the U.S. Marshal Services’ National Sellers List [PDF].

Yet more tips from article “How to Find Distressed Properties” by Angela Colley

One way to find distressed properties is to choose a target neighborhood, then drive around and eyeball the homes there. Be on the lookout for these telltale signs:

  • Properties that stand out from other homes on the block because they are in a state of neglect
  • Properties where the lights are not turned on at night
  • Homes with yards overgrown with weeds
  • Broken windows and shutters in need of repair
  • Faded and peeling paint
  • Notices post on doors or windows
  • Uncollected newspapers and junk mail

Be Wary of Web Searches
Internet searches can yield a wealth of information about distressed properties, but there are a few risks:

  • Many sites charge a fee to browse their database. Since you’ll have to pay upfront, you won’t know if the cost was worth it until you’ve already paid.
  • Not all sites guarantee their information. What you’re looking at online may not be what you see in person.
  • Some listings are outdated. You may waste time by looking at already-sold homes.
  • If you’re browsing online, be sure to stick with a reputable free site. Try browsing realtor.com®’s Homes for Sale to get an idea of what is available in your area.