Distressed properties can be very attractive to real estate investors, but you need to know what to look for and where. In this blog we’ll show you how to spot a property in distress before the competition does. Here’s how:

1. Take a Drive

Although doing an old-fashioned drive-by may not be the most efficient, it can be the most effective. That’s because you may spot potential distressed properties driving around that other investors could simply miss out on because they aren’t willing to put in the time and effort. 

If you’re a remote real estate investor, ask a member of your local real estate team to hit the pavement and look for details, making sure to compensate them for their time and trouble.

2. MLS

Your local multiple listing service (MLS) is another good resource for finding distressed properties. Ask your real estate agent to look for properties with more days on market than average, homes that have been listed for sale multiple times, or listings that have expired. 

Oftentimes short sale and pre-foreclosure homes are listed on the MLS. Property listing websites such as Zillow, Homes.com, and Realtor.com also pull data from the MLS if you prefer to conduct an initial search first before getting an agent involved.

3. Distressed Property Websites

According to recent research by Kiplinger, the 15 best foreclosure sites for finding distressed properties include:

• Equator.com offers free listings of foreclosure and short sale homes.
• HomePath.com lists thousands of foreclosure homes being sold by Fannie Mae.
• HomeSteps.com lists homes in foreclosure that Freddie Mac is selling to investors or homebuyers.
• Wells Fargo REO Properties requires you to contact the listing agent directly.
• CitiMortgage and Bank of America also list properties in foreclosure owned by the bank.
• Government sites for foreclosure listings include HUD.gov, HomeSales.gov, FHA Single Family Real Estate Owned Properties, and USDA-RD/FSA Properties for single-family homes, multi-family homes, farms, and ranches.

4. County Tax Records

Property tax records are public information on many county assessor websites across the country. Generally speaking, if a homeowner can’t pay their taxes the property may soon become distressed. Unpaid property taxes are also an indication that the property owner may be delinquent on their mortgage as well. 

5. Court Records

To find homeowners who are behind on the mortgage you can research the local county court records. The public records section of the county recorder’s office lists notices issued to a homeowner and publicly recorded before and during the foreclosure process, including Notice of Default, Lis Pendens, and Notice of Sale.

6. Property Auctions

REO property is often sold at auction if a lender forecloses on a home and is unable to sell it directly. Property auctions are advertised in your local paper, and on real estate auction websites such as Auction.com, and Tranzon.com.

7. Probate

Probate courts deal with the assets and debts of a person who has died. The job of a probate judge is to ensure that creditors of the deceased are paid and any remaining assets – such as real estate – are properly distributed or sold. If the property is distressed and requires a lot of work, the heirs may be willing to sell it to a real estate investor at a very fair price. 

8. Networking with Lawyers

Lawyers who specialize in the areas of real estate foreclosures, probate, or family law can also be a great source for finding distressed properties. While it takes time to build a relationship with an attorney, it may be well worth your effort. Networking with lawyers can give you the inside track to find distressed homes coming available due to events such as a financial crisis or divorce.

At First Equity Funding, we do more than provide commercial and residential asset-based loans. We help real estate investors analyze and identify investable opportunities, ensure fast approvals of hard money real estate loans and offer construction consultancy to help plan and schedule the project more efficiently. Contact us today!