Distressed properties typically refer to homes in foreclosure or our marketed to be foreclosed upon. Other properties sometimes included in the distressed property type are short sales. A short sale is when a seller can not pay their mortgage payments and can not pay off the entire loan amount due to some financial stress. The seller requests the bank to approve accepting a lower payoff amount by finding a buyer who has offered to pay off an amount close to market.

Here are some tips for purchasing distressed properties:

1. Search the Realty Direct foreclosure list.

2. If you search yourself for distressed properties and purchase from the selling agent, you are paying a commission to someone with a vested interest. Obtain objectivity in the sale by working with your own REALTOR. You won t pay any more. Technically, everyone works for the seller, since they pay the commission.

3. With distressed or foreclosed properties, time is of the essence. Purchasers must close on the date specified by the agency, and cannot close after this without penalties of $25-200 per day.

4. It takes 1-3 weeks to qualify a loan. If you are approved for a loan, make sure you are qualified by your lender as soon as possible. If you are paying by cash, make certain funds are available.

5. If finances are in order, the REALTOR will then submit an offer. When the offer is accepted by both seller and buyer, the REALTOR will submit the ratified contract to the lender and closing agent.

6. When purchasing a distressed property, always obtain 2-3 bids from different contractors to estimate costs of repairs, if you do not plan on doing the work yourself.

7. If you are going to sell the property after rehabilitating it, ask your REALTOR to research similar properties in the neighborhood to ascertain market price. Also, do the research to know when you can resell the property based on laws and/or mortgage requirements.

8. Keep copious records for tax deductions. Any expenses related to the purchase, repair, or maintenance of the property may qualify.

9. The title you receive after purchasing a distressed or foreclosed property is a special warranty deed rather than a general warranty deed. Some buyers are alarmed by this, but there is no need to worry. The purchase of title insurance protects the buyer. Each lender purchases insurance to protect the loan as well. Titling insurance should be obtained by the property purchaser. It is always offered by the closing agent. There are different title programs that you should review to see which one best suites your needs.

10. Foreclosure properties require special addendums and special contracts by the individual bank and HUD office (where applicable).

11. Foreclosure properties are potentially the most profitable, but require the most attention to detail. Finding an experienced local REALTOR is important to your success.