Selling Your Distressed Property

Determining The Value Of Your Distressed Property

You’ll know the value of your distressed property after your lender does an appraisal of it or BPO (broker price opinion). To do this, the lender has a realtor go to your home and do a valuation of the property, which will decide whether or not it qualifies as a short sale.

Sometimes the valuation is not accurate and we have to dispute it. While we check Redfin and Zillow estimates, the best way to evaluate a property is through a real estate agent’s visit. While it is the lender who hires the real estate agent to assess your distressed property, if the valuation is questioned, we refer our clients to realtors who have experience with distressed properties.

Distressed Property Pricing Strategy: Avoiding Selling Too Low Or Too Quickly

When it comes to the price you set for selling your distressed property, every case is different as there are a lot of considerations…

Selling With Equity

If you have equity in the property, you’ll need to talk with your attorney and realtor. An experienced realtor should be able to handle the process. However, if your real estate agent is less experienced, your real estate attorney should be included in future conversations with your realtor.

You’ve got to look at what’s going to maximize the equity and what’s going to maximize the return, which means you’ll want to price it for a quick sale. But if your property is in a higher price range it will probably sit longer.

Some homeowners would rather not sell until there is no equity left. Other homeowners want to move immediately, getting the property off their hands. The point is that valuing your distressed property, discussing your options, and making a game plan requires discussion. The sooner you sell the property, the sooner you can stop late fees, interest, and foreclosure fees.

Selling Without Equity

If you do not have any equity in the property, the process is different. If you are close to the property sale date, you need to get an offer right away. Recognizing whether or not you have the time to wait will factor into the sale price you set.

Selling With A Time Crunch

If you’re coming up on a sale date, most homeowners will lower the sale price, which does two things. A lower price will make your home more attractive and encourage an offer. Another thing is the lower sale price might spark a bidding war. Setting the price on your distressed property is important. Overpricing your property with the sale date coming up is not the right decision. That is why an experienced realtor is crucial to selling your property.

Taking Your Property Off The Market

If you have an offer on your distressed property, you keep the property on the market but mark it contingent because banks want the properties actively marketed. They want to get as much money as they can.

If they see your property has been taken off the market or if it’s not listed, they’re probably not going to review the file for a short sale, like they would another property. Some lenders even have requirements about the amount of time that a property needs to be listed before you can accept an offer.

Ultimately, you decide on the offer you want to accept and submit that to the bank. But you do need to have a profit margin.

The Effect Of Disclosures On The New Homeowners

Disclosures do not affect new homeowners. Their purchase of the property is not affected by what you did or didn’t pay on the home while you lived there. However, distressed properties are sold as is. The new homeowners will not get repair credits after they sign the contract.

The Process Of Selling Your Distressed Property To A Buyer

Once you have a buyer for your distressed property, your realtor will put together the contract. In Chicago, there’s one main buy-sell contract that’s used more often than the others, which your realtor drafts. After adding the specific terms of the sale, your realtor will send the agreement with a short sale addendum over to the seller’s realtor and the attorney.

The review period is a standard five business days to either cancel or make modifications. Once the buy-sell agreement is agreed upon, your attorney submits it to the lender. If we can’t get lender approval in 120 days or the timeframe that’s agreed to, the buyer can cancel the transaction.

Common Misconceptions Or Misunderstandings About Selling A Financially Distressed Home In Illinois

One misconception is a short sale means negative tax implications, but that’s seldom the case. The bank wants short sales to be done. Congress knows that if you’re doing a short sale, you probably lost your shirt. Thus, legislation was written for the short sale. If you’ve paid on your property for 20 years on a typical 30-year mortgage, and you sell your property in a short sale because the bank is foreclosing on your house, you don’t have tax consequences.

The other misconception is that homeowners do not have to do anything. They’ll give their house back to the bank. That is not the case either. If you do nothing, the bank will go through the foreclosure process and sell the property. Foreclosures almost certainly sell for significantly less than what is owed. What’s more, the difference between what the property sold for and what you still owe is the amount that you can be held liable for.

For example, if you owe $500,000 on the property and your bank sells it for $300,000, the bank can take a personal judgment against you for that $200,000 unless you’ve filed for bankruptcy and gotten a rare discharge. In the judgment, the bank can freeze your bank accounts, garnish your wages, and seize your IRS tax refunds. This debt is also on your credit. As such, if one of our clients says that they want nothing to do with the house, they are giving it back to the bank, we explain the possible consequences of doing so and offer a no-cost solution.

For more information on Options For Selling Distressed Properties In IL, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (312) 313-1033 today.