Buying Distressed Properties

February 17th, 2010

old house

Buying distressed properties, whether they are in foreclosure or are a short sale, can be difficult. I am going to cut and paste an email from a prior client in relation to this topic, and my reply, as an example of how difficult it can be to buy distressed properties:

Example from a client on buying distressed properties

“Hi Brian,
I found myself doing initial legwork for a home purchase and found myself posting the following to a forum. I’d like to hear your recommendations as someone who is in the business. Thanks
In this day of browsing for your home, I do not see why Redfin cannot represent buyers for foreclosed homes. If there is an expense issue, buyers like myself may be willing to pay the regular commission just to facilitate property purchase. There is much opportunity there. I find a property that is outside Redfin’s purview and search for the listing agent and write down a posted number. Somehow, I cannot get anyone to call me back. This is hard to believe. I saw one house in foreclosure that I was willing to pay cash for due to location, land etc. And I was willing to accept other conditions. After calling the agent, and leaving a message, nobody returns my call. House sits on the market for a few more weeks. Then its price drops! WTF?

Second case, I find another property that a local says is on the market. The empty looking house has no signs on the lawn. I also see no listing in,, or Google Real Estate. A few weeks pass. The other day I drive by and BINGO – brand new sign with agent contact info. I call the number and get my call returned promptly (unusual) only to tell me that the property is under contract. That property was so ideal, I would have been willing to engage in competitive bidding to acquire it. Now I can only hope that their financing falls flat.

I don’t understand what I am doing wrong, other than the fact that I should probably not represent myself without a broker. But I want to avoid a realtor! I feel my time has been wasted finding out about this chaotic process. I am forced to find broker representation elsewhere unless Redfin can fill the niche presented by loan free buyers.

Any advice?”

And my reply:

“Interesting post. I have heard similar stories. In fact, I have seen some Realtors say they flat out will not work with anyone interested in foreclosures and short sales. This is because the banks and listing Realtors are so difficult to work with. Most people feel buying these properties is difficult to impossible. Many Realtors feel it takes too many hours and their time will be more rewarded in regular resales.

I don’t know if its due to them being inundated with interest that they are unable to handle? Think about it, if you are a bank and just want inventory off your books, and you are a large out of control organization, do you care about getting top dollar or being efficient?

Let’s say a foreclosed property gets 34 calls and half go unreturned. And the 17 parties that got called back bid the property up to the right number the bank was looking for. Do you think the bank and the Realtor care about the other 17 people who did not get calls back who all insist they would have bid “a little bit more”? My guess is it just a sloppy inefficient process. And the banks are probably leaving some money on the table and are too inefficient to know it. I think buying these properties is like finding a needle in a haystack.

I am not sure getting a Realtor to help you will improve your odds. I’d be interested to hear how that goes if you go that route. In other words, I am not sure a Realtor is going to return another Realtor’s call any faster than they would return your own call. I just think the process is a mess. I have done financing for a few foreclosures, and can see why people don’t want to work with them. It takes weeks or months to get a reply from a bank on a simple question. Good luck”


To finish the discussion, I just had a Realtor friend of mine finish my sentence. I said, “I am blogging about how hard it seems to be to buy foreclosed/distressed real estate for the…” and he stopped me and said “for the average consumer.” And I said yes, how did you know!? And he responded that regular consumers are getting beaten out by investors who are paying cash.

He said, “its a waste of time for someone who wants to buy a foreclosed home and live in it, because they usually have financing contingencies, take too long to settle, and want home inspections!” Further, “investors come in and offer above asking, with no contingencies, pay cash, and settle fast, then they fix them up and flip them.” So it seems the bottom line is that if you want to buy a distressed/foreclosed home, you need to have all cash, settle fast, and maybe even say you are an investor!

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Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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