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Distressed property refers to property that is suffering from issues that is giving the owners a lot of stress.
While there are various circumstances that put a house under the “distressed” category, industry practice usually use this term to describe real estate facing foreclosure.
However do note that there are many other issues that can put an owner under stress.
For example, an owner is not able to generate enough revenue to repay the mortgage debt obligations. A house that is constantly requiring expensive repairs. Property value falling below the mortgage balance. Or partners in ownership conflict.
Even homeowners who are going through divorce can sometimes be described as distressed property. Because the liquidation of the house is a problem the couple will be worried about.
As can be observed, distressed property is a term that can very much be used to label any real estate with owners who are suffering financially or mentally from just owning the property.
It doesn’t matter if it’s commercial or residential.
When such properties are sold, it can be described as a distressed sale.
Real estate investors who seek out such motivated sellers can often work out great deals that lean in their favor.
Yet even though the sellers might sometimes feel that they are being preyed on, they might be relieved that they have finally gotten the property off their hands.