Real Estate Term of the Day – Distressed Sale
A distressed sale is almost exactly what it sounds like, meaning it is when a property or other asset is sold in an urgent manner. These types of sales often lead to a net loss for the seller because the assets are needed quickly and are most often used to pay for debts or medical emergencies. Mortgage borrowers who can no longer afford their payments may also opt for a distressed sale, such as a short sale. In the case of a short sale, the value of the home is less than what the owner owes to the lender, and this means the owner suffers a loss on their home.
Often, in distressed sales, a loss occurs because the seller is so eager to get rid of the property or asset that they are willing to accept an offer that is lower than the value of the item. If the asset in question is something like an antique, and the seller chooses to work with a pawnbroker, they are especially likely to get offers lower than the asset’s value. Pawnbrokers do this because they want to turn a profit on the item, and sell it for a higher price than they paid. While this isn’t the best option for the seller, it does provide them with instant cash. Some buyers are also likely to take advantage of a seller if they know that the sale is distressed. If they are aware that the seller needs a transaction immediately, they will know that they can get away with putting in an offer much lower than the market value.