Distressed properties face financial or legal challenges—which can affect their value and marketability. The motivation behind discussing them is that they can be difficult to sell through typical or conventional means. Here are several examples of why a property could be labeled “distressed.”
- Foreclosure
- Short Sales
- Bank-owned or real-estate-owned (REO) properties
- Bankruptcy
- Abandoned properties
- Tax liens
Navigating these sales requires a sufficient understanding of the legal safeguards that have been placed, which must be paired with strategic guidance from an experienced real estate attorney. In other words, they can be sold, but the seller should be prepared for a unique process.
Legal Safeguards for Sellers of Distressed Properties
Sellers of distressed properties can take a relative amount of comfort in knowing that there are legal safeguards to protect their interests. For instance, the Illinois Foreclosure Mediation Act was established to assist homeowners dealing with the stresses of disclosure. Lenders must pursue mediation with a homeowner before the foreclosure process is initiated.
This is the time for the homeowner to discuss remedies to avoid it outright. Some homeowners can devise a payment plan to meet their obligations on a different timeline. Others may begin the process of selling their home before they are foreclosed on. The benefit is that the seller may prevent their credit score from being harmed, and they recoup the equity in their home without assuming a massive loss.
The Illinois Homeowner’s Bill of Rights was also designed to prevent homeowners from being in a position where they have an increased risk of foreclosure. It prohibits lenders from pursuing predatory lending practices and establishes communication between the future buyer and the mortgage lender. For example, the lender must submit a series of disclosures before extending a loan offer. These are essential documents that homebuyers should be aware of and should lean on their real estate attorney for further clarification. It may decrease the chances of them becoming a seller with a distressed property.
Practical Strategies for Selling
Due to the magnitude of the transaction, selling real estate requires a team that includes a real estate attorney and an agent. Skilled real estate attorneys will take the time to understand the seller’s position and circumstances before they explain to them what their legal rights are and what options are available to them. They will be pivotal when it comes to negotiations. Don’t overlook the importance of having a real estate attorney during distressed property sales.
Be diligent when selecting an agent who understands these types of sales. They should have a pulse on recent sales and pricing trends. They create a marketing strategy for the property like a typical property. When a seller lists a distressed property, they should anticipate buyers asking about its history and condition. Although your real estate agent will help you with this, it is important to be forthright, honest, and have answers prepared. Another element to consider is how flexible a seller should be. Typically, distressed properties don’t get full-market value, but there is still a chance to recoup some of the equity in the house, especially when compared to foreclosures.
Speak with Experienced Legal Counsel
Anyone considering buying or selling a property in the Chicago area can contact Auricchio Law Offices to schedule a free consultation. We will ensure that you understand the nuances of real estate law so that you can reach the closing table as an informed buyer or seller.
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