Searching for distressed properties in NYC to buy, renovate, and rent or sell isn’t exactly a walk in the park. But, it doesn’t have to be drudgery either. There are several ways to find fixer-upper homes for sale in New York, no matter which borough you invest in. More than anything, it’s a matter of determining which method yields the best results and to focus your efforts there. That’s what I told my buddy, Eliot, when he recently quit the world of finance to embark on a career in real estate investing. He already had a few ideas up his sleeve, but he also wanted to know where I find leads since I make it look so easy. So, we took a walk to discuss his potential strategies, as well as the one I prefer to use.
Ways to Find Distressed Properties in NYC
Whether you’re thinking about buying investment property in Manhattan to hold as a rental or investing in East Harlem homes to rehab and resell, you’ve got to buy distressed properties at a discount and identify how to add value. But, before anything, you’ll need to find the deals in the first place. There are good deals to be found in New York, and Eliot had come across a few ways to source leads on distressed homes for sale. His ideas are below, followed up by mine:
Real Estate-owned (REO) Sales
Historically, REO homes have been sold at a discount by lenders in an effort to offload inventory and recoup some of the costs associated with a defaulted loan. These foreclosed properties can be in pretty bad shape because the owner couldn’t afford the maintenance or because the property sat vacant for a long period of time, or both. That’s what makes REOs an attractive pursuit for many investors. They are easy to spot too; you can find REOs on the Real Estate Board of New York’s Residential Listing Service (RLS), on lender websites, and with many paid listing services.
More and more often, lenders are taking on the responsibility of clearing titles, evicting occupants, and even performing some repairs and, on the surface, that seems like a benefit. Paying tax liens and evicting tenants can cost you more money and time than your potential profits can afford. But, this practice has emboldened the lenders to start pricing their properties at full ARV—even when the home only gets a quick lipstick rehab with new paint and carpet. So, these days, investing in REOs is more likely to put money in the pocket of the banks than into yours.
You can sometimes find distressed properties at auctions. Before a home reverts back to a lender, it’s often first sent to an auction, like the foreclosure auction in Brooklyn, by the court overseeing the proceedings. The City of New York also auctions properties that have been seized due to back taxes, bankruptcy, divorce, or unpaid liens at the Sheriff’s Sale. If a homeowner passes away and leaves no heirs, or there is a dispute among family members, a judge may order the property to be sold at a probate auction. Auctions are typically listed at local municipal offices, advertised in newspapers, and posted online.
But, buying property from an auction is not always a good deal, nor is it easy. You rarely get the chance to perform any due diligence or get a home inspection. Since the properties are sold as-is, if you buy a house that needs major repairs or has any encumbrances, you inherit all associated expenses. And, though every auction has its own sale terms, down payments tend to be substantial and balances are usually due within a few days or less—in cash. Failure to meet the terms can result in the forfeiture of your deposit plus fees. Investor competition can be strong at auctions too, which puts you at risk of bidding too high to win or wasting your time just to lose.
Purchasing properties from homeowners in pre-foreclosure is usually easier, and frequently cheaper, than buying from a lender or at an auction. If a homeowner is in financial distress and can’t pay the mortgage, they may want to unload the home as quickly as possible. If they’ve received a Notice of Default or Lis Pendens, the pressure to sell can be even greater. Searching New York’s Unified Court System website produces notices of pre-foreclosure and information about the homeowners. Querying the websites of other government agencies, like HUD, does the same. These homes often end up on lead lists too, which you can get from private companies for a fee.
Unfortunately, sorting through pre-foreclosure notices on government websites is time-consuming—if you can find the right pages to begin with. All pre-foreclosure activity tends to be listed, including canceled notices, so it’s easy to lose your way, and your patience, sorting through it all. And, because the information changes on a regular basis, you have to keep checking back for updates when you think you’ve found a great investment property. Buying from homeowners in pre-foreclosure puts you on the right track for getting good deals, but government websites can keep you running in circles.
The options above only provide access to a small slice of the best investment deals out there. And, frankly, it’s hard to juggle multiple strategies for finding distressed properties in New York City—something you’ll have to do to keep finding leads. Unless, of course, you have a better idea of how to find motivated sellers of distressed properties, like I do.
Find Motivated Sellers of Distressed Properties the Easy Way
I’m a big fan of buying properties from distressed homeowners before they lose their properties. It’s not only easier than dealing with lenders, auctions, and government websites, it’s kinder. When I work directly with a homeowner, I have the opportunity to buy a home at a price that allows me to add value with a rehab and realize a potentially good ROI when I sell. But, I also have the opportunity to help the seller get out from under a property they can’t afford with some dignity and, sometimes, a little equity.
As an independently owned and operated HomeVestors® franchisee, both the success of my business and the experience of the seller are equally important. And, thanks to all of the marketing tools and other helpful resources that I have access to, distressed homeowners know how to find me. Investing in real estate doesn’t get any easier than that.
For a better way to find distressed properties in New York, contact HomeVestors today!
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