There are a lot of homes for sale in Metro-Detroit, and as many as half of the homes for sale of the Michigan real estate markets fall under the category of a distressed property.

Distressed properties in Michigan are homes that have either gone through a foreclosure, or they are currently being marketed by the existing home owner as a Michigan short sale property.  While a foreclosure is a bank-owned or lender-owned property, a short sale in Michigan comes from a homeowner that is unable to maintain their current mortgage.

Instead of pushing the foreclosure process, the lender agrees to sell the property for less than the balance of the loan.

There are some variable dynamics to a short sale in Michigan that differ from a traditional sale, especially in the area of more paperwork; there’s more of it.  The transaction process can be a bit longer which can lead to frustration on the part of the buyer.  That’s why a lot of first-time buyers tend to move away from the idea of a short sale.

With that said, if you do some homework and work with a buyer’s agent, you can avoid some of the potential frustrations and pitfalls of a distressed property in Michigan.  Ultimately, with the right people on your side, you can get a great home at a price most home buyers only dream of.

The Benefits of Buying Distressed Property in Michigan

If you thought that distressed property in Michigan was only in the “bad” areas, think again.  There are foreclosures and short sales all over southeast Michigan, including communities with higher home values such as Royal Oak, Northville, Birmingham and cities within western Wayne County and Washtenaw County.

The greatest benefit here is that you could potentially get a more expensive home you couldn’t normally afford at a much lower price.

Second, with distressed properties in the short sale phase you’ll be working with an extremely motivated seller.  If the seller is in financial trouble then they are very interested in getting out from under the mortgage.  The sooner they’re out, the sooner they can get their financial situation under control.

From a lender perspective, their interests rest in getting the home sold off and removing the liability from their balance sheets.  Without payments coming in for the property, the lender is losing money.

Pricing – Another benefit here is that the housing market has plummeted in recent years and taken home values along with it.  Many of the foreclosed properties in Michigan can be purchased for only a fraction of what they would have commanded over 5 years ago.  With a short sale you want see as good a deal as with a foreclosure but there is still money to be saved.

The Downside of Buying Distressed Property in Michigan

If you have the idea in your head that you’re going to get a $350,000 for under $50,000 then you need to take a brief moment and shake those thoughts.  You’re not likely to find a steal.  With the market beginning to heat up this year, we’re seeing a lot of bidding wars on distressed property throughout southeast Michigan, especially in communities with higher home values.  Distressed homes, foreclosures and short sales in Northville, Novi, Royal Oak, Ann Arbor and other high value communities are getting picked up quickly with competitive bids that sometimes go up to (and over) current home values.

Remember too that the transaction process for these homes can take longer than if you were buying from a private seller.  While recent proposed changes could reduce the short sale process, changes come slowly so it could be some time before we see real change in how long a short sale takes in Michigan.

Lastly, some foreclosed properties can be in rough shape.  Upset, frustrated and angry homeowners may cause damage, strip fixtures and outlets as well as plumbing, damage carpets and walls and leave the home in a state of disrepair.  This could increase your costs in the home buying process.

If you’re interested in purchasing a foreclosure or short sale in the Metro-Detroit area, the first step is to get pre-approved for a mortgage with a Michigan mortgage lender.  Contact me today to get the process started, then you’ll know what kind of funds you have to work with while searching for distressed property in the area.