How to Find Short Sales and Distressed Properties

A short sale occurs when a homeowner sells their property for less than the outstanding balance of their mortgage, with the lender’s explicit agreement. This typically arises when a homeowner faces financial hardship, making it difficult to keep up with mortgage payments, and the property’s value has fallen below the amount owed. While such sales can be complex, they often present opportunities for buyers to acquire properties at a reduced price. This article outlines strategies to identify such properties.

Online Resources for Identifying Short Sales

The Multiple Listing Service (MLS) serves as a primary database for real estate professionals to discover short sale properties. When searching public real estate websites like Zillow or Realtor.com, buyers should look for terms such as “short sale,” “subject to bank approval,” “notice of default,” or “pre-foreclosure” in property descriptions or status fields. Applying filters for “foreclosure” or “pre-foreclosure” can also help narrow down potential short sale listings.

Specialized websites cater specifically to distressed properties, including short sales and pre-foreclosures. These platforms aggregate listings from various sources, sometimes offering properties not yet widely advertised. Some online real estate auction platforms also feature distressed properties, including short sales or bank-owned (REO) properties.

Check the websites of lenders and banks, specifically their Real Estate Owned (REO) divisions. When a property goes through foreclosure and the bank takes possession, it becomes an REO property. Banks aim to sell these properties to recover their losses, often listing them directly on their corporate websites or through dedicated portals. Searching for “REO properties,” “bank-owned homes,” or “foreclosure listings” on major bank sites can reveal available inventory.

Working with Real Estate Professionals

Engaging a real estate professional specializing in distressed properties can improve the search for short sales. These agents have specialized training and experience in short sale transactions, including lender negotiations and approval processes. Their expertise is valuable for identifying potential short sales before public listing.

Real estate agents have direct access to the MLS, offering more comprehensive filtering than public websites. They can efficiently search for properties with indicators of financial distress or short sale potential. Agents may also know about off-market properties or have direct connections with lenders, providing early access to unadvertised opportunities.

When seeking an agent, inquire about their experience with short sale transactions and any specific certifications. The National Association of Realtors (NAR) offers the Short Sales and Foreclosure Resource (SFR®) certification, indicating specialized training in distressed properties. Other designations, such as Certified Distressed Property Expert (CDPE), also signify advanced knowledge. Asking for references from past clients can also provide insight into an agent’s capabilities.

Public Records and Other Direct Approaches

Public records and direct observation can uncover potential short sale opportunities. Many short sales originate from properties in pre-foreclosure, where the homeowner has defaulted on mortgage payments before foreclosure is complete. Public notices of default, or Lis Pendens, are legal documents filed with county recorders’ offices when a lender initiates foreclosure. These publicly accessible records indicate financial distress, making a property a potential short sale candidate.

Accessing these public records typically involves visiting the county clerk or recorder’s office. Some jurisdictions also publish these notices in local legal newspapers or provide online databases. Identifying properties with a Notice of Default or Lis Pendens allows interested parties to research the property’s ownership and mortgage status.

Another method involves observing neighborhoods for signs of property distress, known as “driving for dollars.” Properties with overgrown yards, deferred maintenance, or neglect can indicate financial hardship or vacancy. Once a potentially distressed property is identified, its ownership and mortgage details can be researched through public records to assess its short sale potential. While contacting distressed homeowners is possible, proceed ethically and respect privacy, adhering to legal guidelines.