Rich Von has a talent for turning around homes that are in disrepair, sometimes revitalizing entire areas. Below, Rich Von shares some of his knowledge, gained from years of experience.
Q: What is a distressed property?
Rich Von: The term distressed property refers to a home that is on the market at a reduced price due to foreclosure or short sale.
Q: Are these properties typically in bad condition?
Rich Von: Some of the properties are in really bad condition and others are near perfect—there’s a wide spectrum. Distressed properties have unjustly been given a bad rep due to the fact that, in some cases, homeowners vandalize properties before moving out.
Q: So it’s a misconception that all homeowners vandalize properties?
Rich Von: Yes. The vast majority of homeowners simply move their items out and let the lender take over from there.
Q: What can I expect if I purchase a distressed property?
Rich Von: A distressed property probably won’t have the niceties found in a home that has been put up for sale for a profit.
Q: Such as…?
Rich Von: The carpets may need to be cleaned or replaced. The walls normally aren’t freshly painted and there may be some light fixtures or cabinet knobs missing. And you should expect to have to do a lot of due diligence so you know exactly what you’re purchasing—this means title searches and very thorough testing to insure appliances are working, plumbing is satisfactory, roof and foundations are ok, etc. A lot of times you’re purchasing the property as is, so it’s important to bring in professionals to get a true and accurate assessment of what you’re buying.
Q: Can someone get a bargain on a distressed property?
Rich Von: Normally homebuyers can get a much nicer home for the money if they’ll consider a distressed property. However, distressed properties can fall into a bidding war, so it’s important for a buyer to be well-educated in the value of a home and the cost of any repairs to avoid overpaying. Just because it’s a distressed property doesn’t mean it’s a deal. I’ve seen a lot of people pay way above retail and think they were getting a deal just because they bought at auction.
Q: If I want to buy a distressed property, will I need an agent?
Rich Von: You won’t need an agent, but I highly recommend it, especially for inexperienced buyers. Distressed properties can sometimes come with extra paperwork and legalities that can be a nightmare for someone who is new to real estate.
Q: Can I make money flipping distressed properties?
Rich Von: Buying and fixing up distressed properties for resale is something that takes experience. Someone can easily lose money if they don’t know what they’re doing. There are all kinds of traps—liens and title issues; construction issues; I could go on for hours.
Q: What do I need to know?
Rich Von: First, it’s important to become thoroughly educated about an area and be familiar with trends. If a neighborhood is on the downslide, for instance, a house may not fetch what it would in a neighborhood that is trendy and popular at the time.
Q: Will I have trouble selling a distressed property once I’ve rebuilt it?
Rich Von: It’s possible to have trouble reselling, yes. A seller can easily run into trouble trying to sell a distressed property, primarily with buyers getting loan money from banks. A bank will often question whether a home is worth what the seller is asking, especially if the area has gone downhill in recent years.
Q: How do I find distressed properties?
Rich Von: Often banks will hold auctions for a property where buyers can get a great deal. A real estate agent can also help a less experienced buyer find great deals on properties.
Rich Von is a co-founder of Von Vesting, Inc., a company that specializes in distressed properties. The company has found great success in recent years, thanks to Rich Von’s knowledge of local housing markets.