What a distressed property is
Finder, a comparison service, describes a distressed property as one where the owner is selling in a hurry. The reasons it gives include financial stress, death, relationship breakdown, mortgagee-in-possession sales, severe damage from fire, flood or accident, and a declining market. It notes that in 'one industry' towns, such as mining towns in Western Australia, the market rose and then fell as the mining boom slowed.
A mortgagee-in-possession sale happens when a borrower cannot repay a mortgage and the bank sells the property to recoup its losses, Finder says. The guide also lists deceased estates, where a trustee sells after an owner dies, and relationship breakdown as common triggers. It says distressed properties are often tempting to buyers looking for a bargain, but that the reason a property is distressed can also point to problems.
How a distressed sale usually works
Finder says distressed properties can sell below the market average because the seller needs to move quickly.
Finder's guide says buyers can find distressed properties on listing sites and individual real estate agents' websites. It also mentions reports that track distressed properties.
Finder says distressed properties can sell below the market average because the seller needs to move quickly.
What buyers commonly weigh
Finder warns that a lower asking figure matters less if the property is in poor condition or sits in a struggling neighbourhood. Its guide sets out what it says buyers commonly weigh, including the property's condition, the neighbourhood and the cost of repairs. It notes that serious disrepair, a very small size or other factors can make finance harder, and that lenders may reject an application or require a much larger deposit.
Finder's guide also notes that distressed properties can be competitive, especially when they look like a good deal, and that lenders decide based on the property as security and the borrower's ability to repay.
Distressed sales in Sydney
Domain reports that mortgage-belt suburbs in Sydney record the highest share of distressed sales in the city. Domain figures show that in April, distressed listings made up 13.2 per cent of all property listings in the Blacktown area, up from 8.7 per cent a year earlier. The Parramatta region was at 8.3 per cent, and Merrylands/Guildford, Richmond/Windsor and Fairfield were at least 7 per cent.
Across Sydney, 3.1 per cent of property listings were considered distressed, Domain says, down from 4.6 per cent a year earlier and higher than in most other capital cities. Domain defines a distressed listing by keywords such as 'desperate seller' and 'urgent sale' in a property advertisement that point to an owner wanting a quick sale.
Questions people ask
- What is a distressed property?
- Finder describes a distressed property as one where the owner is selling in a hurry, and says this can be for many reasons, including financial stress, a death or a relationship breakdown. Other reasons it gives include mortgagee-in-possession sales, property damage and falling values.
- How does a distressed property sale work?
- Finder says a mortgagee-in-possession sale happens when a borrower cannot repay a mortgage and the bank sells the property to recoup its losses. The guide adds that properties can sell below the market average because the seller is selling in a hurry.
- Why do properties become distressed?
- Finder lists financial stress, death, relationship breakdown, severe damage from fire, flood or accident, and a falling market among the reasons. It also notes that in 'one industry' towns, such as mining towns in Western Australia, the market rose and then fell as the mining boom slowed.
- Where can distressed properties be found?
- Finder reports that distressed properties can be found on listing sites and individual real estate agents' websites. It also mentions reports that track distressed properties.
- What risks come with a distressed property purchase?
- Finder says a lower asking figure matters less if the property is in poor condition or in a struggling neighbourhood. It notes that serious disrepair, a very small size or other factors can make finance harder, and lenders may reject an application or require a larger deposit.