What is a distressed property?

A distressed property is a property whose owner has defaulted on the mortgage and is in usually poor physical condition. Such a property is typically in foreclosure and is usually sold at a low price, since the lender wants to dispose of it quickly.

Situations that can put a property in distress include the death of a family member, a divorce or separation and financial misfortunes. An investor in a distressed property should get accurate estimates of the repairs needed, as they form a significant portion of the investment cost. The investor should then submit a bid for the property at a price below the asking price.