All properties, whether distressed or not, are going into contract with little delay during this STRONG Seller's Market. So, you should keep ALL of your options OPEN.
Many Buyers start a property search only focusing on distressed property due to a belief they are cheaper and less difficult to buy than non-distressed property which is simply is not the case.
Basically, there are four types of "distressed/foreclosure" property. Here's a quick relative risk/difficulty scale for distressed property (1 being the most risky):
1) Trustee Sale-
You personally go to the County court house and bid on a home you probably have never seen the inside of, nor will have the opportunity to fully investigate. Seasoned investors need only apply. Cash/Cashiers check only, no financing. You may be interested in these two videos; â€œForeclosure Auction Guideâ€ http://www.youtube.com/watch?v=1CanJbhGdJM
2) Auction Company Sale-
A little better, at least you have a seat in a packed room where the auctioneerâ€™s primary job is to get the highest offer from a much larger group than #1 above has. You are buying â€œAS-ISâ€. Do you have the ability to gauge cost of repairs you might see? This option is best for those who can walk a home and calculate refurbishment costs on the fly IF an investigative period has been allowed. If you are â€œgung hoâ€ about an auction of this sort perhaps you should go through the steps to vet the property yourself and consider attending an event to see â€œhow the sausage is madeâ€ and how comfortable you would be if you went this route.
When a property does not sell via #1 or #2 above you eventually see it come on market via a RealtorÂ® MLS. You will still needs the skills to evaluate property condition and the good news is your RealtorÂ® will be helping you to do so along with professional property inspectors you hire. The downside of an REO is the Bank typically only sells "AS IS" (meaning, the Bank will not typically make repairs even if you identify an issue) and the Seller's property disclosures are limited to what is statutorily required by law.
Before moving on to 4, 1 thru 3 above have a higher probability for issues with Title, referred to as "Title Defect" or "Cloud on Title", which means you would not have clean/clear ownership - not a comforting thought.
Some examples of situations affecting Title are:
-Outstanding future interests of others in the property
-Easements on the property
-Variations in the names of grantors and grantees
-Variations in the chain of title
-Outstanding dower interests.
-Adverse possession claims
-Existing violations of equitable servitudes or covenants
-Zoning restriction violations
Hereâ€™s another video from the auction trenches: "Wells Fargo auctions off house they don't own" http://www.youtube.com/watch?v=yV6NeHoq1wA
and hereâ€™s an interesting situation I have run into:
"REOs: How Buyers Can Avoid Hidden Unsecured Property Tax Liens" http://tinyurl.com/asvofat
4) Short Sale-
While there is nothing chronologically short about this option (plan on 60-90+ days before a Lender approval) it nonetheless is the closest relative to the non-distressed sale (where the Seller is selling â€œAS ISâ€/no Seller credits or repairs). The only real risk with these transactions is the underwhelming boredom and the overwhelming mystery of why it takes so long to obtain Lender Approval(s)!
If you enjoy the â€œthrill of the dealâ€ proceed with options 1 thru 2. If you like to know what you are getting for your money stick with 3 or 4 and non-distressed property.