Real Estate Deal Analysis & Advice

6 Ways to Locate Distressed Properties Online

Expertise: Business Management, Landlording & Rental Properties, Real Estate News & Commentary, Real Estate Marketing, Personal Development, Real Estate Investing Basics
106 Articles Written
Exterior facade on abandoned foreclosed home

If you want to locate distressed properties online, the first thing you have to realize is that no one calls their own house a “distressed property” unless they’re really desperate to sell it. People just don’t think in those terms—unless they’re already highly active in the real estate market. And generally, those people know what they’re selling and will make it hard to raise a profit in the first place.

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What you’re actually looking for are motivated sellers with real estate they don’t want or can’t handle:

  • Properties with delinquent taxes
  • Properties with delinquent mortgage payments
  • Properties that are legally obligated to be sold due to bankruptcy or divorce settlements
  • Properties being sold out of probate
  • REO/bank-owned properties
  • Government-owned homes

So, let’s talk about how to find each of these kinds of property. But first, we need to add a caveat: All of these methods depend on you having already selected a specific area where you want to purchase a property.

Ideally, it’s a good idea to do neighborhood-level research first anyway, so we’re going to assume that you have. But you should nonetheless be aware that these techniques won’t be useful to someone who doesn’t already have a neighborhood (or at least a small city) in mind.

Properties With Delinquent Taxes

Finding properties with delinquent taxes is fairly straightforward—if you can find the local tax assessor’s website. Depending on where you’re looking, you might need to Google for “[City Name] Tax Assessor” or “[County Name] Tax Assessor.”

And of course, every tax assessor’s website is constructed differently. The vast majority of them—especially in densely populated areas—have lists of tax-delinquent properties that you can download and examine.

Related: Rehabbers Beware: 5 Big Issues Distressed Properties Hide (& How to Detect Them)

Properties With Delinquent Mortgage Payments

The best “underwater” properties are the ones that are right on the verge of foreclosure—they’re the most motivated sellers. In many parts of the United States, you can find an official publication of these houses by Googling “[County Name] Legal Notices,” but you can also find reliable, easy-to-browse listings at RealtyTrac.com, Foreclosure.com, and HUDForeclosed.com.

Properties That Legally Must Be Sold

Fortunately, if you’re familiarizing yourself with your county’s legal notices, you’re already a good way toward the next group of easy-to-find distressed properties. Not every county is legally obligated to post notices of bankruptcy or divorce, but every county is required to announce when and where properties that are being auctioned are being auctioned.

The same legal notices that cover foreclosure auctions also announce auctions for properties being auctioned for bankruptcy or divorce. There’s just no reliable easy-to-browse alternatives here, unfortunately.

Another option is to cultivate relationships with local bankruptcy and divorce attorneys, so they call you when they encounter a motivated seller.

Properties Being Sold Out of Probate

If you’re going to look to probate court as a way of obtaining a distressed property, you should be aware that probate court adds several wrinkles to the process that might affect your decision.

First, with some courts, you can’t make an offer on a probate property without putting a 10 percent deposit down, and that 10 percent is non-refundable—whether you end up with the property or not.

Second, there’s a long process (six months is not uncommon) that involves several stages at which you could end up not buying the property.

  • First, you have to make an offer and have the executor of the estate and the probate court agree to sell you the property. The executor must agree to the price; the court can’t object to the price but can decide to reject your bid on other legal grounds.
  • Then, there’s a minimum 30-day delay in which the property is offered publicly at the agreed-upon price, allowing someone to outbid you.
  • Finally, on the day the court sets to actually sell the property, they hold an auction, giving other people another chance to outbid you. The price for the auction generally starts at least 5 percent above your initial agreed-upon price.

The only two circumstances in which you get your 10 percent deposit back are if the court rejects your bid for legal reasons or if you are outbid. Should you place a bid and then find out from the home inspector that the entire place is falling apart, you’re still out that 10 percent.

Needless to say, this makes probate houses a significant risk.

Finally, on top of all that, there are still relatively few counties or municipalities in the United States that list probate sale announcements online at no cost. Of the services out there that harvest probate leads and sell them (because the other option is to comb through obituaries, which is essentially the real estate market’s spin on a lawyer chasing ambulances), SuccessorsData.com and USProbateLeads.com are your best bets.

credit-report-loan

REO/Bank-Owned Properties

Real estate-owned aka. bank-owned properties aren’t just “distressed”; they’ve already been foreclosed upon. Most of them are just sitting empty, slowly costing the companies that own them money.

On the downside, 100 percent of them are sold as-is, so if you don’t have a good reason to be confident that a particular home is solid, they can be a gamble. The best way to find REO properties is right here on BiggerPockets with its well-maintained list of REO searches that covers the entire country.

Related: 3 Reasons to Always Buy Distressed Property (& How to Find One)

Government-Owned Residential Properties

When the HUD, Freddie Mac, or Fannie Mae insures a mortgage and that mortgage fails, those entities foreclose on the mortgaged homes just like a bank would. And when they do, they turn around and try to sell those homes, just like a bank does.

Furthermore, properties are also frequently offered by several other government entities, such as the Department for Veterans Affairs or the FDIC. While every agency has its own rules and methods, you can start your research into this vast arena at the HUD Single-Family Homes for Sale webpage, which has links to each government department’s relevant webpage.

There are also several solid links on the U.S. Marshals Service’s National Sellers List [PDF].

Between all of the resources listed here, finding a distressed property worth making a bid on isn’t a matter of “how” so much as “when.” Give your mouse-hand a workout and investigate, and you’ll find that the process is a lot easier when you’ve got a solid starting block to push off of.

Good luck!

Where do you find your distressed properties?

Let me know what you’ve had the most luck with.

While in the mortgage business, Drew rose to a VP position at the first broker he worked for and then started his own company. In the pursuit of excellence, he obtained several mortgage designation...
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    m.a.raihan
    Replied about 3 years ago
    An interesting story. I like the authors explanation and presentation. thanks for sharing
    Drew Sygit from Birmingham, Michigan
    Replied about 3 years ago
    @M.A.RAIHAN: thanks, we try to follow the KISS principle:)
    Larry Russell Rental Property Investor from Whitsett, NC
    Replied about 3 years ago
    Nice article. A comprehensive list of alternative ways to find “distressed” properties online. Good timing for those looking for more ways to find potential rental properties.
    Drew Sygit from Birmingham, Michigan
    Replied about 3 years ago
    @LARRY RUSSELL: it’s getting harder and harder to easily find decent investments, so we thought we’d remind everyone of some basics. Thanks for reading and commenting:)
    Tim Sabo Rental Property Investor from Johnstown, PA
    Replied about 3 years ago
    An absolute necessity for anyone in real estate: you must learn WHERE to find and HOW to buy bargains! Great article with links.
    Drew Sygit from Birmingham, Michigan
    Replied about 3 years ago
    @TIM SABO: thanks!
    Lacey S. from Carrboro, North Carolina
    Replied about 3 years ago
    Has anyone used this hudforcelosed.com website? I was checking it out but it seemed a little sketchy because it’s a paid membership but it will not tell me how much a membership costs, at least I couldn’t see anywhere the fee was listed. It only says there is a 21 day free trial…but then what? If anyone knows, I’d be curious!
    Tim Sabo Rental Property Investor from Johnstown, PA
    Replied about 3 years ago
    This is the site you’re looking for, not the ‘.com’ ripoff you have. https://www.hudhomestore.com/Home/Index.aspx?sLanguage=ENGLISH
    Drew Sygit from Birmingham, Michigan
    Replied about 3 years ago
    Guys, go to HUD.gov and follow the links:)
    Lacey S. from Carrboro, North Carolina
    Replied about 3 years ago
    Thank you! I had followed the Hudforeclosed.com link the article recommended but I will stick to the government version. The HUD government site is also very easy to use! Thanks!
    James You Real Estate Agent from Los Angeles, California
    Replied about 3 years ago
    thank you for sharing
    Drew Sygit from Birmingham, Michigan
    Replied about 3 years ago
    @KEE YOU: thanks for reading and taking the time to comment!
    Travis Colsen Lender from Saint Paul, Minnesota
    Replied about 3 years ago
    Excellent resource!
    Drew Sygit from Birmingham, Michigan
    Replied about 3 years ago
    @TRAVIS COLSEN: many thanks for commenting sir:)
    Sina Simingalam Investor from McLean, Virginia
    Replied about 3 years ago
    Fantastic! This helps me plug some holes in my marketing. Thanks.
    Drew Sygit from Birmingham, Michigan
    Replied about 3 years ago
    @SINA SIMINGALAM: be sure to share any successes here on BP!
    Horace Moning
    Replied almost 2 years ago
    Hi sirs I looking for something invest in what the starting price for a distress house.
    Rodric King from Orlando, Fl
    Replied over 1 year ago
    Great information thanks…
    Drew Sygit from Birmingham, Michigan
    Replied over 1 year ago
    @RODRIC KING: glad someone is reading our old articles and finding them still helpful:)
    Rena Jonas
    Replied over 1 year ago
    Great article!!! Great tips!!! Do you have any suggestions on how to research if there are any liens or mortgage liens on it? I want to go after the tax delinquent properties, but don’t want to be hit with a surprise!!!
    Christopher Orr Flipper/Rehabber from front range, southern colorado
    Replied 30 days ago
    Rena Jones I go to the county records office the clerk and recorder. They have 6 public computer you look at deeds of trust and than match up release of deed of trust with them and your left with the current liens.
    Drew Sygit from Birmingham, Michigan
    Replied over 1 year ago
    @RENA JONAS: most Multiple Listing Services (MLS) allow users to access public records. Public Records will show any mortgage liens, but it will just be the amount at inception of any mortgage. You will have to make some assumptions to extrapolate what the current balance might be and understand that lines of credit may be max’d out. Also, you want to find out what the estimated delay is between when a lien is recorded and when it actually shows up online.
    Dovi Klein
    Replied 3 months ago
    Are there any way to find rejected refinance leads?
    Drew Sygit from Birmingham, Michigan
    Replied 3 months ago
    @Dovi Klein; They are not public information and getting them directly from a bank/lender is unlikely due to federal privacy laws.
    Raheem Lee from Norfolk VA, United States
    Replied 3 months ago
    Very Great Article.
    Drew Sygit from Birmingham, Michigan
    Replied about 2 months ago
    @Raheem Lee: thanks!
    Muoki Musau Realtor from Leesburg, VA
    Replied about 2 months ago
    New investor here. Your explanations are so helpful, comprehensive as well as readable. I love BP because of content like this, and people like you. First comment of the new decade! Thanks again.
    Drew Sygit from Birmingham, Michigan
    Replied about 2 months ago
    @Muoki Musau: glad you found the information helpful. Now go out and buy an investment property:)
    Christopher Orr Flipper/Rehabber from front range, southern colorado
    Replied 30 days ago
    Code enforcement keeps a list Of empty houses in my town. check with the police or fire station they know a lot of empty houses. And the unpaid water bills is public info.
    Drew Sygit from Birmingham, Michigan
    Replied 27 days ago
    @Christopher Orr: Yes, as great idea! Although you may have to file a Freedom Of Information request to get the list.
    Richard Aguilar Flipper/Rehabber
    Replied 28 days ago
    Great idea!!
    Lemar Allen from Elizabeth City, North Carolina
    Replied 29 days ago
    Great read! I found this article to be very insightful. I am a newbie, currently in the process of working on building the foundation for my REI business. Thank you for the resources that you have shared...great tools to help me reach my Real Estate goals!
    Drew Sygit from Birmingham, Michigan
    Replied 27 days ago
    @Lemar Allen: just be sure to NOT treat real estate investing like picking a mutual fund! Real estate is a lot more hands-on.
    G. Brian Davis from Baltimore, MD
    Replied 29 days ago
    Great roundup Drew, thanks for sharing. I've had some success with auctions and estate-sale properties in the past, forced sales often yield lower prices!
    Drew Sygit from Birmingham, Michigan
    Replied 27 days ago
    @G. Brian Davis: knowing how busy you are, thanks for taking the time to comment!
    Roger Mohnani from Richmond Hill, New York
    Replied 28 days ago
    thanks for sharing
    Drew Sygit from Birmingham, Michigan
    Replied 27 days ago
    @Roger Mohnani; many thanks for commenting:)
    Katt Wagner from Cocoa Beach, FL
    Replied 26 days ago
    Hey Now! Great points on every type of property list, but don't forget about All The Leads for probate lists :P
    Robert Mitchell Contractor from Atlanta, GA
    Replied 26 days ago
    Great list thanks for sharing
    Mark Pedroza Real Estate Agent from Roseville CA ~ San Francisco, CA
    Replied 19 days ago
    Buying a probate property during court confirmation is almost considered a probate auction. A court referee will be appointed by the court to give an "Opinion of Value". The referee probably does not go to the property and does not do an interior inspection. As an investor of a probate property one must take into account is is a fixer? Is it really in bad condition? Are there any factors that limit marketability? Does the street and/or neighborhood determine the price of the property? What repairs are needed? Most investors who are not real estate professionals are going to use Zillow, Redfin or Trulia or information from a title company. The successful bidder needs to know that it is a no contingency sale which means the investor's offer is not subject to appraisal.. Investors should bring a agent with them. All probate auction bids must be 90% of the court referee's opinion of value. Should an investor be the winning bidder of the property, if they can't close in 30 days that investor will lose their down payment. It would be best to for the investor to initiate a marketing campaign to the PR (Personal Representative) and the attorney. The attorney represents the PR while the PR represents the (decedents) estate..