Every now and then many people wonder if they should focus only on Bank sales for their real estate investments or not. In this blog, the concept of distress sales is discussed thoroughly:?

1) We lose wider exposure - When we are in the market for an investment property if we rather limit ourselves to only looking at a distress or bank sales we are doing a disservice to ourselves by not looking at other options in the market which might not necessarily be a distress sale but are indeed a good value for our money. When we are buying a Real Estate Investment our goal should be to get a good property in a decent neighborhood at a favorable price, whether it is a bank sale or it is sold by a regular Seller shouldn’t be my primary criteria for selecting properties to review. As our whole intent should be to get maximum ROI (Return on Investment) in the long run and choose the best property which works to achieve that goal and not only look at a smaller subsection of the properties and ignore the whole inventory.
2) Reduced inventory - When we limit ourselves to bank sales we are looking at a very limited section of the market as a whole, as the stress sales conventionally will come into the market when there is a sudden and significant increase in the lending rates. When the rates are steady or they are reducing, it's unlikely you will see them in the market.

3) Inferior State of the Property - If the property is a distress sale, generally the properties are in an unkempt state as the previous owners have left the home in stress and likely have not treated the property well before leaving or the tenants had to leave due to predicament and have left hurriedly in a bad taste. For the most part, they are not in the best of the state due to the difficult situation previous family has left the property and they were psychologically upset. 

4) It's not a bargain - The banks and financial institutions, i.e. the mortgagee have a mandate even in a distress sale to do everything to market and ensure the property is sold at the fair market value. And  on successful sale keep their portion and provide the rest to the Sellers what remains after paying outstanding mortgage and expenses. It's again a misconception that just because it is a bank sale I will get it for a reduced price. You definitely might get a good bargain for a stress sale, however, if you open yourself to look at the entire inventory you might be able to pick up properties that will give you a better value in the long run for your Real Estate Investment and there might be opportunities to negotiate as well.

Wish you all the very best! Reach out to our dedicated team at Elixir for any queries you have in Real Estate and we will do our best to help.


Mudit Mehta
Broker of Record
ELIXIR REAL ESTATE INC.
Off: 416-816-6001 | [email protected]