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Selling Distressed Property in Arizona

The first words that come to mind when we hear “Distressed Property” are “needs work,” “old house,” or “destroyed.” These properties don’t start off being distressed—it takes time for a property to reach this state. Yet, selling a distressed home can be relatively quick and painless. Whether you’re dealing with foreclosure, probate, repairs, or out-of-state ownership, this guide will walk you through your options for selling a distressed property in Arizona fast and efficiently.

As with any home sale in Arizona, there are three main routes for selling a property: hiring a real estate agent, selling the home yourself as a For Sale By Owner (FSBO), or the easiest path—selling directly to an AZ Cash Buyer. The Cash Home Buyer route is the most convenient, as it allows flexibility with no lender contingencies and no appraisals.

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Table of Contents

1. What is a Distressed Property?
2. Can You Sell a Distressed Property?
3. Factors to Consider Before Selling
4. How to Sell a Distressed Property in Arizona
5. Common Mistakes When Selling Distressed Property
6. Challenges in Selling Distressed Properties
7. Final Thoughts

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What is a Distressed Property?

In most situations, people tend to think of a distressed property as one that needs work, is neglected, or damaged. While this is true, a distressed house can also be a financial burden to the owner, such as in cases of foreclosure.

This means the owner has failed to make mortgage payments, and the lender has begun the foreclosure process. Once the home goes into foreclosure, it is considered a distressed property.

Four types of distressed properties in Arizona:

1. Foreclosed Homes:
   These properties are at risk of being repossessed by the lender or bank due to the owner missing mortgage payments. If the owner cannot make up the payments or figure out a payment plan with the lender, foreclosed homes are often auctioned to recover losses.
2. REO Properties (Real Estate Owned):
   If the bank or lender takes possession of the property, they will attempt to auction it off to the public to clear the debt. When foreclosed homes are not successfully sold at auction, the lender will list them on the market—often at a steep discount—with an REO specialist or real estate agent. These properties are typically sold “as-is.”
3. Short-Sale Properties:
   Homes sold for less than the outstanding mortgage balance often require lender approval. This means the financially distressed owner has formed an agreement with their lender to accept a mortgage payoff amount less than what is owed to facilitate the sale.
4. Fixer-Uppers:
   Homes requiring significant repairs or renovations are often sold below market value due to their condition. A fixer-upper is classified as a distressed property due to issues like water damage, structural problems, or mold. Fixer-uppers are common purchases for cash buyers, who have the flexibility to buy without lender approval or inspections.

Other Types of Distressed Properties:

In addition to the ones mentioned above, other Arizona distressed properties may include those affected by tax liens, divorce, abandonment, bankruptcy, or local code enforcement violations.

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Can You Sell a Distressed Property in AZ?

Short answer: Yes. You can sell a distressed property through a real estate agent on the open market, as a FSBO, or directly to a cash buyer. If you’re in the early stages of pre-foreclosure, you still have the right to sell the property. Time will be of the essence, as you’ll need to settle missed mortgage payments quickly. Communication with your lender during this process is crucial.

If the house has already been claimed through foreclosure by your lender or bank, the property is now legally owned by them as an REO, and you no longer have any rights to claim ownership or sell the property.

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Quick Facts

• Pre-Foreclosure or Fixer-Upper: You can sell the property directly as you wish.
• REO Property (Banked Owned): If the lender owns the home, they control the sale process.

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Factors to Consider Before Selling in AZ

Property’s Market Value

Marketing an Arizona property as distressed, needing work, or damaged will attract lowball offers. Protect yourself by understanding the market value of your property. Start by determining your property’s true market value. You can do this in one of three ways:

1. Pay for a Home Appraisal:
   This is the most accurate option but typically costs an average of $500.
2. Hire a Real Estate Agent:
   Contact an agent and ask if they’re willing to provide a Comparative Market Analysis (CMA) for free in exchange for the potential opportunity to earn your business.
3. Do it Yourself:
   With online tools like Realtor.com or Zillow.com, it’s easy to check recent sales in your area. Check out this article on doing a CMA yourself.

When conducting your own Arizona CMA, try to remain unbiased. Just because your neighbor’s house sold for a certain price doesn’t mean yours will. Unless your home has been recently remodeled or is a new build, you’ll need to account for the cost of necessary repairs when calculating its value.

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Repairs Needed

Is the property in need of work? If so, evaluate the repairs and estimate costs. Hiring a home and pest inspector is the most efficient way to get a baseline for the work needed and its cost. Inspectors focus on safety and health hazards and can provide estimates for repairs.

Alternatively, you can call a contractor or handyman for estimates. Consulting with a real estate agent may also help identify repairs that will yield the highest return on investment.

Decide whether to sell the house as-is or invest in repairs. Most Arizona cash home buyers prefer as-is sales, while traditional buyers on the MLS typically expect repairs. If you’re in pre-foreclosure, time constraints may limit your ability to complete repairs.

The fastest way to sell a property as-is is to accept an all-cash offer from a local Arizona cash home buyer.

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Selling Timeline

Determine whether the property is distressed due to financial hardship (foreclosure) or its condition (fixer-upper):

• Foreclosure: Time is limited, so stay in communication with your lender to determine your deadline for selling and settling the debt.
• Fixer-Upper: You’ll have more flexibility to schedule the sale around your timeline.

Give us a call today to discuss your options or get started by filling out the form below!

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How to Sell a Distressed Property in Arizona

We’ve covered the types of distressed properties in Arizona as well as what to consider when selling. No we will shine the spotlight on different options for selling. Understanding these options and how they help you reach your goals or deadlines will ensure success.

Sell to a Real Estate Investor or Cash Buyer

Selling directly to a cash buyer is the quickest and most straightforward option. Buyer such as a Cash House Buyer or Real Estate Flipper will be experienced in handling distressed properties and offer benefits like:

• No Need for Repairs or Staging.
• Faster Closing Times (as little as 7-days)
• Minimal Paperwork.
• No Commissions, No Closing Costs & No Hidden Fees.

Steps to Sell to an AZ Cash House Buyer:

1. Request an offer online via phone.
2. Schedule a walkthrough of the property.
3. Review and sign the purchase agreement.
4. Close the deal and receive your payment.

Sell As-Is

When sellers search online for how to sell my house fast in Arizona, the fastest solution to sell a distressed property is as-is. This means the cash house buyer can buy your house fast, helping you avoid foreclosure or skip expensive house repairs.

This is especially beneficial when your house is distressed due to structural issues. Cash house buyers and real estate flippers won’t ask for you to complete repairs, nor will they ask you to credit them at the close of escrow to go towards them fixing the house.

Benefits of As-Is Sales:

• Save money on repairs.
• Attract cash buyers specifically seeking fixer-uppers.
• Increase the likelihood of receiving a cash-offer, helping expedite the process.

Use a Real Estate Agent or Sell as FSBO

Hiring a real estate agent will help you negotiate and market the property to a wider pool of buyers. However, selling with a local AZ agent is best for non-urgent sales due to longer timelines and repair expectations. The other option is to sell the house yourself as a for sale by owner. This will present the most amount of work, and generally the longest time frame of the options. The one benefit of doing a FSBO is you save on commissions.

FYI, there are no commissions nor any long waits when you sell directly to a cash home buyer.

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Common Mistakes When Selling Distressed Property

1. Overpricing the Property: Setting an unrealistically high price can deter buyers. Price your property based on its market value and condition. See the paragraph above on comparative market analysis.
2. Waiting Too Long to Sell: If foreclosure is imminent, waiting too long can result in losing ownership entirely. Take immediate action, contact the lender or bank you holds your mortgage and set a plan with them. You want to coordinate a timeline, so you know exactly how much time you have to close on the property.
3. Failing to Verify Buyer Credentials: Time is of the essence. There is no need for wasted time or the potential to be taken advantage of by a lack of due diligence. Ensure potential buyers have the financial ability to close the deal, especially if you’re selling under time constraints. Contact a trusted cash home buyer, like Patriot Flip!
4. Not Disclosing Issues: It is better to be safe than sorry! Disclose everything you know about the property. If you know something about the home, and don’t disclose it you can face legal issues, if the seller is able to prove you knowingly kept specific information that would have been detrimental in the buyers decision to purchase the property.

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Challenges in Selling Distressed Properties

• Time Sensitivity: Deadlines from Foreclosure often leave limited time to market and sell a distressed property in Arizona.
• Repair Costs: Extensive repairs can be expensive and time-consuming, discouraging traditional buyers.
• Emotional Stress: The pressure to sell quickly while managing financial and legal responsibilities can be overwhelming. As well as managing repairs if you decide to sell to a traditional buyer on the MLS.

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Final Thoughts

Selling a distressed property in Arizona won’t be the same process for every situation, depending if the home is distressed due to financial hardship or if the home is in disrepair and needs work. Yet, selling a distressed property doesn’t have to be complicated. Whether you’re facing foreclosure or dealing with a fixer-upper, the key is to act quickly and choose the best selling strategy for your situation.

At Patriot Flip, we specialize in buying distressed properties as-is, offering fair cash deals with fast closings. Contact us today to get started and alleviate the burden of your distressed house.

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• Selling Distressed Property: How to Sell a Distressed House in Arizona
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• Can I Sell My House To Avoid Foreclosure in Phoenix, AZ?
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