When realtor Sean Carroll went out looking at homes with a prospective buyer not so many months ago, it didn't take long to find a property that fit exactly what the buyer was looking for. When Carroll put his client's offer in however, he was told by the listing agent it was a “distressed property,” known in real estate parlance these days as a short sale.
“I had no idea how that was going to affect the transaction,” says Carroll, team leader and realtor for Team Carroll at RE/Max Classic Group in Berkeley Heights. “I had never encountered a situation like that before, but at the time the data was suggesting that the prices were starting to fall, and that there were going to be more of these types of sales.”
In the early days of the recession, many real estate industry professionals like Carroll had never seen the likes of a market like this, and were truly unfamiliar with how to navigate it. As the economic crisis has deepened and more residential buildings have slid into financial disarray, real estate agents and property managers alike are learning everything they can about managing, buying and selling distressed properties.
What exactly defines a distressed property depends on who you ask, and what sector of the industry they work in. To Carroll, it means several things. “It means it’s already owned by the bank, and it’s been foreclosed on,” he says. “The lenders are taking it back from the owner, or the property is on the market for sale and it’s listed as a short sale.”
“Everything today in any residential category is in a state of distress,” says Jon Gollinger, a 35-year industry veteran and founder and CEO of Accelerated Marketing Partners, LLC in Boston, “and it’s not going away anytime soon. In 2006, I said this was a two-year problem, but now there are 20,000 units that sit empty in Miami, 8,000 in Atlanta and 20,000 in New York City. When the industry was healthy, these units would sell out in two to three weekends. Not anymore. Many brokers never saw a down cycle like this, so they don’t understand how to work in this climate."