Distressed Properties

Distressed properties can be a potentially lucrative option for those who are looking to buy the house of their dreams at a low price. They can also be a profitable opportunity for real estate investors who want to flip it for a profit or rent it out.

Even when you are able to find distressed properties that seem attractively priced, it is vital that you understand the risks involved and make sure you are getting good value for your investment. Even when reliable and capable real estate agents or larger property management companies are involved, buying a distressed property comes with inherent risks.

At Kelly Legal Group, we know the intricacies involved in buying distressed properties better than anyone else. Our board-certified attorneys have an in-depth understanding of Texas real estate laws and can represent individuals as well as businesses in real estate transactions. Whether you are interested in residential or commercial real estate investing, we can provide you with the right advice and protect your rights and interests.

What Is a Distressed Property?

A real estate property becomes distressed when the person or business that owns the property is unable to make their monthly mortgage payments and the foreclosure process may have begun. Real property can also become distressed if the owner files for bankruptcy or if they get involved in a legal dispute and if the property in question needs to be liquidated as part of the legal proceedings.

Distressed properties can be broadly divided into three categories – depending on whether the property in question is about to be foreclosed on or whether it has already been repossessed by the lender.

Short Sale

When a person owes more on their mortgage than what their property is actually worth, it is considered an underwater or upside-down mortgage. In such a scenario, the property owner can choose to sell the property through a process called a short sale rather than allowing it to be foreclosed on by the lender.

Through a short sale, the property owner can sell their distressed property for less than what they owe their lender. The lender typically writes off the balance. The biggest advantage of a short sale is that it allows the property owner to avoid the negative consequences of foreclosure and allows the lender to limit their losses.


When a property owner is unable to meet their mortgage obligations or if they default on their loan, the lender might choose to sell the distressed property through a foreclosure sale or auction.

Real Estate-Owned Property

If the lender is unable to sell the distressed property through a foreclosure sale or auction, it is considered a real estate-owned (REO) property. These properties are typically sold on the market at a significant discount.

Buying a Distressed House in Texas – What You Need to Know

Buying a property at a distressed property sales value has its own upsides and downsides.

The upside is that these properties are listed below market value and can be bought at a discount. You can fix it and sell it for a significant profit or choose to rent it out and earn passive income – both of which can be very profitable for you.

The downside is that distressed homes are usually sold as-is, which means you probably have to spend a significant amount of money on repairs. Moreover, you can expect plenty of competition at these distressed sales, which means there is always the possibility that you could be outbid by someone with deeper pockets.

Looking to Buy a Distressed Property? Choose Dedicated Real Estate Lawyers in Austin, TX for Best Legal Representation

At Kelly Legal Group, we have extensive experience in representing individuals as well as businesses in residential and commercial real estate transactions. If you are interested in buying a distressed real estate property, we can find out if the property has any liens, unpaid taxes, or any other issues, take care of all the paperwork involved, and protect your rights and interests at every step of the process.

To discuss the possibility of buying a distressed home with skilled lawyers who are real estate professionals, call us at 512-505-0053 or write to us online. You can schedule a free consultation with a seasoned Austin, TX real estate lawyer today!