DISTRESSED SALE

DISTRESSED SALE 

by Anthony O. Anyakora

“Real estate investing even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth.”   - Robert Kiyosaki

A distress sale or distressed sale happens when a property, asset or stock is sold quickly.

Distress sale often result in financial loss for the seller who for reasons of economic constraint must accept a lower price. The proceeds from these assets are most often used to settle debts or emergencies.

A distress sale may occur due to any of the following:

+Bankruptcy

+Divorce

+Declining real estate value

+Medical expenses/ health problems preventing the owner from maintaining paid employment

+Business failure

+Death of spouse

+Unemployment

Bankruptcy is a state or condition of one who is unable to pay his debt. This could be caused by unemployment, health challenge or business failure.

Divorce could lead to a distressed sale when the property is jointly owned by a couple. Therefore parting ways martially automatically translates to parting with every asset that is jointly owned.

More often than not, this leads to a distressed sale as there may be little or no time to get a suitable buyer under ideal market condition.

Unemployment is another factor that could lead to a distressed sale as the applicant/ job seeker would want to leverage on sales of existing assets to ameliorate the effects of unemployment. Health problems can also cause distressed sale. 

It is often said that, Health is wealth.” The property owner is of the opinion once they are healthy enough they could make more money to replace the disposed assets. In a world of uncertainties, business failure may occur due to unforeseen circumstances such fire outbreaks, theft, death, government policies etc. When these occur, and the business owner is declared bankrupt he may be required to forfeit some of his assets.

Death of one’s spouse is usually a very bitter pill to swallow. There are some people who have fond memories of their home and the death of a spouse would bring about untold grief to the other person. They might decide to move on while they put their past behind them.

Also people migrating from one country to another also known as “Japa” in local parlance as have been the case in Nigeria in the recent past. Most homeowners are willing to sell their properties below the market value in order to raise funds for their travel expenses. More often than not, close friends and relatives are the greatest beneficiaries of such transactions.

Furthermore, the owner of a distressed sale property misses out on the opportunity of future gains in case the value of the asset goes up. Also the new owners of an asset sold in a distressed sale may need to spend a significant amount of money towards the repair of the assets, as most sellers would sell “AS IS” and probably would not have done any required repairs.

In conclusion, buying a distressed property means that you stand a good chance of buying it at a price that is below market value.

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