Is Distress Selling of Property a Solution for Clearing Bad Debt?

Many American citizens have accumulated an insurmountable pile of debt, which causes a significant amount of stress, deterioration of quality of life, and a black cloud seems to follow us wherever we go. Debt isn’t always a bad thing; we need debt in order to establish and maintain credit, which allows us to be able to take out loans, purchase property, and invest in other financial opportunities. However, when debt begins to accumulate, we end up having to make sacrifices to clear the negative dollar signs.

There are ways to clear “bad debt,” which is often deemed as such when we have debt that we can’t keep up with or that continues to grow. While there are plenty of other solutions out there, for many homeowners, distress selling their homes, properties, or land may be the only way out of piled up debt. In this article, we’ll have a short Q and A to talk a little bit more about properties as assets, distress selling, and some helpful tips to come to a decision that works best for you.

Q: What is an asset?

A: Assets can come in many different forms, but generally speaking, it is an owned object, property, or entity that holds value. While some may not own property or homes, an asset could be a car, a watch, an expensive piece of jewelry, or old family heirlooms and antiques. Parting with certain assets can be heartbreaking and very difficult; therefore it is important to know what your own assets are to avoid distress selling.

Q: What is “distress selling?”

A: Since property is one of the most widely accepted assets, we’ll refer to distress selling in terms of selling homes or other properties. Distress selling a property usually occurs when it is financially impractical to continue paying for a property, or when the individual’s debt must be urgently paid off. Distress selling is usually proposed when the value of an asset outnumbers the value of debt an individual has incurred.

Q: Is distress selling a property a good solution for clearing debt?

A: The short answer is yes, distress selling is often a good solution to clearing debt; however, the long answer is much more complicated. There are times when distress selling is ill advised, and can actually get property owner’s into more trouble down the road—the individual circumstances and context should dictate one’s decision. For instance, if the amount of debt accrued is significantly less than the value of the home, there are other options to look into before resorting to a distress sale.

Q: What should property owners consider before distress selling?

A: Your most significant asset might be your family home, your own business, or something dear to your heart that would be difficult to part with. Depending on your own circumstances, a distress sale might help you out of a hole, or it could dig it deeper—but it’s important to consider the following first:

• Your ratio of income to debt
• The value of your property after several appraisals
• What other assets you have available to you
• What your plans are for the future (both financial and personal)

Some Helpful Tips for a Financially Sound Future

No matter the life events that lead up to distress sales, there certainly are ways we can avoid making such an incredibly difficult decision. It isn’t surprising that financial planning isn’t many individuals’ favorite activities; however, planning for the future can reduce stress in your life, and protect you and your family. Here are a few helpful tips for building a strong financial foundation:

• Conduct research before any big decision
• Seek professional help from financial investment experts
• Have a good idea of what your own assets are and their value

The real estate investment industry can be highly complex and difficult to navigate for most individuals, often resulting in distress sales and other disheartening financial decisions; although it is important to remember that real estate can be lucrative, exciting, and life changing—especially in times of financial uncertainty. The investment advisors, managers, and experts at Landwin have an exceptionally diverse background in clientele and real estate investments alike—in other words, we are seasoned professionals in our field. If you would like to know more about how Landwin can help you through your real estate decisions, please contact us directly. We look forward to proving to you our expertise and dedication.

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Martin Landis

Hello everyone! It’s Martin Landis here. In my role as the Managing Member (CEO) of the real estate advisory firm Landwin, LLC, I draw upon my many years of business experience in real estate and marketing.