Are Distressed Sales on the Rise?

In recent times, Melbourne has seen a surge in distressed property listings, primarily attributed to rising interest rates and an escalating cost of living. These forces have compelled many property owners to reassess their financial strategies. In particular, outer suburbs or the "mortgage belt" of Melbourne are showing significant increases. As Domain data suggests, the southern part of the City of Casey has seen a rise in distressed listings from 3.1% a year ago to 4.6% this June. Cardinia and Wyndham have also seen over a percentage point rise each, making them areas of attention for potential investors.

Detailed distressed sale percentages for some of the popular areas (as of June 2023) are as follows:

• Wyndham: 2.3%

• Whittlesea: 1.7%

• Melbourne City: 2.2%

• Bayside: 1.3%

• Boroondara: 1.4%

• Yarra: 2.3%

• Stonington-West: 1.9%

• Stonington-East: 0.6%

• Glen Eira: 1.8%

• Manningham-East: 0%

• Manningham-West: 0.9%

• Monash: 1.6%

• Dandenong: 3.7%

• Casey-South: 4.6%

• Casey-North: 1.7%

• Frankston: 0.6%

• Mornington Peninsula: 1.1%
  

However, the allure of distressed properties often comes with hidden challenges.

What Exactly is a Distressed Property?

A property is termed 'distressed' when its owner urgently needs to sell, often due to financial difficulties. Several factors can push a property into distress:

• Mortgagee sales: When borrowers can't repay their mortgages, banks take over and sell these properties to retrieve their losses.

• Relationship breakdowns: Events like separation or divorces might necessitate rapid property sales.

• Deceased estates: The death of a property owner can lead to a quick sale by the estate's trustee.

• Sudden loss of employment: Sudden loss of regular income urges owners to sell quickly due to inability to fulfil financial obligations.

• Market fluctuations: In single-industry towns like the mining towns in certain part of Australia, property values can fall dramatically with industry downturns. People sell for loss if necessary to avoid further price declines.
  

Navigating the Purchase of a Distressed Property

If you're considering investing in a distressed property, consider these guidelines:

• Due diligence is crucial. Ensure that you understand the market value of similar properties to avoid overpaying.

• Engage experts. Opt for an independent property valuation. A building inspection can also give insights into the property's condition. A professional buyer's advocate can guide you in these areas.

• Location vs. Property. Understand if the distress is due to the property's location or its own issues. A property in a flourishing area may be a better investment than one in a declining neighborhood.

• Risk vs. Reward. A discounted price might seem appealing, but always weigh the potential profit against the risks.

• Organize your finance. Given the competitive nature of distressed properties, get your finance pre-approved. A mortgage broker or buyer's advocate can assist in these scenarios.

Consult a Professional Buyer's Advocate

A buyer's advocate's role goes beyond merely helping you find a property. They ensure that due diligence is maintained, advising on potential risks and market dynamics, and ensuring that you're making an informed decision.

Engaging a buyer's advocate can save time, reduce risks, and provide invaluable market insights, which is crucial when dealing with distressed properties. And yes, they also help you to negotiate for the best possible deal.

Pathfinder Advisory, distinguished in the property investment arena, possesses a profound expertise in market analysis, risk assessment, and portfolio management. Drawing from years of hands-on experience, our team offers keen insights into the intricacies of the real estate market, ensuring investments are both strategic and secure. Collaborating with us not only provides access to deep market intelligence but also to robust risk mitigation strategies and tailored portfolio solutions, maximizing returns and safeguarding investments for our clients.