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How do you determine the value of a distressed property?
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A property that needs to be sold is worth less than a property that does not have to be sold. Not only is the distressed seller under a lot of pressure to sell, he might not have other choice if he wants to avoid foreclosure. In a hot market foreclosures are rare as the distressed seller can still sell his/her property. In a flat or down market it is not only the decreasing value that hurt the marginal buyer but also macro economic developments as increased unemployment. Buyers in that case are usually not as motivated and might be hunting for bargains. In these scenarios the distressed seller is in a much more vulnerable position.
As in any market the value is what one is willing to sell for and another person is willing to buy for. As the distressed seller is not in a position to hold onto a property the value is determined by what the buyer is willing to pay for the property. Therefore it is essential for the distressed seller to create competition amongst potential buyers to maximize and salvage the best deal. In Aspen and Snowmass distressed sales are extremely rare but do happen once in a while. Just think back to the fire sale of ken Lay’s Aspen properties after the Enron debacle. Good deals can happen to those who have trust in the market. |
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