The Underlying Gains and Implications of Distressed Sales

In this short piece, ESV Reward Chinedu Ugbomor, a Registered Estate Surveyor and Valuer, and the Principal Consultant of Reward Ugbomor & Co, a firm of estate Surveyors and Valuers with diverse interest in the real estate market space, lends his voice on the subject of distress sales from a professional background.

The incidence of distress sales has been part and parcel of real estate business for time immemorial and as long as the need to meet financial obligations on a daily basis remains, distress sales will equally remain. Unforeseen circumstances arising in the course of daily economic activities will always give rise to distress sale either by individuals or corporate bodies.
Simply put, distress sales in real estate business occur when a property or asset must be sold immediately for the owner to meet urgent and pressing financial obligations. This immediate financial obligation varies from one need to another. Over the years, some real estate firms and agents have taken advantage of property distress sales to improve on the business fortunes. Land banking and other properties hastily bought by real estate agents and firms for speculative motives are good examples of distress sales.

Buying distressed sales properties could turn the fortune of an individual or a firm in the real estate business but not without disadvantages when due diligence is not done before the property acquisition. For a distress sale transaction not to go awry, the real estate firm or the purchasing party must consider a number of factors.

The first step to take is to find out the original owner of the property. It is dangerous for a real estate agent to commit his money without finding out who actually owns the property in question. At this stage, find out if it is an individual property or a family property. If it is a family property, are all the family members willing to sell? If yes, where are the legal documents to give credence to the statement that all the family members are willing to sell the property.

As a professional in the real estate industry, the onus is on the firm or individual to find out why the land or house is being sold. Also, find out if the property has an impending lawsuit.
On the legality of the property or asset, find out if it has the relevant legal titles that were genuinely obtained from the relevant authorities. If this is correct, find out the history of the property to avoid buying a property that originally belongs to the government.
Knowing the community and the history of the community where the property is situated is another key factor to be considered. Some communities do not sell houses or landed properties to foreigners, and if they do, it comes with some implications.
The topography of the area is a geographical factor to be considered too. A property acquired in a dry season can be submerged by flood during the rainy season. Knowing the topography of the area will guide and define the nature of the structure to be erected in the case of a parcel of land.

The economic potential of the property is a must. Investment analysis should be quickly carried out to determine the economic viability of the property. To most business minded firms and individuals, this is the major determinant factor in distress sales transactions.
Property managers, investors, and the general public must professionally comply with all the aforementioned points to successfully acquire any property or asset on the condition of distress sales. This is the major reason why both parties – sellers and buyers should allow professionals to handle their distress sales transactions. Corners cut today may lead to a property lost tomorrow.

ESV Reward Chinedu Ugbomor is a Registered Estate Surveyor and Valuer. He is the Principal Consultant of Reward Ugbomor & Co, a firm of estate Surveyors and Valuers with diverse interest in the real estate market space. He sent in this piece from Asaba, Delta State, Nigeria.