Key Takeaways:
Repair costs: Distressed properties often require costly repairs, and delaying them only increases expenses.
Taxes and insurance: You’ll still need to pay property taxes and higher insurance premiums, even for homes in poor condition.
Depreciation: The longer you wait, the more your property could lose value, making it harder to sell later.
Legal liability: Vacant or poorly maintained properties come with legal risks, from trespassers to accidents.
Opportunity costs: Keeping a distressed property ties up funds that could be invested elsewhere more profitably.
Deciding whether to keep a distressed property can be challenging. While it may seem like a short-term inconvenience, holding onto it may lead to unexpected costs and risks. This blog explores whether you should keep a distressed property or consider selling it.
Repair Costs of Keeping a Distressed Property
The first hidden cost of deciding to keep a distressed property is ongoing repairs. Even small issues like leaks or structural problems can become large, expensive repairs if left unattended. Deferred maintenance not only drives up costs but can also lead to further damage.
For example, small water damage could turn into mold, which is expensive to fix. Neglecting repairs also decreases the home’s overall value and can lead to code violations and fines.
Property Taxes and Insurance
When you keep a distressed property, taxes continue to accumulate. Even if the home is vacant or in poor condition, property taxes still need to be paid. Moreover, insurance premiums for distressed properties tend to be higher. Insurers often view vacant or damaged homes as riskier, leading to increased costs.
If you aren’t living in the home or renting it out, these ongoing expenses can drain your finances.
Depreciation: The Cost of Holding On
As the condition of the property worsens, its market value can depreciate. The longer you keep your property without addressing key issues, the harder it becomes to sell at a favorable price. Holding out for a better market might sound like a good idea, but the reality is that a home’s condition plays a huge role in its value.
Selling the property before it declines further can help you avoid bigger losses in the future. Learn how to know the value of your distressed property in this blog post “Valuing a distressed real estate asset“.
Liability Risks of Keeping a Distressed Property
Owning a distressed property comes with legal risks, especially if the home is vacant. Vacant properties attract squatters or trespassers, and if someone is injured, you could be held liable. Distressed homes are also prone to vandalism and theft, leading to costly repairs and insurance claims.
These legal and liability risks are often overlooked but can result in significant financial trouble for property owners.
Missed Financial Opportunities
Choosing to keep means tying up capital that could be invested elsewhere. This opportunity cost is often ignored, but by holding onto a property that isn’t increasing in value, you miss out on other potential financial gains.
Selling the property frees up funds for more profitable investments or personal goals, making it a smarter long-term financial choice.
Conclusion: Should You Keep a Distressed Property?
The decision to keep a distressed property comes with more hidden costs than most realize. From growing repair bills to increasing taxes, insurance, and liability risks, holding onto the property may not be worth it in the end. Selling your distressed home quickly could save you money and spare you ongoing stress.
New Horizons Property Group can help you sell your distressed property with ease. Contact us today for a fair, no-obligation cash offer and take the first step toward financial relief.
If you want to learn more about the benefits if selling your distressed property to a cash buyer, click on the post below!