The Six Ways Realtors Can Resolve Distressed Property Situations

Carol is a realtor friend of mine with whom I recently told me about lost real estate sales. She was trying to carve out a niche in distressed properties, but encountered recurring roadblocks that were costing lots of time. The problems often start the same – she will locate a prospective seller of a property located in a neighborhood undergoing heavy development. The rightful owners agree to sell the property, but legal roadblocks cause severe delays or lost sales.


Carol was on the verge of walking away from distressed properties because of the frustration she was experiencing. She was especially aggravated by the difficulty of determining at the start whether a messy title situation was worth getting involved in. The key thing she wanted to know was whether a particular situation had straightforward fix or to walk away.



Below are six common distressed property situations and how to resolve them.


1. Stolen Title


Real estate fraud is rampant in areas undergoing development. Fraud typically occurs with estate properties where the owner died but the heirs did not raise an estate and secure title. The fraudulent conveyor will typically partner with a notary to forge the dead owner’s signature on the deed. The new “owner” will record the deed and try to resell the property to an inexperienced investor who did not conduct a title search.


Solution: An estate must be raised for the deceased, followed by filing a lawsuit called a “quiet title action” against the fraudulent conveyor and any subsequent purchasers. An uncontested quiet title lawsuit takes about 3 months to resolve.


2. Incapacitated Property Owners


Children caring for an elderly parent suffering from a mental health condition often wish to sell the parent’s property to care for the parent. But problems arise if the parent suffers from incapacitation and never signed a power of attorney prior to the incapacitation. The property cannot be sold because the elderly parent is legally incapacitated and the children have no authority to sell.


Solution: A legal case called a “guardianship” is the solution. A guardianship allows designated family members to handle the legal affairs of the incapacitated parent. A guardianship may take about 4 months to resolve depending on the judge assignment.


3. Occupants in the Property Who Refuse to Leave


An occupied property must usually be vacated before sale. If the occupant is a holdover tenant (a person who paid rent in the past), a legal case called an eviction can be filed. If the occupant never paid rent and did not have a landlord-tenant relationship, a legal case called an ejectment must be filed. The time and cost for these cases vary wildly from county to county.


4. Unsatisfied Mortgages


When a borrower mortgages a property, the lender will record the mortgage with the local recording office. When the mortgage is paid, the lender will file a mortgage satisfaction to release the property. But in past decades, lenders did not always record the satisfaction for the borrower. If the lender merged or closed business without releasing the mortgage, the borrower is stuck with a lien even though the mortgage was paid in full.


Solution: Unsatisfied mortgages will cause the title company to escrow the seller’s proceeds until the lien is removed. The sale will likely go forward, but the seller will not receive their money. The lien can be declared invalid through a Quiet Title lawsuit. Mortgage satisfaction problems typically take 3 months to resolve.


5. Disagreements Between Co-Owners


Property held in the name of two people who disagree on whether to sell is a major obstacle. These co-owner disputes often arise between unmarried persons who jointly bought property and estate property that was transferred to multiple heirs. A co-owner has a right to a partition and sale through a partition lawsuit. Partition actions often cause the uncooperative party to agree to sell because the cost of partition can be placed on the non-cooperative party. Partition cases take a few months to a year depending on whether the case settles.


6. Occupants of a Property Claiming Title by Adverse Possession


Property owners cannot sit on their rights forever. Nor can heirs to a family property. A legal owner (or heirs) can lose title to a person who resides in a property for a certain period of time. The minimum period of occupancy is either 21 or 10 years in Pennsylvania depending upon the circumstances. Adverse Possession lawsuits can take anywhere from several months to two years depending on the case.


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