There’s a story going around (it shows up in real estate Twitter threads, in a few national articles I read this past weekend) that a wave of distressed properties is about to hit the Charlotte market. Forbearance ending, eviction moratoriums lifting, the COVID economic damage finally washing through to housing.
I run acquisitions in Charlotte. I look at every potential deal that comes in for east Charlotte, NoDa, Plaza Midwood, Steele Creek, and the Mecklenburg County suburbs. The story doesn’t match what I’m seeing.
Inventory is tight. Investors are competing harder than they were last year. Pricing on as-is properties has held up better than I expected. And the deals my team is actually closing this fall look different from the deals we closed in 2019.
Here’s what’s happening in the Charlotte distressed market right now, and why it matters for both Charlotte homeowners thinking about selling and investors trying to figure out where the floor is.
How is Charlotte’s distressed-home market really performing in late 2020?
Charlotte’s distressed inventory is tighter than predicted. Federal moratoriums froze formal foreclosures, deferral programs absorbed most missed payments, and inherited and tired-landlord properties became the dominant distressed channel. Cash investors are competing harder for fewer deals, which has pushed offers 6 to 9 percent above 2019 levels on comparable as-is properties in NoDa, Plaza Midwood, and east Charlotte. The HUD avoiding-foreclosure resource is the right starting point for homeowners weighing options.
What “Distressed” Looks Like This Fall
In Charlotte, distressed property in 2020 falls into a few buckets:
Pre-foreclosure inventory is actually low. The federal foreclosure moratoriums on Fannie/Freddie/FHA loans have effectively frozen the formal foreclosure pipeline since March. Notices of Hearing in Mecklenburg County are running well below normal. The clerk’s office is processing what comes in, but the volume of new files is depressed.
Inherited property volume is up substantially. Estates that were going to be cleaned out and listed in spring 2020 are still sitting. Some heirs are out of state and don’t want to travel. Some can’t agree on what to do. Some are dealing with elderly relatives who passed during the spring wave. We’re closing more inherited deals in Charlotte right now than at any point since I started this company.
Tired-landlord situations are accelerating. The eviction moratoriums and the rent collection issues are real. I’ve talked to multiple east Charlotte landlords this month who are 4 to 7 months into non-paying tenants and have no realistic path to evict before spring. Some of them are selling with the tenant in place. We’re buying.
Divorce and relocation deals look mostly normal. There’s some COVID-related divergence (people who moved during the pandemic and never came back, marriages that broke under quarantine), but the volume looks similar to last year.
What I’m not seeing: the wave of garden-variety financial distress people predicted. Homeowners who got into trouble in March mostly used forbearance. Their formal foreclosure exposure won’t surface until winter or spring 2021 at earliest, and even then, the deferral options on agency loans are going to keep many of them out of the foreclosure pipeline entirely.
Why Pricing Has Held
Two things are propping up Charlotte distressed pricing this fall:
Investor competition. There are more cash buyers chasing fewer distressed deals. I see it in our offer math. On a typical NoDa or Plaza Midwood property that needs $40,000 of work, my offers are running about 6 to 9 percent higher than they would have been on similar properties in fall 2019. We’re not the only ones tightening up. Other Charlotte investors I talk to are doing the same.
Retail demand. Even on as-is properties, the number of end-buyers willing to take on a project has gone up. Mortgage rates are at record lows, under 3 percent for 30-year conventional this week, and that’s pulling buyers down-market into renovation territory. Properties that would have sat in 2019 because no retail buyer wanted the project are now finding owner-occupant buyers willing to do the work themselves.
Add it up: tighter supply, more cash competition, more retail competition. Distressed pricing in Charlotte this fall is closer to retail than it has been in years.
What That Means for Sellers
If you’re a Charlotte homeowner with a distressed property (pre-foreclosure that’s not yet in the pipeline because of the moratorium, an inherited house in Eastway, a tired rental in NoDa), this is genuinely a good moment to sell.
I don’t say that lightly. I’d rather underprice expectations than overpromise. But the pricing we can offer right now is materially better than what we could offer 18 months ago on the same property. A 1,300 square foot brick ranch in the Plaza Midwood / Eastway corridor, fair condition, no major issues, would have gotten an offer in the $185,000 to $200,000 range from us in 2019. Today the same property is more like $215,000 to $240,000.
That’s not because we’re being generous. It’s because the market behind us is real. Retail comps are up. Investor demand is up. Construction costs for renovation are up too, but on net, we can pay more.
If you’ve been sitting on an inherited Charlotte property because you weren’t sure what it was worth, get a number now. The market a year from now might be the same or it might be softer. The premium for selling into the current investor competition is real.
How Investor Behavior Has Shifted
A few patterns I’ve noticed in how Charlotte investors are operating this fall:
Faster offers. The 7-day “offer review period” from 2019 is dead. Sellers are getting offers within 24 to 48 hours now because investors don’t want to lose deals to faster competitors. We’re typically delivering written offers same-day or next-day on properties we walk.
Less aggressive due diligence. Inspection reports as a renegotiation tool have largely fallen out of favor. Most cash investors in Charlotte right now are buying truly as-is, with limited reservation, because the seller has options. If you try to chip the price two days before closing, the seller will walk to another buyer.
Higher willingness on tenant-occupied properties. A year ago, many investors avoided tenanted properties because of the management headache. With eviction proceedings frozen, the only investors buying east Charlotte rentals are the ones (like us) who are comfortable taking on the tenant under NCGS § 42-3 lease succession and managing through. That’s narrower competition, but the investors who are doing it are paying real numbers.
Shorter timelines. We’re closing properties in 7 to 14 days regularly this fall. The longer timelines we used to need for title curative work are mostly gone. Mecklenburg’s Register of Deeds is back to normal turnaround on recordings, the closing attorneys are caught up on remote signing workflow, and lenders aren’t in the picture for cash deals.
The East Charlotte Reality
I’ve spent enough time in east Charlotte (Eastway, Sharon Amity, the Sugar Creek corridor) to know what the actual block-by-block pricing looks like. A few specifics from this past month:
A small ranch off Eastway Drive, three bedrooms, original kitchen from 1985, decent roof, no HVAC issues. Owner moved to Charleston in May. Closed cash for $208,000, 11 days from contract. We’ll put $32,000 of work in and resell.
A duplex in NoDa that an out-of-state landlord had been carrying since 2017 with mounting issues. One side vacant, one side with a tenant 5 months behind. Closed for $315,000, 16 days. Tenant in place at closing. Lease transferred under NCGS § 42-3. We’re working out the back rent privately with the tenant. Eviction wasn’t going to be available before spring anyway.
A fire-damaged 1960s home in west Charlotte where insurance was disputing the claim and the owner had been camping with relatives in High Point for four months. Closed for $128,000 in 9 days. We’ll either tear it down or do a heavy rehab depending on the structural assessment.
These deals don’t look like distressed deals from a decade ago. The pricing is tighter, the timelines are faster, and the seller’s exit numbers are meaningfully better than they would have been in a soft market.
What I’m Telling Other Investors
If you’re a Charlotte investor reading this and you’re underwriting at 2019 numbers, you’re going to lose deals. The market has moved.
The houses that were $175k cash in 2019 are $215k cash in 2020. The houses that were $250k are $290k. The renovation costs have gone up too. Lumber prices have been wild this fall, and getting subs scheduled is harder, so margins haven’t fundamentally improved. But the price you have to pay to be the winning bid is higher.
I’d rather underpay and get fewer deals than overpay and crowd the spread, but the spread is what it is. Sellers are getting multiple competitive offers in many cases now. The Charlotte market isn’t pricing in distress anywhere near what it was.
What I’m Telling Sellers
If you have a Charlotte property in some form of distress, whether financial, physical, or situational, this is a fine fall to move on it. Better than I expected six months ago when everything looked uncertain. Better than I’d have predicted in 2019.
Call (845) 316-1119 or use our contact form. I or one of my Charlotte buyers will walk the property within 48 hours, give you a real number same day, and close in 10 to 14 days if it works for both of us. We’ve been buying Charlotte tired-landlord properties and pre-foreclosure homes at a meaningful pace all year. We have funding committed, title attorney scheduled, and signing capacity through year-end.
The wave that everyone is predicting may still come. But betting on a future market price that may or may not materialize is not the same as taking a real number today.
The fall window is open. The numbers are competitive. If you’ve been waiting for a sign, this might be it.