If a business is in trouble and looking for a quick infusion of cash to stay afloat, a distressed asset sale may be a convenient solution. It can also create unique opportunities for others to acquire the property on the cheap.

In a distressed asset sale, a business sells off its property, equipment and other assets that have value. These proceeds are then used to pay their creditors or run their business. In many cases, the sale is part of a company’s bankruptcy proceedings. The seller does, of course, face a disadvantage in any distressed asset sale. Since they’re looking for fast money, they’re not exactly in a position to hold out for a buyer who will give them top-dollar for the assets.

What are some things you need to consider before buying  distressed assets?

Generally, assets can’t be sold if they’re encumbered in any way. But that doesn’t mean you shouldn’t do your due diligence before purchase. If creditors have already sued to attach a lien on some of the business assets, for example, the owner probably can’t sell them while the litigation is pending. If the business doesn’t have the clear title to an asset because they’re still paying off a loan on that asset, that could be another issue. You can also run into trouble if the bankruptcy trustee in charge of the seller’s assets decides that you paid too little. In that case, they can actually void the transaction.

Inattention to “red flags” before you seal a deal could leave you struggling to reclaim your money if the deal falls through. A distressed asset sale can be a win-win for both buyer and seller in many situations — and they’re probably more common than you think. Whether you’re buying or selling, make sure that you have experienced assistance with your distressed asset sale so that you can avoid potential complications down the line.