Your Guide to Buying Foreclosed Properties

Last Updated on September 27, 2021 by Lamudi

Foreclosed properties are attractive to buyers because of lower selling prices. Acquisition of a foreclosed property requires awareness of the buying process and considerations that differ from a new development.

Nowadays, in this age of rising prices and inflation, prospective homeowners must consider other options other than new developments when scoping for purchases. One of these options is foreclosed properties. If you’re wondering what are foreclosed properties meaning, these are basically properties repossessed by either lenders or the local government. Foreclosure happens when the property’s titular owner is unable to keep up the periodic repayments to a lender or the real property tax owed to the local government. There are two ways to acquire foreclosed properties:

  1. Purchase from a lender, such as a private bank or insurance companies. Interested buyers can inquire via websites or offices, or source listings through SPAV companies who help banks sell off non-performing assets. Foreclosed properties are also listed on housing portals such as Lamudi.
  2. Auction from a government agency. Listings and auction schedules are available from HDMF (Pag-Ibig) and SSS, as well as from government banks such as Land Bank and BSP.

Foreclosed properties can be advantageous both to homeowners and investors. Apart from lower selling prices, foreclosed properties come with lower downpayment rates of around 5-10 percent as opposed to 20-30 percent for a new development. Thus, monthly repayment rates are expected to be lower. Foreclosed properties can also appreciate in value depending on ongoing or future developments in its vicinity.

Things to Consider When Buying Foreclosed Properties

Location: This is a consideration for any property, regardless of its condition or selling prices. Homeowners would do well to consider the area’s safety, vulnerability to natural calamities such as floods or earthquakes, as well as access to basic services such as schools and hospitals. Investors may also look at the presence of major thoroughfares, transport hubs, malls, and commercial developments in the area.

Additional Costs: Apart from paying the selling price or assuming the responsibility for monthly repayments, buyers also shoulder other expenses when acquiring a foreclosed property. These include real property taxes, association dues in private properties or developments, and taxes and fees for the transfer of the property title. In addition, the documentary stamp tax for transactions has increased by 100% due to the TRAIN Law of 2018.

Condition of the Property:  Foreclosed properties are sold “as is”, meaning the seller will not make further improvements before turning over or selling the property. Prospective buyers must take extra care to check for structural flaws and pitfalls, or features such as plumbing that may require repair. These are additional costs to consider in the acquisition of foreclosed property.

Tips for Buying Foreclosed Properties:

Work only with accredited brokers/agents: Although many buyers prefer to directly engage in the purchase of new property, others may still engage the services of a broker. Working with accredited brokers helps give buyers peace of mind, as well as ensures fewer problems with transactions. This is particularly important when trying to acquire foreclosed properties being auctioned by government agencies since these agencies have lists of accredited brokers in their areas.

Know the buying or auction process: For buyers transacting with banks or private lenders, know the buyer’s selling terms and what documents are needed for the transaction. Buyers participating in auctions must be prepared with a 10% bid bond for their bids as well as the required documents.

Check Financing Options: Several options are available for buyers, such as mortgages and contracts to sell from banks. There are pros and cons for both options: mortgages immediately transfer the title to the buyer, but contracts to sell are more flexible for the buyer.

Have available cash or a pre-approved home loan: Having these on hand before negotiating for a sale or participating in an auction shows the buyer or auctioneer that one is serious about this purchase. It also saves time.

Protect Yourself From High-Interest Rates: Opt for a fixed rate plan or interest rate caps, to prevent unpleasant spikes in monthly repayments. This is important to protect one from hikes due to inflation or other market forces.

Acquiring Foreclosed Properties Through Pag-IBIG

If you are planning to acquire a foreclosed property through Pag-IBIG, here is a quick guide: 

  1. Register and fill out the purchase offer form.
  2. Submit and drop the purchase offer form in the designated Pag-IBIG drop box along with the following:
  • Copy of valid IDs of the offeror and the authorized representative if necessary. In the event that the offeror cannot be present at the time of dropping off his purchase offer form, he may appoint his representative with an authorization letter/Special Power of Attorney (SPA). The authorization letter is limited to the submission of the purchase offer form.
  • Document proving income if the chosen payment method is Long-Term Installment (LTI).

Payment Method

If the purchase offer is accepted, here are the available payment methods:


Those who will pay in cash will be given a 30% discount. 

  • Pay an initial 5% of the total amount together with the payment of the reservation fee.
  • The total amount must be paid within thirty (30) days from the day of signing the Deed of Conditional Sale.

Short-Term Installment

Those who will pay in short-term installments will be given a 20% discount. 

  • Pay an initial 5% of the total amount together with the payment of the reservation fee.
  • The total amount must be paid within one (1) year with an interest rate of 6.375%.

Rent-To-Own Through Pag-IBIG or Long-Term Installment (LTI) Housing Program:

Those who will avail of Pag-IBIG’s long-term housing program will be given a 10% discount. 

  • Submit the complete document within Thirty (30) days from the payment of the reservation fee, including the P2,000.00 processing fee, advance 1-year insurance premiums, and documentary stamp tax.

The opening of submitted Purchase Offers is based on the scheduled time and day published on the Pag-IBIG Fund website. The winning buyers will be published on Pag-IBIG’s official website.

Acquiring Foreclosed Properties Through Bank

Philippine banks and other financial institutions have their own procedures when accepting offers for foreclosed properties. They also apply different standards in terms of credit checking. 

Buying a foreclosed property requires as much care and effort as buying a new property. All of this will pay itself back as a worthwhile investment or asset, without hurting the budget!


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