Nine Tips for Buying Foreclosed Properties

Nine tips for buying foreclosed properties

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Here are nine tips on how to successfully navigate the foreclosures market

Foreclosed properties are considered nonperforming assets; hence, banks and lending institutions who own these properties are very actively marketing them the best way they can. One of the ways they do so is through discounted sales to potential homebuyers and investors, which is the reason foreclosed properties are sold below their actual market value.

But foreclosed properties may not be on most Filipino homebuyers’ purchase plan. Perhaps it is because of pity or they feel they are taking advantage of others’ misfortune (foreclosed assets, after all, were owned previously by people who for some reasons were unable to pay off their mortgage), many Filipinos hesitate to buy foreclosed houses.

But according to Ramil Alquileta, founder and CEO of My Saving Grace Realty & Development Corporation (MSGRDC), more Filipino homebuyers are now seeing foreclosed properties in a different light. Not only are there people seeing foreclosures as an affordable means to become a homeowner, many investors are making money out of buying foreclosed properties by turning them into leasable units or saleable homes.

Opting for foreclosed properties has its good sides. Although their low price tags are certainly attractive, not all foreclosures make excellent deals. To help you spot and score a diamond among an ocean of foreclosed homes, remember these nine guidelines.

1. Know Where to Look

To find foreclosed properties, go to banks, Lending Institutions, SPAV companies (companies formed under the Special Purpose Vehicle Act of 2002 to help banks shed their nonperforming assets), and government financial institutions like the Social Security System (SSS), Home Development Mutual Fund (Pag-IBIG Fund), and National Housing Authority (NHA). In addition, banks and financial institutions also have a roster of accredited brokers and brokerages that help them market and sell their foreclosed assets. Checking out their websites will help you find the best property deals.

2. Get Your Financing Ready

As with any competition, having an edge over other buyers will give you more chances of getting the foreclosed property you want. When you have already been prequalified for a housing loan by a bank or financial institution, you will attract more attention from sellers. They will know you are a credit-worthy and serious buyer who has a housing loan approved that you can use anytime. Because of this, you will have more negotiating leverage compared to other buyers. In addition, getting pre-approved helps you stick to a budget.

3. Work with a Bank or Accredited Broker

Foreclosed properties are sold on an “as-is, where-is” basis, so as a buyer due diligence is of utmost importance. But this is easier said than done, especially if you have several properties lined up for inspection, not to mention documents and titles that must be verified. However, working with a bank or its accredited broker/brokerage greatly reduces the risk of ending up with problematic property.

4. Attend Property Auctions

Property auctions, usually organized by banks or real estate brokerages, are a great way to discover foreclosed properties not normally listed on property websites. Attending auctions also allows you to talk to an agent face-to-face to thoroughly discuss your purchase, seek their advice, and practically walk you through the buying process.

5. Have Some Cash to Spare

The best foreclosures ignite bidding wars, especially during auctions. And to have a good chance at acquiring the property you have set your eyes on, you must be ready to make an attractive offer and deal with the payment terms. Those buyers with down-payment money ready on spot normally win these bidding wars, and may even be offered hefty discount by the seller.

6. Inspect the Property

Foreclosures are almost always sold “as is, where is” so do not hesitate to schedule an inspection. Remember, these properties have been previously owned so expect that not all would be on tip-top shape, though most on offer during auctions may require only minor repairs. Seasoned real estate investors or flippers would recommend investing on a foreclosed property that can be fixed within 30 days or less. This way, they can sell, lease, or move into the property in a short time and avoid incurring additional holding costs.

7. Carefully Consider Your Location

Location largely affects the profitability of any property. If the property is in a high-growth area or an area developing into one, chances are good that its value will appreciate. The same goes for foreclosures close to transport infrastructure, such as expressways, MRT and LRT lines, airports, and even new townships. A data analysis conducted by Lamudi shows that the cities in the periphery of Metro Manila offer the most number of foreclosed properties, including those in Cavite, Bulacan, and Rizal. Within Metro Manila itself, Quezon City offers the most foreclosed options for real estate buyers.

If you’re buying from any of these locations, check if there are infrastructure projects currently in the works. For example, the cities of Dasmariñas, Imus, and Bacoor in Cavite and Santa Rosa, Biñan, and Calamba in Laguna will experience growth over the next few years with the upcoming Cavite–Laguna Expressway (CALAX), while San Jose Del Monte in Bulacan will surely be on people’s radar once MRT-7 is completed.

8. Deliberate on Your Offer

To ensure that you will not be paying more than you should, find out the market value of similar properties in the vicinity of the house you are bidding for. If you are planning to sell or lease the property as soon as you have purchased it, do more due diligence and check how quickly comparable homes are selling. You would do well with a fast seller as it will let you avoid expenses from its maintenance, security, and tax.

9. Know Your Fees and Taxes

Other than the down-payment and the property’s selling price, there are also fees and taxes charged to the buyer. For example, buyers must take care of notarial fee, registration fee, transfer tax, and documentary stamps tax, and if you’re buying a condo or townhouse units, the buyer will also be required to pay monthly association dues.

Buying foreclosed properties entails a good deal of effort, patience, and lots of due diligence. But then again, so do the purchase of any type of real estate—foreclosed or not. However, acquiring an excellent property for a bargain price should be more than enough motivation—and reward—for your hard work.

Main image via Shutterstock

This article was sponsored by My Saving Grace Realty & Development Corporation.

Founded by a once homeless man, My Saving Grace Realty & Development Corporation (MSGRDC) came into being after Ramil Alquileta realized how it was to be homeless when he got tied up with debts and then eventually had to give up his own house and almost all their properties to cover the yearlong debt he had. Because of this, he founded the MSGRDC in order to help most especially the hardworking Filipino compatriot throughout the world in acquiring the best value for money property available in the market.

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