Last Updated on March 4, 2019 by Lamudi
In this post for Lamudi Philippines Q&A series, we list the reasons why foreclosed properties are worth your consideration.
Q: Is It Advisable to Buy Foreclosed Properties?
A: Although most Filipinos would normally turn their backs on foreclosed properties, there is a growing number of enterprising individuals who are seeing this type of assets in a different light. In fact, many real estate experts believe that foreclosures may be the best real estate investment there is, and that they are worth your consideration.
This does not mean that foreclosed properties are not without risks. However, armed with good information and a bit of cunning, foreclosed properties may be your way to finally becoming a homeowner (or even to financial independence).
Here are reasons why:
1. They Are Quite Affordable
Foreclosed properties are considered nonperforming assets, so banks, insurance companies, and other asset management firms are trying to dispose of foreclosed properties quickly; hence, these property types usually come a lower price tag. This does not mean, however, that banks will accept any offer that will come their way; they may try to cut the asking price to generate multiple bids to earn them a pool of bidders (and earn a bit in the process).
2. You Can Get One with a Lower Down Payment
Foreclosed properties come at delightfully low down payments. According to Property Forum Philippines’ Manuel Alleje, some are being offered on as low as 5 percent down payment in property auctions. However, as a rule of thumb, it is always better to ready a higher down payment as it gives you higher equity on the property.
3. Lower Monthly Amortizations
According to Alleje, you can snatch a foreclosed property for a longer payment term (up to 15 years). This means you can have a lower monthly amortization. If you plan to lease the property out, having a monthly amortization lower than the rental will earn you a profit.
4. Clean Property Title
Since you are buying from a legitimate financial institution, foreclosed properties almost always have clean titles. These properties before they became foreclosures were collaterals for loans and, hence, have undergone diligent review by the bank. Nevertheless, it would not hurt if you do your own due diligence.
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