Building a house or buying a new one comes with huge costs. If you’re tight on the budget but already want to own a home, one option to consider is to buy a foreclosed property in the Philippines.
Property location, construction specifications, inflation, and the high cost of materials are some of the factors that contribute to the expensive cost of a newly-built home. Fortunately, foreclosed properties offer a more affordable alternative for home buyers and investors to buy a property. If you are yet to explore this option, this article provides comprehensive information to keep you guided.
What are Foreclosed Properties?
A foreclosed property is a type of asset that has been repossessed by the lender or the local government after the owner failed to keep up with the required payments or if its real property tax has not been paid to the local government.
Considered as non-performing assets, banks and lending institutions that own foreclosed properties actively market them. They provide discounts to potential homebuyers and investors and sell these properties lower than their actual market value. Read on to learn more about the benefits of buying one.
Advantages of Buying Foreclosed Properties
Low Cost
Foreclosed properties are marketed lower than their actual market value as they are considered distressed assets. Mainly, owners are more particular about getting rid of these properties and turning them into money as quickly as possible.
Legitimate Transaction
Banks or government units are the owners of foreclosed properties and this is another advantage for prospective buyers or investors. Because of such ownership, the legitimacy of the transaction can be assured. Although you would release a huge amount to them, you can be certain that the transaction is clean, there are no problems with the documents, and you’ll have nothing to worry about.
NOTE: Foreclosed properties that are under a bank have updated taxes and utilities as the bank pays for its real estate taxes, monthly dues, and other expenses.
Fast Title Transfer
If there are no pending court cases, the property titles of foreclosed properties are immediately transferred to the lender. Upon the acquisition of foreclosed properties, the ownership, as well as inherent liabilities, is also transferred.
High Profitability
For investors, acquiring foreclosed properties in the Philippines is a good investment. Its acquisition price is lower than the actual market value so you can sell it at a higher price. Some properties may only require minor repairs, upgrades, and renovation to further increase their market value which will also impact their profitability when sold in the market.
While there are great benefits when you buy foreclosed properties in the Philippines, there are also some disadvantages that you need to be careful of.
Issues You Need to Watch Out For When Buying Foreclosed Properties
Possible Damages
When you buy a foreclosed property, you should accept that it is a pre-owned property. There could already be problems with the unit. Consider damages as normal. Since they are sold on an “as is, where is” basis, you have no choice but to accept it as is, including its flaws.
Existing Liabilities
Aside from damages to the unit, another problem that may be encountered with foreclosed properties are illegal occupants. Some foreclosed properties may come with existing conflicts such as informal settlers or an occupant who has a strong refusal to vacate the property.
TIP: To ensure that you’ll make the most of your money’s worth when you buy foreclosed properties in the Philippines, you may need to have the asset checked by a professional who can assess its actual value and give you an estimate of the cost of bringing it back to its good condition.
3 Key Considerations in Buying Foreclosed Properties in the Philippines
- Location: When buying any real estate property, location is a key consideration. Location may give you an idea about safety, the potential for flooding, and accessibility to transportation, basic services, major thoroughfares, and commercial developments.
- Other Expenses: The actual selling price of a foreclosed property is just a part of the financial obligations that you must commit to. The TRAIN law has brought restructuring on taxes. Prepare for other expenses such as real property taxes, transfer tax and fees, documentary stamps, and association dues if the property is in a private subdivision or development.
- Actual Condition of the Property: As mentioned earlier, the “as is, where is” condition of foreclosed properties may bring potential problems. It is essential to conduct a thorough inspection to assess the actual condition of the property and beware of structural flaws and other damages that may require huge expenses for repairs.
Fool-Proof Tips to Buy Foreclosed Properties in the Philippines
1. Do your search carefully.
Start by looking for legitimate sellers of foreclosed properties. Some real estate brokers and brokerage firms are accredited to offer foreclosed assets and may offer you the best deals. Other common places to look for foreclosed properties in the Philippines include:
- Banks
- Lending institutions
- SPAV companies (Special Purpose Vehicle Act of 2002)
- Government financial institutions (SSS, Pag-IBIG Fund, National Housing Authority).
2. Consider property auctions.
Another venue where you may find foreclosed properties is through property auctions. These events are organized by banks or real estate brokerages. The properties included in auctions are not usually listed on property listings. Aside from finding more options, property auctions are a chance to personally talk to an agent so you can ask questions, get their advice, and be guided about the buying process.
TIP: Prepare extra cash when attending property auctions. You’ll have a better chance to acquire the foreclosed property you’re eyeing if you can make an attractive offer or provide the downpayment on the spot.
3. Prequalify for a housing loan.
Another edge that you can have over other buyers of foreclosed properties is if you are already prequalified for a housing loan either by a bank or financial company. This will create the impression of a good credit rating and the readiness to buy a property anytime. Aside from getting greater seller preference, your pre-approved loan will also help you stick to a certain budget.
4. Seek professional help.
As an ordinary property buyer or investor, it would be possible to miss out on important factors that you need to look into. Some things may also require professional judgment to ensure that you’ll get the best value from your money. Seek professional help to check the title and other documents or to assess the actual condition of the unit. Getting the help you need will prevent the risk of acquiring a problematic asset.
5. Schedule an inspection.
It is a must to check the actual property. Take a look at the condition of the unit, the feel of the location, and the overall atmosphere in the neighborhood. A transaction as huge as buying a property is worthy of your time and effort so make sure that you’ll schedule an inspection.
6. Research its market value.
Real estate properties have the potential to turn in huge profits. However, you also have to do your part to ensure that its cost isn’t more than its actual value. Here are some of the steps that will help you find the market value of a property:
- Head to the BIR’s website to check for the zonal values of your area per square meter
- Get an estimate by checking the prices of the properties in the same location
- Check property listings in your location
ALSO READ: Pre Selling Condo vs RFOs: The Comparison that Every Condo Buyer Should Know
There are advantages to buying foreclosed properties in the Philippines. But along with those are some potential issues that you need to keep an eye on. You may get the best deal from a foreclosed property but it will require a good deal of effort and due diligence to stay away from problems.
Whether you’ll buy a foreclosed property for personal use or to sell it at a higher price, a real estate investment promises huge profit. As always, it is best to transact with legitimate sellers or trusted real estate developers to make sure that you will reap the fruits of your hard work.
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