There are significant financial commitments involved in developing a home or purchasing a new one. Buying a foreclosed property in the Philippines is one choice to think about if you are looking to become a homeowner in the Philippines but have a limited budget to work with.
The price of a newly built home can be significantly impacted by a variety of factors, including the location of the property, the construction standards, the rate of inflation, and the price of the materials. Fortunately, homebuyers and investors looking to buy property can take advantage of a more cost-effective option to do so in the form of foreclosure properties. This article includes in-depth information that can serve as a guide for you in the event that you have not yet investigated this possibility.
What are foreclosed properties?
Properties that have been taken over by the bank, the government, or any other organization are referred to as foreclosed properties. The majority of people whose residences have been foreclosed on took out a loan, but they did not end up paying the money back.
As a consequence of this fact, the financial institution has all of the legal documents necessary to acquire ownership of the property and sell it to individual consumers. The failure of a mortgage borrower to pay a tax required by the local government can also result in the property being put up for foreclosure.
The value of these kinds of properties typically decreases as a consequence of the high number of foreclosed properties that are now available on the market.
The majority of these residences are typically in a deteriorated state or are not exactly well-maintained in any way. In spite of this, it is still feasible to acquire a foreclosed property that is in an acceptable state of maintenance or good condition.
Pros and Cons of Buying Foreclosed Properties in the Philippines
Buying foreclosed properties in the Philippines is a fantastic idea since it gives you the opportunity to get an affordable price on house and lot packages, condominium units, commercial and industrial structures, and even empty lots.
But just like with other things in life, there are a lot of factors to consider before you make a purchase. Buying foreclosed properties comes with a number of pros as well as potential cons.
1. Less Costly
Because they are regarded as distressed assets, foreclosure properties are sold at prices that are significantly lower than their real market value. The primary objective of the owners of these properties is to immediately convert them into cash and get rid of them as quickly as possible.
2. Legal Transaction
Another benefit that potential buyers or investors can take advantage of is the fact that the owners of foreclosure properties are typically financial institutions or government units. The legal status of the transaction can be ensured thanks to the ownership held by such an organization. Despite the fact that you will be handing over a substantial sum of money to them, you can be certain that the transaction will go smoothly, there will be no issues with the documentation, and you will not need to be concerned about anything.
3. Quick Transfer of Title
When you buy foreclosed properties, you will be able to secure a title transfer in the shortest period of time because, in most cases, there are no unresolved legal issues associated with the property that you will need to settle.
When it comes to foreclosures, you can also put your faith in the legitimacy of the transaction in the hands of the banks and the government.
You won’t have to wait several months to have the title transferred; it will be done in less than a month, at which point you will be free to make any changes to the property that you see fit.
4. Utility and Tax details has been update
When you buy a property that has been foreclosed on, the taxes and utilities on it are typically already paid for. This eliminates the need for you to be concerned about the additional cost that was mentioned.
5. The Power in Negotiations belongs to the Buyer
When you acquire a house that has been foreclosed on, you put yourself in a position where you have more negotiating power. This indicates that you have the ability to negotiate a lower price than what the seller is asking for, which will ultimately result in you saving more money.
6. Very Profitable
Buying foreclosure properties in the Philippines can be a profitable investment for investors. Since you purchased it at a price that was lower than its current market value, you will be able to make a profit by selling it at a higher price. To further boost their market worth, which additionally impacts their profitability when they are sold on the market, some properties may just require minimal repairs, upgrades, and refurbishment.
When you buy foreclosed properties in the Philippines, there are a lot of excellent pros that come with the purchase, but there are also a few cons that you need to watch out for.
1. It can become Costly
If you are not careful, buying foreclosed properties can quickly turn into a costly investment. In addition, this is a purchase that you will need to account for in your budget, particularly if you are planning on investing in a property that is currently in a horrible condition.
2. Possible Damages
When you buy a foreclosed property, you should be prepared to acknowledge the fact that it has previously been owned by someone else. There is a possibility that there are already issues with the unit. Consider damages as normal. You have no choice but to accept it in its current condition, including any problems that it may have, because it is offered on an “as is, where is” basis.
3. Existing Liabilities
Illegal occupiers are another potential issue that may arise with foreclosed properties, in addition to any harm that may have already been done to the unit. There is a possibility that certain foreclosure properties would come with pre-existing difficulties, such as informal settlers or an occupant who is strongly against leaving the property.
4. The Market is Highly Competitive
When buying a foreclosed property, you should anticipate competing with other buyers who are interested in purchasing the same property as you are.
This may work against you in the sense that you could wind up spending an excessive amount for the property as a result
When purchasing foreclosed properties, always remember:
Before you begin your exploration of foreclosed properties, there are a few things you should keep an eye out for during your search, including the following:
When buying foreclosed properties, one of the most important things to consider is the location in which the house has been located. In an ideal scenario, you would buy a property near schools or shopping malls. If you plan to sell the property in the future or move into it yourself in the future, it is especially important to evaluate the level of safety in the area around it. Last but not least, you should investigate whether or not the area is prone to natural disasters.
2. Property’s Actual Condition
The fact that foreclosed properties are sold “as is, where is” raises the possibility of unforeseen complications, as previously mentioned. It is essential to carry out a comprehensive inspection in order to ascertain the actual condition of the property and to be on the lookout for structural defects as well as other damages that could result in extremely high costs to fix.
3. Additional expenses
The actual selling price of a foreclosed property is just one aspect of the ongoing financial commitments that are required of you as the buyer. The passage of the TRAIN law has resulted in the restructuring of taxes. Additional expenses, like property taxes, transfer taxes and fees, documentary stamps, and association dues, may be incurred if the property is located in a private subdivision or development. Be prepared for these potential costs.
9 Things to do in avoiding common mistakes committed when buying a foreclosed properties
1. Always conduct research.
Always be sure to complete the necessary research before buying a property that has been foreclosed, especially when it comes to figuring out the pros and cons of investing in foreclosure properties.
This can help you determine if you are able to handle the stress and the responsibilities that come along with it.
2. Consider property auctions.
Property auctions are yet another potential source for you to look for foreclosure properties. Banks and real estate brokerages are responsible for organizing these events. Most of the time, the properties that are up for auction are not included on property listing websites. In addition to expanding the number of choices available to you, attending a property auction gives you the opportunity to engage in direct conversation with a real estate agent, giving you the chance to probe them for information, seek their guidance, and be guided through the process of making a purchase.
3. Avoid rushing the procedure.
Finding exceptional property investments can be a time-consuming process. It takes most individuals a week of hunting before they hit the jackpot, but it can take many months until you find a home that is worth the investment.
If you are in a hurry, you run the risk of buying a property that does not have nearly enough opportunity for growth.
4. Hire a licensed real estate agent or broker.
If this is your first time buying foreclosed properties, you should seek the assistance of a real estate agent or broker to help you through the process. These professionals can assist you in taking advantage of properties that are now available for reduced prices, and they can also assist you in negotiating the finest offer possible on your behalf.
In the event that you do not personally know any real estate agents or brokers, you should inquire for suggestions from members of your family and circle of acquaintances.
5. If you can, conduct a property inspection.
Checking out the actual property is an absolute requirement. Examine the condition of the apartment, the vibe of the surrounding area, and the ambiance of the area as a whole before making a decision to move in. In a purchase as significant as buying a piece of property, investing your time and energy into something as important as an inspection is more than justified.
6. Get pre-approved for a mortgage loan.
If you have previously been pre-qualified for a mortgage loan by a financial company, such as a bank or a financial firm, you will have an additional advantage over other buyers who are interested in buying foreclosed properties. This will give the impression that your credit rating is strong and that you are prepared to make a home purchase at any time. Your pre-approved loan will not only help you gain better seller preference, but it will also make it easier for you to stick to a particular budget.
Also Read: How to Get a Pre-Approved Bank Housing Loan?
7. Look into its market value.
There is the potential for huge profits to be made from real estate properties. However, you are also responsible for doing everything you can to ensure that the price does not exceed the real value of the property.
8. Buying at the right moment
Buying foreclosure properties is a significant investment, so make sure you time the transaction well. This is especially critical if you plan to purchase an expensive piece of property.
For instance, buying a property after the pandemic is advantageous because a lot of the original owners of good properties had no choice but to sell them because they were unable to keep up with the payments and dues that were required of them.
As a result, you should anticipate receiving a favourable offer.
9. Set your expectations.
If you want to avoid being dissatisfied with your investment in a foreclosed property, you should always make sure that your expectations are realistic before making the purchase.
For instance, if you have a limited budget, you shouldn’t expect to locate a brand-new property that you can immediately sell, rent out, or live in. You won’t be able to do any of those things.
In a nutshell, there are a lot of things to know before buying foreclosed properties. Take time to do your own research, but it is much better to ask for professional assistance from a real estate agent or broker so they can help you and give you in-depth information before buying foreclosed properties.
Affordable House and Lot
Meanwhile, if you are planning to invest and buy an affordable house and lot for you and your growing family, choose Bria Homes as your home of choice.
Written by Alfred Alaba