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A straight answer to this question is: it all
depends. All opportunities to buy foreclosed properties should
be treated on a case to case basis and list all the factors,
positive and negative given the minimum bid or price offer by
banks. Aside from analyzing the value of the property such as
the prevailing market price, lot area, floor area, location, how
old the building, design, structure, etc., there is a need to
find out from independent sources the real story behind the
foreclosure. While it is generally accepted that it is due to
financial slump of the owner, but there could be more than that
such as financial slump plus the area has unsolvable problem or
bears a problem that takes a huge amount to resolve. Take the
case of the house and lot foreclosed by a bank in a subdivision
in Mandaue City. The lot where the house stands looks good in
its location near the exit of the subdivision when the weather
is fine but based on deeper interviews with the nearby
residents, the front lawn turns into an instant swimming pool
for frogs during rainy season since the drainage in the areas
near the exit are defective. The owner could not get the other
residents to cooperate as they are not affected with the problem
being in the higher elevation, so only those few houses located
in lower elevation will have to bear the effects of the problem.
Despite this problem and the bank knows fully well, the minimum
bid remains the same for years and allows it to lay dormant
unsold. Nonetheless, there are excellent
profits to be made by investing in foreclosed properties, but
before you start, there are a few myths to clear up. First of
all, while it's true a bank or mortgage lender is motivated to
get foreclosed properties off its books, it's usually not
possible to buy them as cheap as you can expect. You can,
however, almost always purchase them at below-market prices.
Second, it's not true that a lender will be willing to sell the
property for just the balance due. The lender will set the price
based on the prevailing market rate, and many other factors. And
third, your credit will still be a factor.
Another common myth is that foreclosed
properties are all in bad neighborhoods.
This just isn't true, particularly as the rate of
foreclosures continues to go up. When the economy stumbles, or
the interest rates rise, many upscale homes are lost as its
owners struggle to meet the increased monthly payments on less
income. You will find plenty of foreclosed properties in
distressed neighborhoods that represent good value, but you will
also find foreclosures in some of the finest communities. . But
regardless of location, it is common for foreclosed properties
in any area to need at least some repair. In most cases, you
will be buying the house "as is," so factor in an estimated cost
of repair when making your bid.
There are three types of foreclosures;
you may purchase a home in pre-foreclosure, at a foreclosure
auction, or lastly, you may purchase an REO (real estate owned)
property that has already been taken back by the bank and has
received no bids at an earlier auction. In a short sale, you,
the investor, offer the lender a discounted price for a property
before the auction takes place. Depending on the property, this
can be an excellent strategy for investment. Buying at auction,
too, is a good source of deals. But sometimes after the auction,
a bank may not receive any bids on a property, or may receive
bids that are under its minimum requirement. These properties
are then called "REO" properties, and most lenders will be able
to provide you with a list of their REO's. This list, too, can
be an excellent resource for finding good real estate deals.
When you bid on a foreclosed property at
auction, it will usually not be possible for you to inspect the
property in great detail beforehand, and you will be expected to
have solid financing--or cash--on the day of sale.
In addition to buying the property at a
discount, it's not unusual for a lender to offer an investor
other incentives, such as attractive interest rates or lower
closing costs and points. If the lender doesn't offer these
sorts of incentives, it never hurts to ask for them.
There are banks who offer "rock bottom prices"
for their foreclosed properties like in the case of a house and
lot in Lahug, Cebu City. The delinquent borrower employs
delaying tactics to hold on to his property by way of legal
defenses. The lot area is approximately 1000 square meters and
the building is already old about 20 years or more. But the
minimum bid required is only P4,497,000 For the lot alone, the
prevailing market value on this area is easily P12,000 per
square meter which one can get a substantial gain even if he
will demolish the house and sell only the lot. However, the bank
sells this on as is basis including the assumption of the legal
case in which case the buyer will have to pursue until the
occupant is ejected from the house by way of a sheriff action.
This represents a very good opportunity to those who know the
laws or at least rely on lawyers who will fight for the
possession of the property with the belief that the cost of the
fighting may only take a few thousand but the legal minded buyer
will be confident that eventually he will gain possession and
fruits of several millions naturally follow |
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When looking for properties to buy whether for as an
investment opportunity or for personal use, a great alternative to
real estate developers, foreclosed bank properties or from private
individuals is buying via auction. Auctioned properties are often
cheaper than foreclosed properties offered by banks. But ironically,
most property auctions being held are conducted by banks whose
properties they were unable to dispose of.
Banks that are auctioning off their foreclosed properties are
usually selling properties that they were unable to sell via normal
means, which makes you think that the properties up for auction are
not attractive to begin with. But there are diamonds in the rough.
There a lots of reasons why the property was not able to be sold.
Maybe the price being offered was too high before, or the place is
located near a squatters area which is extremely not attractive to a
prospective buyer but now SM is building a mall very near the
property being auctioned, how can you go wrong buying a property
very near SM city mall right?
But before you dive in and buy every cheap
property for up auction. You must conduct and inspect the place you
are planning to bid on, even if it is near Makati or other
attractive cities to live in. After coming up with your list, visit
the place and ask around the neighborhood about the history of the
house, check and see if the property is near schools, hospitals,
public roads, LRT or MRT stations which makes is a great buy. If you
don't conduct visitations, you might end up buying a property near a
cemetery, one way roads or near slums and end up being neighbors
with holdupers, drug dealers or carjackers.
Once you found the right property for you you are
ready to bid. Most auction houses require you to bring a show money
in the form of cash or cashiers check. And after winning the bid.
They often offer very flexible terms on the financing of up to 25
years in most cases involving property auctions conducted by banks.
Pag-ibig also has an extensive list of properties for auction and
now they have lowered their loan rates makes it even more attractive
to consider them in you list of finding cheap properties for
auction. |
