Know All About Your Investments: Why Foreclosed Homes Are Cheaper

Is it a good idea to buy foreclosed properties in the Philippines? Considering how property prices in the Philippines have been steadily increasing as more and more areas develop, it may be in your best interest to invest in this type of property in the country.

Foreclosed properties offer you the opportunity to acquire assets at a great deal. Now, you may be wondering “Why are foreclosed properties cheaper than traditional properties?” We’ll delve into this very question in the next section. 

What are Foreclosed Properties?

Foreclosed properties are condos, houses, or lots that have been taken over by lenders because the owner failed to make the required payments such as loans, mortgages, or property taxes. The lenders can be banks or government institutions such as PAGIBIG, SSS, or BIR. 

When the foreclosure process is complete, the lending institution becomes the owner of the property and they can sell it to recoup their losses. 

Why are Foreclosed Homes Cheaper?

There are many reasons why foreclosed homes are cheaper than other forms of property. Here are some of the most common ones: 

The Institution is Liquidating Assets

Foreclosed properties are a way for banks and government institutions (like PAGIBIG, SSS, or BIR) to liquidate assets and minimize losses. They prioritize recouping their costs over maximizing profit, so foreclosed properties are often priced below market value but high enough to cover the cost of acquisition. 

However, most of the time, these institutions sell foreclosed properties at a lower price than market value. So, if you do your research and play your cards right, you can get new property at a great deal.

It Can Be in a Less Desirable Location

Another reason why foreclosed properties are cheap is because they could be in less desirable places. The property’s market value may not appreciate as quickly as you want it to – or at all due to its location.

Another reason could be because the property is located in an area with a high risk for natural disasters. An example would be if the property is located near or on a fault line.

The Property May Have Problems

If you look through foreclosure listings, you’ll notice that the fine print on these documents says, “as-is, where-is.” This means that you get the property regardless of its state, so if you suddenly find termites in the property, you’ll have to take care of it on your own dime. This is why we highly recommend that you conduct a site visit of the property, so you know what you’re buying. 

Most foreclosed properties will need a significant number of upgrades and repairs. Some properties could have even been stripped of valuables such as copper wires, cabinetries, and other fixtures during its downtime. Refurnishing and fixing these assets will fall on your shoulders as the new property owner.

Additionally, if the property you purchase has outstanding balances such as association dues, real estate taxes, or utility bills, you’ll also need to shoulder these financial burdens. So, before you purchase the property, make sure you ask for the help of professionals such as registered brokers, contractors, and electricians to get a ballpark figure of how much you’ll be spending to fix the property.

There May Be Illegal Occupants

Some foreclosed homes have been unoccupied for years, which could have attracted informal occupants to stay in the property and make it their own. As long as these occupants are on your property, you cannot proceed with renovations. You’ll need to work with the local authorities to legally evict these occupants from your property. 

The Auction May Get Competitive

Foreclosed properties come with an attractive price tag so, it makes sense that you’re not the only one who’s making a bid for these properties. Auctions for foreclosed property can get competitive, which can lead to a big price jump on the initial listing price as more bids come in. 

If you’re set on acquiring the foreclosed property you’re eyeing, you may want to have some extra funds ready in case the bidding goes beyond your initial budget. 

Leveling Your Expectations About Foreclosed Properties

Foreclosed properties are an excellent opportunity for you to acquire properties at a lower cost. Yes, they may need more time and effort to be up and running again, but with the right team and financial partner, you’ll get a brand-new property at a great deal.

If you’re looking for a trusted finance partner who has a list of foreclosed properties and who can help you secure the funding to purchase them, then you can count on RCBC. RCBC’s home loans can help you achieve your goals by giving you the resources you need to secure and renovate the property you want. 

Visit our website today to get started on buying foreclosed properties!