4 Reasons to Consider in Buying Foreclosed Properties

Every real estate investment has its challenges, and foreclosed properties are not exempted. You could face a lot of headaches if you do not do thorough due diligence. 

Foreclosed properties are usually on the “As Is Where Is” condition. It would mean inheriting all the “Pops and Flops” of the property. Some foreclosed properties are not worth the risk to invest in, so you have to move on to your next prospective property.

These are the significant factors that you should consider before you jump into foreclosed properties to filter out which one is the real gem.

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1. Pending Suit

Always look for the certified true copy of the Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT). It is your first line of defense that you are transacting to the legal owner of the property. The title should be consolidated and named under the seller/bank.

You will see any possible Lis Pendens (pending suit) inscribed in the title once you check it in the Registry of Deeds. One reason for Lis Pendens is to keep the property within the court’s power until the litigation is terminated. 

2. Illegal Occupants

Visit the property and make sure if it is clear of occupants. If it is a house and lot or apartment, do not rely on the bank that the occupants will move out of the property by the time the property is sold. You can ask for help from the barangay or decide to go to court if the occupants still resist moving out of the property. Instead of you doing this, require the seller or the bank to do everything about the illegal occupants. 

3. Fees and Arrears

If you want to acquire a foreclosed property through a bank loan, check first if it has a high appraisal value. Otherwise, you may lose your earnest money if the bank rejects your loan. 

Study all aspects of the property because once you enter a contract with the bank, any unsolved problems will form part of the contract.  There is also a possibility that all the earnest money, downpayment, and monthly amortization will be forfeited. 

Real property tax, electricity and water bills, homeowners association dues are some of the most common arrears that might occur in your transaction. Require the seller to update the arrears first before deciding to buy the property.

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4. Physical Condition

Remember you are buying an “As Is Where Is” property. Consider the estimated costs of repairing the damages. Essential things to check include but not limited to: 

• FENCE
  • Is it a gated property, or is it something that has been abandoned? 
  • If it does not have any fence, is it still livable, or neighbors started considering it as their big trash can?

• STRUCTURE
  • Are there any exposed steel bars or signs of fire burns?
  • Is the property still structurally sound?

• UTILITIES
  • Are the electric and water meters still working? 
  • Are there any broken sewage pipes?

In buying a foreclosed property, some rewards will save you some money, but there are also risks that you might spend more. Proper due diligence and inspection are keys to success in this type of property. These are the obstacles unique to foreclosed properties, and you might even inherit these headaches if you fail to consider these factors.

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Original article written by Joem Navarro, REBPH Intern.

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