When investing in real estate, foreclosed properties are an option that many property buyers do not initially consider. Foreclosure refers to the legal process in which a homeowner who fails to pay off the mortgage in 90-120 loses ownership of the property. The lender, usually a bank, or any other financial institution, seizes the rights to the property, and auctions it in order to pay for the remaining mortgage.
Unlike a typical resale property, foreclosures are usually sold as is, leaving the buyer to shoulder any other repairs and upgrades. On the other hand, the process of moving in is much faster.
If you are looking to purchase a foreclosed property, here are some questions to ask yourself before you purchase in this two-part article series.
1. Consider the cost
Most foreclosures are bought at a price below market value, but this does not always entail a bargain purchase. Are there major taxes (ex. Real estate tax, transfer tax, VAT, Documentary Stamps Tax, Capital Gains Tax)? If it’s a condo unit, are there association dues? Are there repairs to be made?
2. Consider the time
The process of buying a foreclosure may take longer than a typical resale. Banks usually work with real estate agents and have their own systems when it comes to releasing the property, so be prepared to adjust your time frame and be sure to be attentive throughout the process.
Depending on your needs and lifestyle, the location of a property is one of the most important considerations. Is the property located near urban conveniences, such as a supermarket or a shopping mall? Is the area flood-prone? Is the area near your place of work or school?
Learn more about buying foreclosed properties in the next installment.