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Tips for Buying a Foreclosed Home

By: Jillian Cariola

Home Guaranty Corporation

For people who are looking to finally cease renting and become homeowners, one of the things that could have been hindering them all this time is working with a strict budget, which limits their options. That’s not to say they can never buy a home with limited financing; they just need to slightly deviate from their original plan. They can choose a pre-existing home instead of a newly constructed one. Or, they can a make a few sacrifices, like opting for a smaller home and in a different location from their first choice. Of course, they can always go for a third option: buying a foreclosed property.

Foreclosures are properties that have been seized by the lending institution if the homeowner is no longer capable of paying the amortization. The reason why these properties are known to sell for prices that are below market value is that at this point, the lender is looking to cover the balance of the mortgage, which is fortunate for buyers who want to get a home on the cheap.

On the other hand, there is also a stigma attached to foreclosed properties, in that they are known to have sustained damage over years of use. This is because properties that have been foreclosed are sold “as-is,” meaning no repairs have been done prior to the sale. Still, this doesn’t mean a foreclosure buyer is doomed to purchase a property that will be more problematic than advantageous. Lamudi Philippines has put together a few tips on zeroing in on a foreclosed property that will actually be worth it in the long run.

1. Redo your home-buying budget

You might be easily swayed by the property’s low price, but you have to think of your expenses after the purchase, and not just the mortgage. It’s one thing to do a bit of repainting or retiling, it’s quite another to give a home a complete overhaul, depending on the extent of the property’s wear and tear. Keep in mind that you will have to shift a considerable part of your budget now toward home improvement projects.

2. Follow the inventory

No idea where to look for foreclosed properties? Aside from doing an online search, you can also consult banks and lending institutions, which have a list of homes considered as nonperforming assets and are therefore being sold for a lot less. Some government offices also have their own roster of foreclosures to choose from, such as the Social Services System (SSS), Home Development Mutual Fund (Pag-IBIG), and even the Bangko Sentral ng Pilipinas (BSP). Many properties being sold through these institutions and government offices are offered through public auctions, but some are also some properties offered without the bidding process.

3. Check the property carefully

Again, it’s easy to be lured by a low price, but don’t jump the gun until you’ve seen it. Sure, you might already be expecting the property to be a bit run-down considering its below-market-value price, but the extent of damages can only be determined through a personal inspection. Visit the property yourself to get an idea of the actual condition of a property, and try looking for professionals like electricians and plumbers who can help you conduct a more in-depth inspection. Check out the property’s walls for foundation cracks, the plumbing and ceilings for leaks, the electrical sockets for damages, termite infestation, and all other issues. If these problems are too numerous or extensive for simple repairs, you might want to reconsider if the property is worth buying, or will become a money pit that’s hard to get out of later on.

4. Consider the neighborhood

There’s not much point in renovating a foreclosure if it’s not in an ideal location. One of the things that homebuyers consider when choosing a property is its location, so once you’re ready to put your newly reconditioned property on the market, it might take a while to find a buyer. Even then, there’s no guarantee you’ll make a profit, especially if you have to lower your price just to strike a deal. Think twice before purchasing the property if its vicinity easily gets flooded or is close to a fault line, has a significant issue with crime management, or is near factories.

For inexperienced buyers, the best way to proceed is to work with accredited brokers that specialize in foreclosures. Not only can they let you in on the ins and outs of buying foreclosures, but they can also help you look for properties within your budget and in your preferred neighborhood. Remember, buying a foreclosure can be tricky, but practicing due diligence will help you score a property that’s worth the investment.

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