INVESTING ON FORECLOSED PROPERTIES

             

            There are many ways to look for properties as a viable investment. However, if you are planning to invest on some foreclosed properties, there are some issues that you need to consider.

The crux of the matter.  Many foreclosed properties have little equity. Since equity is the difference between the fair market value of the property and the outstanding balance of all its liens, a property’s equity increases whenever the debtor makes payment on his mortgage balance. However, with low downpayment schemes stretched over a long period of time, it is no wonder why equity on mortgaged properties may take some time to be realized. Also, since the bidder in an auction sale is oftentimes the lender, the bid offer is usually lower than or exactly the amount of what is owed, leaving no surplus from the sale proceeds to the advantage of the homeowner. Consequently, the homeowner is left with little or no equity at all. Finally, if the property goes out in a sheriff sale, the lender usually imposes late fees, interests, court costs, attorney’s fees on top of the amount owed, thus, eating up a large amount of the equity.

Raw emotions.  A lot of foreclosed properties have been damaged, smashed, or trashed as a form of revenge of its owner against the party foreclosing it. I have seen a mortgaged property deliberately destroyed by its occupant who lost a court battle; smashed glass windows, broken tiled floorings, wrecked concrete walls, damaged gates and fences, leaving the place in total disarray and uninhabitable. Ultimately, the mortgagee had no choice but to accept the condition of the premises in its dilapidated form.

Failed expectations.  Since most of the occupants of a foreclosed property are under some financial distress, expect the property to be poorly maintained due to lack of funds.

Caveat Emptor.  There may be some hidden liens in the foreclosed property that you failed to assess. My husband and I are a living case in point. Learning about a foreclosed property, my husband and I got pretty excited about it that we rushed to purchase it. To wade off the competition, we made our decision hastily without even doing some background check on the premises. Satisfied by merely looking at the title, we assumed that everything was fine. Little did we know that the said property have tax liens dating years back. Ultimately, the problem was resolved, but the experience cost us many a sleepless nights.

While generally, foreclosed properties attract investors for its incredible deals, it never hurts to do some background research to give you more room for options.

Venturealty Services

venturealtyservices@yahoo.com

+63 0922- 8190122

+63 0917- 4439772

+63 0922- 8152583