Why Is It Advantageous to Buy a Foreclosed Property?
Have you ever watched HGTV’s programs where the hosts show what they do to the properties they find? Are you aware that most of the time, these shows feature foreclosed homes which they refurbish and transform into nice and attractive dwelling places that could easily give passive income (rentals) or handsome profit after reselling?
What if you have the opportunity to acquire a foreclosed property and do something similar? Surely you can! Purchasing a foreclosed property under market value puts you in a position to accumulate equity when improvements or repairs are made.
That is why it is vital for an investor to understand the foreclosed property market because the pros exceedingly surpass the cons. Allow me present 8 reasons why you should consider buying a foreclosed property.
1. Value for money
Foreclosed properties being auctioned are usually 10% to 30% lower than the market value. Why? Because the bank is looking to get it off their books rather quickly. As a result, they will set the price lower in order to get multiple and better offers. Further, if the bank owns the property, any liens, debts or issues with the title most likely will be cleared.
2. Due diligence done by bank
One aspect that is nice about foreclosed properties is the extent of due diligence or appropriate investigations made by banks before they make a decision to grant a loan. Of course, borrowers mortgage their property as collateral. We should understand that most properties being sold off during auctions by bank are foreclosed ones which used to be collateral for loans.
Nevertheless, it is also good to do your personal inspection beforehand. The more you know about a property early on before making an offer, the better prepared you will be in deciding whether or not to continue tendering a bid for the property. Lists are normally given out by banks.
3. A move-in ready home
Although it’s a rarity, some foreclosed properties are either abused by the former owner or might have some issues. It does happen. But oftentimes, a lowly-priced property might not look good at first glance but it could turn-out to have a very good potential. It might need only some refurbishing. So, it is best to inspect the property and see the potential of it for your home or reselling it for a profit. OFW’s nowadays would love to buy a property that is ready to move-in. So if you are going to buy a property for own-use or for reselling, a foreclosed property would be a practical choice.
4. Accumulation of Equity
Another reason to pursue buying a foreclosed property, in addition to getting a home at a good price, is the equity it can accumulate from buying low. Sometimes it’s just a matter of making repairs or developing the property further. In most cases it is a matter of time. It is about having patience as the neighborhood continues to develop. With the pace of recent infra-structure developments in most areas, it is good to anticipate the appreciation in value of those properties given the fast-paced commercialization of a lot of foreclosed property locations.
5. Lower mortgage payments
Winning a bid on foreclosed properties may require you to pay a 10%-20% down payment of the bid price and the remaining portion can be paid in instalment terms of either 5-15 years at a very modest interest rates (8-10% p.a). Once the documentations are done, you can already “take out” or “move-in”, thus giving you the opportunity to rent-out the property if you are not the end user, or sell the property later at a good profit margin.
6. Dream neighborhood
If you had the opportunity to live in your dream neighborhood, say, one that is very near a golf course, would you do it? Foreclosed properties are everywhere in all ranges of condition and prices. You only have to browse through the list provided by banks. If you see one pop up in a particular area that you like, bid on it.
8. A good investment opportunity.
Foreclosures provide great investment opportunities. Whether an income property (for rentals, Airbnb, etc) or a rehabilitation project, these homes places you in a good position to buy low and sell or rent high. The stock and equities market may be a good place to bet your money on but it is highly volatile. When crunch time comes, you can rest assured that the prices of real estate properties will always remain stable.
Maybe one of the least-considered benefits of the whole foreclosure process is how it works. This is important to your clients moving forward because they will be better prepared to pursue future opportunities in this niche marketplace. As the saying goes: there’s a first time for everything.
If your clients are apprehensive about jumping into the world of foreclosed properties, making them understand the different benefits might provide the courage they need to take the leap.
So, what are you waiting for? Come and enjoy the benefits of “foreclosures investing”. My Saving Grace Realty Development Company is here to be of service to you.
You choose, we provide!
ANC on the Money interview with Mr. Noli Alleje, Real Estate Auction expert);
The Luxury Life KCatMoffitt Realty, with Anthony West real estate agent and founder.