Foreclosed properties can offer great value, but you need to move forward carefully before purchasing one. Sold at auction, these properties have been seized by the lender due to the borrower’s failure to pay, and you often don’t know exactly what you’re buying until the deal is done. Whether you’re an investor trying to make money or an individual trying to save money on a home in the Philippines, keep these tips in mind as you look for a foreclosed property.
1. Get your financing ready
In the Philippines, foreclosed properties are sold at auction, and if you decide you want to buy, you need to be ready to act quickly. Make sure that you have your financing pre-approved with a solid chance of approval. Also, talk with your lender about your plans to buy a foreclosure — they can let you know if you need to set up any special financing.
2. Have cash on hand.
To win a competitive auction, you can’t just have a pre-approved loan. You will also need cash in hand to make a downpayment. If possible, you should have as much of the purchase price as possible in cash, but on the low end, you should aim to have 10 to 20% of the price in cash.
3. Make sure you have extra reserves.
Winning an auction on a foreclosed property feels great, but it’s only the first step. You generally don’t get to look at the inside of the home before you bid, and if it’s in rough shape, you’ll need to spend a lot of money on cleaning and repairs. To make this possible, make sure that you have extra cash reserves.
4. Don’t forget about fees and taxes
Buying, cleaning, and repairing the property aren’t your only costs. You will also need to pay some fees and taxes. Generally, when you buy a home in the Philippines, you will need to cover a notarial fee, registration fee, transfer tax, and documentary stamps tax. These fees can vary from area to area so make sure that you understand what they are in the area where the home is located. Additionally, if you purchase a condo or a townhouse, you may also need to pay homeowner’s association dues.
5. Consider the location carefully.
There are foreclosed properties all over Metro Manila and nearby cities such as Cavite, Bulacan, and Rizal, and of course, there are foreclosed properties in smaller towns throughout the country. When you select a property to bid on, make sure that you think carefully about its location. If you plan to live in foreclosure, you only need to consider your personal preferences, but if you’re investing in the property, you need to think about resale value.
Consider the location as it currently is, but also think about the upcoming potential. For instance, properties usually rise in value when nearby infrastructure gets updated. Study infrastructure plans and timelines so that you can be a savvy buyer.
6. Research comps and set a maximum bid
Bidding can get exciting, and if multiple people want the same property, the price can go up quickly before you realize it. To ensure that you don’t bid more than a home is worth, set a limit before you go to the auction. Research comparable properties in the area to estimate what your target property is worth. Then, use those numbers to guide you at the auction.
7. Attend as many auctions as possible.
The more auctions you attend, the better chance you have of landing a great foreclosure. Banks, SPAV companies, the Social Security System, and the National Housing Authority often post about auctions on their websites. Keep an eye on these sources and make a point of going to a lot of auctions. Then, make smart bids and enjoy the thrill of getting ready to buy a foreclosed property.