Be More Careful When Buying a Foreclosed House
by Zoe Zorka
The road to home ownership can be long, and many Filipinos explore all avenues to end their days as renters much sooner. One of the fastest routes to become a homeowner is buying a foreclosed property.
Like every residential house and lot in Cavite and other sought-after markets in the Philippines, a foreclosed piece of real estate can provide security. Unlike properties owned by developers, though, these units are under the management of banks and are far cheaper.
Foreclosed houses are typically offered below market value. They are attractive to buyers not because they are hot commodities but because they are hot potatoes. They are considered bad assets, which is why the financial institutions that own them want to get rid of them ASAP.
On paper, foreclosed properties are a real bargain, but they are not always a steal. The following are some of the dangers you should keep in mind when considering to buy one of them:
Unresolved Legal Concerns
The most likely headache you might encounter is the legality of the property. Although the lender of the mortgage has a lien on the house, its legal status can still be ambiguous when its occupant, the delinquent borrower of the loan, refuses to cooperate.
If you buy a foreclosed property with an impending legal case, you might be able to move in when you want after payment. You need to make sure first that the title of your prospective house is already transferred to the lender’s name before you move forward.
Hidden Structural Defects
Generally, foreclosed properties are sold in “as is” condition. In other words, a seller has no obligation to make sure that the unit is structurally sound and aesthetically pleasing. What you see is what you get. If you fail to spot a problem, you might end up spending a lot more than you expected because it might not be ready for occupation.
Expecting a foreclosed property to require some repairs will allow you to to prepare your finances more realistically. Having this mindset can help you understand the actual cost of buying one and making it habitable.
It is your responsibility to find complicated structural issues right from the start. Consider inspecting it with a professional or anyone who trust with a deep understanding of residential property construction.
Illegal Settlers
Squatting is a common problem among unguarded foreclosed houses. If its original occupant declines to leave despite a request from the bank, the unwanted dweller will become your problem if you pull the trigger on the purchase. You might even be forced to pay a ton of extra cash to convince the occupant to move out.
Scarce Financing Options
Considering all of the said dangers, finding a willing lender to loan you the funds to buy a foreclosed property can be an absolute challenge. A bank will conduct its investigation and will likely deny your application given the complicated status of your chosen property to avoid inheriting the problems attached to it if and when you default on your housing loan yourself.
A foreclosed house is cheap for a reason. If you want to become an actual homeowner without any hassle, do not take shortcuts. Keep saving and improving your credit until you can afford to buy a brand-new house and lot.