Availing of foreclosed properties is a way to enter property investing on a budget. They are usually sold 10% to 30% lower than their market value, making it an attractive alternative. Check the guidelines below to see what you should do before and after getting a foreclosed property.
Buying foreclosed properties
- Choosing a location. Do your research properly, or you can ask for professional help locating properties by contacting agents like Gerald Eve Services to provide assistance finding properties according to your needs and budget.
- Check the property. While the price of foreclosures is below the market price, the amount required for repairing damage caused by previous ownership can increase the cost. The area in the vicinity may also not appeal to your lifestyle or doesn’t look appealing for reselling in the future. Evaluate these factors to determine if the place is worth its value.
- Buy from bank-owned foreclosures. For those who don’t want to compete against professional bidders in an auction, contact your local banks to enquire about available foreclosed properties. You may place a deal with the sales agent who will deliver your proposal to the bank, a notice of intent letter will be given later to indicate if the bank agrees or disagrees with your deal.
- Have a mortgage agreement ready. Foreclosures require a 10% down payment depending on the seller. If you need help with financing your fees for payment, first settle a mortgage agreement to have an idea of the budget you can set when buying properties.
- Be ready for getting outbid. Despite the seller agreeing with your offer, if a new buyer pitches a higher price, the seller can still withdraw from their deal with you, even if you already surveyed the property and started doing the legal work.
- Check the previous occupants. It’s your responsibility to explain the repossession of property to remaining tenants once the foreclosure is passed to you. Therefore, avoid this confrontation by checking first if previous occupants have given in their keys or agreed to move out once you become the owner.
Things to do once you own a foreclosed property
- Check credit rating. While uncommon, check your credit rating to see if it got mixed up with the previous owner. Contact the biller to update them the situation of the repossession.
- Reconnect utilities. If the supply of gas, water, and electricity were cut off, ask for the reconnection of these utilities to make the property start functioning.
- Pest control. Schedule an appointment with a pest control company before occupying a repossessed building. There is always the possibility of pest manifestation in a property that has been unoccupied for a long time.
- Refurnish and upgrade. Immediately replace old and broken electrical lines and decaying parts of the building, specifically those made of wood. The sooner the foreclosure is given a fix and upgrade, the faster you’ll be able to occupy or utilise it for commercial use.
Buying a foreclosed property is laborious and usually requires more work than buying a new property. Therefore, you’ll need patience and good analysis to determine what is worth investing your money in.