Foreclosed properties are those on a “distressed” status properties. We may be familiar of the term “REO” or “Real Estate Owned” are typically owned by banks (which mostly are lenders), government agency or government loan insurer after an unsuccessful sale at a foreclosure auction.
How one property does becomes REO? Well, if you bought a house using a loan or mortgage and you won’t be able to keep up with your responsibility to pay on time then you might be a candidate for a possible foreclosure. There are several reasons why homeowners failed to pay their dues. From financial difficulties – job loss to life changing events – like death, divorce or medical illness, which lead for the main provider unable to pay loans.
These properties where placed on a public auction – bidding for highest potential buyers. But because of the property condition, some are unable to sell and this became the lender’s asset (non-performing asset). It is for this reason that lenders need to dispose the property as soon as possible to regain loss and to avoid further maintenance expense. These properties are now listed on the market in a lesser price but on “as is” condition.
Foreclosed properties’ prices often are enticing because of their discounted price and if the property is well maintained, a lot of buyers – mostly realtors would go for it.
But what you need to know about foreclosures before you jumped on it and purchase one?
It’s not as pristine as you think. Because this has been owned by owners who are incapable of financing maintenance for any repairs of their home and will be sold “as is” on the market. You may want to consider looking at the repairing costs first and look for the best resale value after.
Also, because some foreclosed properties has been sitting in the market for long, (Foreclosure Process takes long to complete) damages caused by negligence or vandalism is common.
Recorded Liens against the property
You may want to determine first if there are liens attached to the property, this includes unpaid taxes, homeowner’s association dues or any repair bills. Purchasing the property also means you have to settle all outstanding dues attached to it.
Maintenance and Cleanliness
Whether it is intentional negligence by previous owners or because it has been vacated for long, Foreclosed homes are awfully in a bad shape. You must check on the utilities such as the electricity and water supply. You might encounter most common issue in a vacant home which are unsecured, theft. Leaving the house with damages and losing some valuable items.
Don’t be blinded
If you go for public auctions, make sure you have seen the property itself and assess the present condition. Consider how habitable it can be and how much you spend on for possible repairs. Bid competitively.
In the end, there’s always potential money in foreclosed properties. You just have to know the basics on how to determine a more marketable property AFTER the possible renovations so it will be more desirable on the market and of higher appraised value.