There are a lot of properties for sale in New South Wales as of the moment. You can even find the perfect home for you within your budget, but have you ever thought about buying a foreclosed property?
Here’s a list of everything you need to know about foreclosed properties, where and how you can buy one if you want one:
What is foreclosure?
The first thing that you should know is what a foreclosure property is, and how it works. A foreclosure is the legal process in which the lender seizes the property when the homeowners fail to pay the agreed mortgage payments and this property is then referred to as the foreclosure property. What happens next is that the lender then sells the foreclosed property to new buyers to be able to recover at least some of the remaining mortgage balance.
Pros and cons of buying foreclosed properties
Most buyers and investors are often attracted to the idea of buying a foreclosed property because these properties are usually priced at a lesser market value and people think that it might be a way to save hundreds or thousands of cash but, not all bank-owned or foreclosed properties are worth it. So here is a list of pros and cons of buying a foreclosed property.
|Usually cheaper than average market value||Properties are often unmaintained or in bad conditions|
|Property is ready for occupancy once paid||Buyers often shoulder repair costs after purchase|
|Open for customization||A lot of competition|
|People are informed of auction dates||Might be paid in full cash|
|No record of any maintenance and repairs|
|People are informed of auction dates|
Now, let us talk about the pros and cons individually.
These properties are usually cheaper than the average value of properties on the market. This means that you could save hundreds if not thousands of dollars on the property itself.
Once the deal has been sealed, you can immediately move in without waiting for the property to be vacated.
Since these properties are often in bad conditions or unmaintained, they will mostly be open for customization based on your liking. With the extra cash that you will be saving from this deal. You will be able to buy a property and have it customized base on your preference as well while spending a total amount that may equate to an average house on the market or even lesser.
When lenders are aiming for auctions, they inform people earlier and that can be an opportunity for you to research about the property and its previous owners. You might even be allowed to do an inspection beforehand and that can be a good thing because you can check if there are a lot of problems inside. That way, you would know how much repairs will cost you in the future and you would also know at what amount to stop when bidding happens.
Most of the time, these properties are unmaintained and are even left in very bad conditions. Other times, these properties are left for weeks or months without heat or air conditioning and the lenders usually don’t issue money for repairs because they are only aiming to cancel out the remaining debt for the property.
Buyers often shoulder the repair cost of the properties after purchase because the previous owners are not obliged to pay for repairs.
Since these properties are way cheaper than your usual properties on the market, they are often targeted by investors especially if the property is located on a high value area. This definitely means that you would have a lot of competitions since these properties are often sold through auctions.
These properties are sold to recover the balance that the previous owners were unable to pay and most of these lenders want to recoup them immediately, so they require full cash payments.
If ever these properties have undergone repairs or modifications, the lenders usually don’t have a documented copy of these repairs or modifications so, these properties are a mystery to buyers as well.
This might also become a disadvantage because they do so to attract a lot of potential buyers. This means that the prices of these properties will more likely increase as people try to get their hands on these properties.
How does foreclosure differ from mortgagee repossession?
Although these terms are used interchangeably, they both have differences that you should be mindful of. In foreclosure, the lender goes through the legal process of transferring the title of the property from the previous owners to them, while in mortgagee repossession, the previous owners remain on the title while the lenders sell the property.
Things to keep in mind before buying a foreclosed property
Since these lenders want to get rid of the properties quickly, they might want you to pay full in cash after the auction or just give you some time after it. Don’t expect flexibility because they are keen on getting rid of these properties as early as possible. So, get those loans approved ahead of time to know if the property is right up your alley.
Although foreclosed properties might be on the cheaper side, you should never take it for granted. You need to do your homework which is researching the property. Researching things such as the property’s location, the crime index around it and the likes can be your own determining point if the property is really a good deal or not.
Inspecting the property beforehand should really be on your mind because it will also help you determine if the property is worth it or not. When inspecting, you need to look at every nook and cranny that the property has because although you are expecting it to be unmaintained, in a bad condition or nasty, you might get worse than what you expected. Inspecting the property to know how much repairs and modifications would cost you in the future will also be a strategic move to know at what price should you stop bidding.
Before buying such properties, you really need to have a complete plan of what you want to do with the property so that you would know how much you will be spending in total and if you have enough budget for it.
These properties may be cheap but do not let that become the only reason you bought such property. Remember that you will still be spending tons of money afterwards so never buy half-heartedly. Don’t buy with so many emotions at play as well because you might buy a property just because you got too emotional even when it caused you a lot than what you expected.
Where to find foreclosed properties
Foreclosed properties can be found through lending company websites sometimes and real estate websites such as realestate.com.au and domain.com.au as well. You can also look for them on local ads, newspapers, and if you know real estate agents, you can try to ask them as well but if you don’t have any luck of finding one, try hiring a buyer’s agent.
The process of purchasing a foreclosed property
If the debtors fail to sell it, the lenders will put the property up for auction along with other foreclosed properties that they have. Most of the time, lenders will do auctions for these properties simultaneously within just days or weeks. When these properties are put up for auction, they are usually listed beforehand so that people could see and even inspect the property before the auction date.
If the lenders were unable to sell these properties during auction, they will automatically be available for purchase straight from the lender themselves. Occasionally, they might be available for purchase before auctions, but they are not advertised or publicized and can only be purchased with the help of licensed real estate professionals.
Are these properties worth it?
Yes, these properties can definitely be worth it but take note that buying a foreclosed property should be done meticulously. It should be well thought out because it will require a lot of your time and might even require a lot more money than what you expected if you miscalculated. So do your research, get your loans pre-approved, inspect the property, think of what you want to do with the property and dedicate yourself to it especially before, during, and after you buy such property to avoid unnecessary spending.