Is Buying a Foreclosed Property in the PH a Good Investment?

So, you want to start investing in real estate but were surprised by the high buy-in rate. 

Investing in real estate is indeed a smart financial move but it can be prohibitive due to the high buy-in rate. But don’t let that stop you! Start your investment journey with the more economical foreclosed properties.  

In this article, we’ll tackle the essential questions to help you navigate how to buy foreclosed properties in the Philippines – what a foreclosed property is, how to buy this type of property, and whether it’s a good investment. 

What is the Meaning of Foreclosed Properties?

A foreclosed property is a real estate asset that has been repossessed and is being sold by a lending institution, such as a bank, or the local government. 

Banks or the government take ownership of a property when the owner fails to keep up with their loan’s amortization. They then sell the property to recover the amount the borrower owes on their defaulted loan.

One of the main characteristics of foreclosed properties is their low prices, which is also why it is common among newbies still learning how to invest in real estate in the Philippines to buy them. 

There are two main reasons for the low price of foreclosed properties. First, banks typically want to sell these properties as fast as possible. So, they try to motivate potential buyers to purchase properties with lower prices. Second, most foreclosed properties have not been maintained well for years and so are in less-than-ideal conditions (although it’s also possible to find foreclosed properties in good condition).

You can find a wide range of properties that have been foreclosed. There are vacant lots, houses and lots, condominium units, townhouses, as well as apartment complexes and commercial properties. So, while foreclosed properties are not eye candies, it is possible to find a gem worth investing in.   

How to Buy Foreclosed Properties in the Philippines

Buying a foreclosed property in the Philippines may not be as straightforward as buying regular properties. Here are some steps and tips to help you be successful in buying foreclosed properties: 

Scout for Foreclosed Properties

You need to find available foreclosed properties before you can buy one. Where to buy foreclosed properties? That’s easy! Here is a list of all RCBC foreclosed properties. There, you’ll find the basic details of available properties, such as the type of property, location, lot area, floor area, TCT or CCT number, and the minimum bid price.

Similarly, different agencies of the Philippine government list their acquired assets for sale on their respective websites. Look into Pag-IBIG, Bangko Sentral ng Pilipinas, the Social Security System, and Government Service Insurance System.    

You may also chance upon some foreclosed properties with real estate agents or in real estate websites. However, be extra careful with vetting who you’re doing business with and the property itself.

We suggest comparing different properties so you can select the best one for your investment plans. Compile a list of potential investments from the list of available properties, then narrow down your choice as you learn more about them.

Have a Plan for Your Investment

Before buying any property, make sure that you have a clear plan for what you’ll do with it and how you’ll finance it. 

Having a solid plan for your investment is crucial in selecting the right property to invest in. You can narrow down the properties that would be ideal for your plans for the foreclosed property. For example, if you are looking to establish a residential rental business, you should look at locations near schools and transportation hubs. 

Finding the ideal property can make your planned business more viable and help you achieve your investment goals.

Research the Property

Find all the information you can about the property to help you assess the value and suitability of the foreclosed property. 

Look into the property’s location, as local zoning ordinances may dictate what you can do with your property. Check if it’s flood-prone or near a fault line. Also, assess the safety and accessibility of the area because these impact the property’s future value. 

Along with these, try to find out various issues, such as title issues, unpaid bills or taxes, and liens on the property. 

Inspect the Property

RCBC allows interested buyers to schedule an ocular inspection of the property. Ocular visits are an important step when buying a foreclosed property because it’s a great opportunity to get to know the property and its location.

Is it accessible? Are there nearby shops, schools, and hospitals? Is there good quality infrastructure? Are there signs of crime in the area, such as vandalism or trespassing?

Of course, it is also your opportunity to check out the property itself. Here are some things to inspect during your ocular visit: 

If you’re buying a house or condominium unit, check its structural integrity. Inspect the foundation, walls, and roof for any signs of damage like cracks, sagging, or leaks. 

Look for signs of water damage and mold as well because these indicate underlying problems later. 

Check if the property has any pest infestations, too. Find out if there are termites, rodents, cockroaches, and other pests on the property. Not only will you need to deal with those when you buy the property, but they could also signal structural issues.

Inspect the condition of plumbing fixtures, cabinets, countertops, switches, and outlets.

By thoroughly inspecting the foreclosed property during an ocular visit, you can make an informed decision about the suitability of the property as an investment.

Research Market Value

The low price of a foreclosed property doesn’t guarantee that it will be a good investment. One way to check if you’re truly getting a bargain is to cross-check the selling price or minimum bid price with the actual price of properties in the location.

The market value can also help you assess the trajectory of the foreclosed property’s potential value – in other words, your potential ROI.

Prepare Your Funds Before Bidding

Remember that you need to bid on foreclosed properties during an auction. This means that you need to be prepared with funds to cover your bid for the property. 

As with buying other types of properties, you can buy foreclosed properties with cash or a bank housing loan

If you’re going down the housing loan route, we suggest getting pre-approval prior to the scheduled auction. A pre-approved loan can give you an edge over other bidders. Coming into an auction with a pre-approved loan signals that you are a serious buyer. It also tells the institution that you are well-prepared and have good credit, so you have a higher chance of securing a favorable deal. 

Whether you’re paying with cash or with a housing loan, be prepared to have at least 25% of the offered price so you can cover the downpayment. You need to pay 25% as a downpayment – 10% as of submission of your offer and the remaining 15% on the schedule indicated in the notice of approval. 

Be sure to check the payment terms so as not to forfeit your bid.

Submit a Letter of Intent

The main step on how to buy a foreclosed property is to bid on your desired property. To do this, you’ll need to submit a Letter of Intent to the RCBC along with other requirements

In the LOI, you indicate your offered price, the property’s details (TCT or CCT number, lot area, floor area, property address, etc.), terms of payment, date of your ocular inspection, and your details. 

The Letter of Intent will get you into the RCBC’s online auction. Keep in mind that your offered price is not yet final as it will still be subject to the bank’s approval. 

Wait for the Notice of Approval

Once the RCBC approves your bid for your desired foreclosed property, we will send you a Notice of Approval. There, you’ll find the repayment terms. 

Process Documents

Once the terms have been consolidated, we can start processing the necessary documents to close the sale. You’ll be asked to sign the Deed of Sale or Deed of Conditional Sale for those buying with a housing loan, as well as other documents needed to transfer the property title. 

Is It Good to Buy a Foreclosed Property in the Philippines?

The low price point may seem enticing, but it’s not the end-all-be-all when investing in real estate. So, should you buy a foreclosed property? Let’s talk about the pros and cons of investing in a foreclosed property. 

Pros of Buying a Foreclosed Property

Accessible Price Point

One of the primary advantages of buying a foreclosed property in the Philippines is the accessibility of prices. These properties are typically sold at a discounted rate compared to market value and other new properties, resulting in significant savings. 

The affordable prices open doors for individuals who may not otherwise afford a home or investment property in their desired location. Additionally, the wide range of foreclosed properties available means that there are options to suit various preferences and financial capabilities, making investing in real estate more attainable for many.

High Potential Return on Investment

One of the main reasons it’s a good decision to buy a foreclosed property in the Philippines is the potential for higher returns on investment. While there are risks associated with any real estate transaction, foreclosed properties often offer investors the opportunity to acquire assets below market value. It essentially allows you to buy low and sell high. 

With proper due diligence and strategic planning, you can renovate and resell foreclosed properties at a profit or generate rental income through long-term leasing. 

Additionally, the Philippines’s growing real estate market contributes to the potential appreciation of your foreclosed property’s value over time. So, you indeed have a higher chance of securing high ROI.

Buy Properties in Established Areas

Investing in a foreclosed property lets you acquire a property in an established location, one with existing infrastructure and access to schools, hospitals, malls, and transportation hubs. 

Accessible locations often come with a hefty price, so a foreclosed property will truly be a bargain. Not only will you likely get the property at a more affordable price, but you can guarantee that people will be interested in buying or renting it. 

Cons of Buying a Foreclosed Property

While buying a foreclosed property offers financial advantages, it’s essential to consider the potential drawbacks. 

The Condition of the Property

One significant concern is the condition of the property. Most foreclosed properties are not maintained well, which could mean additional expenses for the buyer. Besides the repairs, you may also need to assume responsibility for other liabilities, such as informal settlers, zoning violations, and boundary disputes, which can delay your plans.

This is why it’s important to research and inspect the property thoroughly so you can avoid properties that have hidden additional expenses. This way, you can maximize your budget and use the property right away.

Legal Issues 

There is also the possibility of encountering legal hurdles with foreclosed property. You may struggle to transfer ownership of a property that still has a lien tied to it or if the institution doesn’t have the land title. 

Unclear titles and other unresolved legal issues can take a while to resolve, so it’s best to avoid them. Be sure to deal only with legitimate parties such as banks and licensed real estate agents when looking where to buy foreclosed properties.

As with any type of investment, it’s always best to conduct ample research so you know the pros and cons of the property you’re buying. This way, you can weigh if a foreclosed property’s potential can outweigh the existing cons, if any. From there, you can make informed decisions and maximize the potential of your investment in foreclosed properties.

Achieve Financial Freedom with RCBC

The road to financial freedom starts with good investments. Although foreclosed properties are the result of another person’s misfortune, they can be a good investment if done right. Of course, it comes with both advantages and disadvantages. However, if you follow our tips on how to buy foreclosed properties in the Philippines, you can minimize the risks and succeed in your investment goals. 

Don’t hesitate to get in touch with us to learn more about investment opportunities.