Foreclosed properties are considered non-performing assets, which is why banks and lending institutions that own these properties very actively market them the best way they can. One of the ways they do so is through discounted sales to potential homebuyers and investors, which is the reason foreclosed properties are sold below their actual market value.

Opting for foreclosed properties has its pros and cons. Although their low price tags are certainly attractive, not all foreclosures make excellent deals. To help you out in your search, here are 7 tips for buying foreclosed properties.

1. Look For a Reliable Broker

Simply put, foreclosed properties are properties that have been repossessed by home lenders such as a bank or the government itself. This situation occurs when the titleholder of the property fails to make the necessary payments in a given period of time.

When buying foreclosed properties, one essential thing to consider is the competency of the broker that you’re looking for. Not only does the broker need to have exemplary negotiation skills, but they should also have the necessary credentials.

They should be able to present you with a document signifying that they’re accredited by the bank or institution that has taken back the property.

2. Attend Property Auctions

Sometimes, online listings for foreclosed properties may not be comprehensive and complete. You wouldn’t be able to view all the available listings, which is a drawback when it comes to buying potentially cheaper or better property.

Property auctions, usually organized by banks or real estate brokerages, are a great way to discover foreclosed properties not normally listed on property websites. 

Attending auctions also allows you to talk to an agent face-to-face to thoroughly discuss your purchase, seek their advice, and practically walk you through the buying process.

3. Know Everything There Is To Know

Buying foreclosed properties is almost certainly new to you, thus, you have to equip yourself with all the necessary information about the property. It’s important to keep in mind that you’re not the only one who’s looking into it. There might be a potentially large group of people who are interested in making an investment on the same foreclosed property.

An important stepping stone is for you to ask about the necessary steps involved in buying this kind of property. Your broker would be able to help you with this, with regards to the property’s status, modes and terms of payments, bank processes, and the like.

By getting all the information that you might potentially need, you’re allowing yourself to stay on top of all the legalities involved in buying foreclosed assets.

4. Get Your Financing Ready

As with any type of investment, having sufficient capital to spare is one of the most important considerations. After all, you wouldn’t be able to make a purchase on something if you don’t have the necessary funds to cover it.

As with any competition, having an edge over other buyers will give you more chances of getting the foreclosed property you want. When you have already been pre-qualified for a housing loan by a bank or financial institution, you will stand out and attract more attention from sellers.

They will know you are a credit-worthy and serious buyer who has a housing loan pre-approved that you can use anytime. Because of this, you will have more negotiating leverage compared to other buyers. In addition, getting pre-approved helps you stick to a budget.

5. Inspect The Property

It goes without saying that you should have already conducted the necessary inspections on the property before buying it. One distinct quality with regards to foreclosed properties is that most of the time, they’re sold “as-is”.

The previous owner likely wouldn’t have had the time to keep up with maintenance repairs on the house. Aside from this, the property might not have been properly cleaned before it was repossessed.

Remember, these properties have been previously owned so expect that not all would be in tip-top shape, though most on offer during auctions may require only minor repairs. Minor property damage is something unavoidable when it comes to foreclosed homes.

6. Consider the Location

Consider the location of the foreclosed house. Aside from the convenience, you would also have to consider the potential of the property to appreciate in value as the years pass.

Properties that are much closer to train stations and other establishments are more likely to become more valuable. Attractive locations also include those with budding infrastructure and ongoing construction work.

Consider viewing listings of foreclosed properties in urban locations, where many of these elements will be present.

7. Think Over Your Offer

To ensure that you will not be paying more than you should, find out the market value of similar properties in the vicinity of the house you are bidding for. If you are planning to sell or lease the property as soon as you have purchased it, do more due diligence and check how quickly comparable homes are selling. You would do well with a fast seller as it will let you avoid expenses from its maintenance, security, and tax.

Buying foreclosed properties may seem risky due to them being sold “as is,” but by knowing what to look out for, you can find the property to turn into your dream home with not much difficulty.