According to experts, repossessed property tends to be about 10-30% cheaper than purchasing conventionally. This is mainly because the financier is trying to recoup the money lent to the mortgage borrower. One stands to reap huge by investing in distressed property. There are however some key points to help maximize gains by helping avoid unexpected hurdles.
Ask the Right Questions
Acquiring repossessed properties is quite different from purchasing through conventional channels where one is able to contact the existing titleholder(s). Here, the agency will be unlikely to provide ready answers to vital questions regarding the property’s value. It’s therefore important to ensure that any structural alterations are supported by the necessary paperwork. This could prove difficult when one only has access to the lender or agency. Here, caution is a good policy to adopt nevertheless.
Calculate the Actual Cost
An exhaustive survey is always vital before any new property can be acquired. What may initially seem like a bargain could end up being a white elephant due to renovations or serious issues that may not be quite evident. This makes sense, because a cash-strapped homeowner would most likely find it hard to keep up with the necessary maintenance. Properties that remain unoccupied for long are also prone to vandalism and neglect.
Watch out for the Mail
If a property has been repossessed, it’s very likely that the owner had other fiscal problems. Any unpaid debts would result in future visits from bailiffs and debt collectors. If any suspicious envelops are found in the mail, one needs to check if they’re from parties claiming unsettled dues. When this happens, the letters should be returned to their respective senders. It’s also important to contact the companies and inform them on the change of ownership. This is especially important if the property will be rented out in future; tenants won’t be pleased with dealing with such issues.
Typically, the properties will also have their essential utilities disconnected. One thus needs to take into account the resources needed to restore such services. This is because they’re crucial on how quickly the return on investment can be realized.
Cash is King
When property is repossessed, it’s the lender’s duty to recoup as much money as they can from the asset. At the same time however, the number of foreclosures taking place means that the institutions will be keen to realize quick turnover. As such, one needs to prove their status as a genuine buyer if they want to benefit from discounts. One needs to prove that they have the required funds, more so if they plan to acquire several units.
If an offer is accepted, it would be prudent to move in fast. The vendor isn’t allowed to have exclusive dealings with any single party; they’re usually required to issue public notices about any offers. In addition, contracts cannot be exchanged till the public notice period of 14 days elapses. Though distressed property investment isn’t always easy, following these tips will help in avoiding problems that could impact negatively on profits.