Today’s article is contributed by Wiiloaded Consultants’ Managing Director and Non-Executive Chairman, Roger Dai Choon Doi, MBA (Westminster Academy), Hon PhD (University Of Northern Malaya), MBSA, A1REP, FICBA, Member of The International Academy Of Real Estate Consultants (TIAREC).
With home prices rising higher than ever, more and more prospective home buyers are looking at the possibility of getting repossessed homes from banks to save up. While these are great and amazing reasons to buy repossessed homes (one is that they are relatively cheaper than regular homes, another is that the negotiations are generally faster since you are only dealing with the bank that owns it), there are also great reasons not to.
For one, not a few of these repossessed homes are in less than stellar combination. One of the most common reasons is that these homes, usually more expensive than what the previous owners could actually afford, are rented out or shared with tons of people (even more than the ideal capacity of the house) to cut on costs. Wear and tear of the home is increased twofold, maybe even threefold in comparison with a regularly maintained home with an average number of occupants. Another reason is lack in maintenance, due to the exact same reason – cutting on costs. Only logically, if an owner can hardly make regular mortgage payments, you cannot expect him to have extra for repairs and maintenance. Lastly, and most unfortunately, some homeowners get too frustrated upon getting their notice of repossession that they vandalize the home right before moving out.
But if you’re still keen on buying repossessed homes, at least arm yourself with these helpful tips:
- Only go for homes whose damages you are willing to put up with. Banks don’t have the energy, effort, and interest in fixing repossessed homes. In our perspective, they’ve already lost enough money from repossession alone. For these banks/lenders, the ideal buyers of these homes are property investors who buy ‘bad’ houses to restore and resell at a much higher price. You do not have the depth of the pockets of these investors and you’re not selling it so there’s no way your restoration expenses will be returned. Get in touch with a quality real estate agent if you have your doubts. Just because the house is cheap does not mean that it comes inexpensively. Do a check and balance of the current value of the house against the projected costs of restoring the house.
- Do a background check on the previous owners as well as the paperwork of the house. As I’ve earlier mentioned, the bank does not have the energy and interest of making the house look interesting to you as much as a regular homeowner would. You know you’ve done this, if you rented out houses or apartments (I’ve had experienced this when I rented a unit at the Suria Stonor— previous owners weren’t able to clear out previous bank charges, leaving me in trouble.) Especially if you do not have an agent, you have to do the research yourself. There may be other legal obstacles or any other similar problems that may come from the sale of the house, so it would be best to do a thorough research before making anything legal and binding.
- Banks are harder to negotiate with than regular homeowners. That is why there is always a tendency for you to lose the house even in deep negotiation stage if someone comes along with a better offer, you’d lose it in a snap. While this could just as well happen when dealing with regular homeowners, it is more likely to happen in dealing with banks. So when trying to get a repossessed home, and you are certain you want it, get things on paper as soon as possible so you don’t lose it when you’re already deep into it.
Questions? Email me through my secretary Amy “DD” Yip – firstname.lastname@example.org