Buying foreclosed property is a sensible approach to securing real estate, but you should be aware they have their advantages and disadvantages - depending on the market circumstances. The advantages are:
1. Distressed prices - these assets are often being dumped into markets with no buyers
2. Bank indifference - Banks are primarily concerned with recovering their own money, thus there is some willingness to accept low-priced offers from prospective buyers
3. Under-utilised assets - foreclosed assets are often under-appreciated assets because the previous owner was unable to make a profit from it, or didn't have the chance
4. Foreclosed property assets often have a negative perception attached to them, whether its a fear of reprisals from the previous owners or threats by the yakuza (in Japan). This means you can get a low price because buyers are scared off.
5. Illiquid markets - Foreclosures tend to be dispersed across the whole country, which means you can get steep discounts in illiquid local markets because most of the buyers are in the cities. For retirees or holidayers this means they can get particular bargains away from the city.
6. Panic sentiment - The wall of fear gripping the market can create a wave of panic selling, resulting in steep discounts. This is particularly pertinent where their is perceived to be no value for the asset. eg. Vacant, unproductive land. Such assets can become compelling buying at the right price.
7. Limited disclosure - The limits placed on disclosure can drive down prices prompting many buyers to stay away. In Japan bidders are not permitted to enter the property. Most buyers are reluctant to bid on properties they can't look at. In the Philippines the information is very scant, and bank managers are less than service-orientated
8. Generous financial terms - Bidding on foreclosed properties requires a deposit of just 5-20%.
9. Financial literacy - In some markets buyers are less sophisticated than others, so foreclosures in these markets can be more compelling. The same of course is true on the selling side, where poor financial literacy increased the number of foreclosures (sellers). Financial literacy is particularly prevalent in the rural areas.
See http://foreclosured.blogspot.com for further information on specific market opportunities.
1. Distressed prices - these assets are often being dumped into markets with no buyers
2. Bank indifference - Banks are primarily concerned with recovering their own money, thus there is some willingness to accept low-priced offers from prospective buyers
3. Under-utilised assets - foreclosed assets are often under-appreciated assets because the previous owner was unable to make a profit from it, or didn't have the chance
4. Foreclosed property assets often have a negative perception attached to them, whether its a fear of reprisals from the previous owners or threats by the yakuza (in Japan). This means you can get a low price because buyers are scared off.
5. Illiquid markets - Foreclosures tend to be dispersed across the whole country, which means you can get steep discounts in illiquid local markets because most of the buyers are in the cities. For retirees or holidayers this means they can get particular bargains away from the city.
6. Panic sentiment - The wall of fear gripping the market can create a wave of panic selling, resulting in steep discounts. This is particularly pertinent where their is perceived to be no value for the asset. eg. Vacant, unproductive land. Such assets can become compelling buying at the right price.
7. Limited disclosure - The limits placed on disclosure can drive down prices prompting many buyers to stay away. In Japan bidders are not permitted to enter the property. Most buyers are reluctant to bid on properties they can't look at. In the Philippines the information is very scant, and bank managers are less than service-orientated
8. Generous financial terms - Bidding on foreclosed properties requires a deposit of just 5-20%.
9. Financial literacy - In some markets buyers are less sophisticated than others, so foreclosures in these markets can be more compelling. The same of course is true on the selling side, where poor financial literacy increased the number of foreclosures (sellers). Financial literacy is particularly prevalent in the rural areas.
See http://foreclosured.blogspot.com for further information on specific market opportunities.
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