This post is by Point B Investment Team’s John Su. John specializes in joint ventures and investment properties. He helps clients invest in the Alberta and British Columbia markets to successfully purchase investment properties, and provides helpful landlord tips.
Many investors think that foreclosures are really great deals because they are paying substantially below market price for the property. But did you know that when you buy a foreclosed or bank-owned property, you cannot include any of the appliances like refrigerator, stove, microwave, or dishwasher with your offer?
This is because the bank doesn’t own those items. They only own the land and the house. I’ve heard of cases where the foreclosed owner even took the light fixtures, door handles and toilets with them in spite!
As the Buyer, you are purchasing the property “as is, where is”, with no warranty from the Seller. So there’s nothing you can do about it if any of the above are missing on your date of possession.
If you are the first person to submit an offer, you are able to put in subject clauses like inspection and financing and even negotiate on the price. Once the offer is accepted, it then goes to court. In court, anyone can bid on the property knowing what the accepted price is. The only caveat is the offer in court must be subject free. Therefore, it’s important to know the risks involved and to ensure financing is in place before making an offer in court.
What can investors do to analyze foreclosure deals?
To further demonstrate if foreclosures are indeed a good (or bad) deal, we’ve done an analysis of a foreclosed property sold to an investor. Based on our findings, and considering the adjustments, we found that the investor actually paid market value for the property. The investor may have even received a poorer asset because the comparable property had a river view and had newer renovations costing $10,000.
So the next time you are looking at a foreclosed property, remember that you may not be getting the best deal. It may be better to find another property where you are able to the negotiate and price, terms, and inclusions. That way, once the offer is accepted, nobody else has the ability to grab it from under you!
You can always contact us here at Point B to help you evaluate whether the investment property you are considering, foreclosure or not, is a good deal.