Buying distressed property: what to look for
Distressed properties and foreclosed homes are definitely cheaper if compared with brand new dwellings or even resale properties.
But despite being such a bargain, some people are reluctant to buy them.
According to experts, buying a distressed property is no different from getting one that is not. However, due diligence should be taken into account to save yourself the trouble of suffering from making a bad purchase and pay extra attention before going for one, they say.
“Buying a distressed property is no more daunting as buying any other property. The only difference is the fact that in many of these distressed sales, the buyer must clear the seller's mortgage. This process can be quite scary in that the buyer must deposit the mortgage clearance amount into the seller's account in order to have the mortgage cleared prior to the property being transferred into the buyer's name. This is not a very comforting thing to do,” Tom Bunker, Investment Sales Consultant, Head Office at Better Homes told Emirates 24|7.
But developments like the escrow account helps to ensure that the buyer’s money is safe.
“With the introduction of escrow services in the market, this process is no longer a daunting experience. Buyers and sellers can now turn the transaction over to an escrow agent who then manages the transaction from start to finish and the parties are comforted with the knowledge that the necessary power of attorneys and guarantees are in place,” added Bunker.
According to Vineet Kumar, Head of Business Development at Asteco, “buying a property at a heavily discounted price (which we term ‘motivated seller’ rather than a distressed sale) opens a window for the buyer with immediate access to capital. The seller achieves a quick sale and the buyer benefits from a below-market price in a win-win situation.
“The sales process should be no different than any ordinary property transaction. Due diligence should be carried out as always, but again as the market matures, service charges and actual cost of owning a property is more transparent now than the days of off the original plan sales. The correction in rents over the last two years now draws a clear comparison of owning a property versus leasing it. Buyers need to think of their investment as a mid to long term commitment, with many properties offering scope for capital appreciation over that time frame,” he told this website.
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