Looking to Invest with Higher Risk?
Another type of Real Estate investing is the purchase of foreclosure properties for either rental purposes, or to renovate and flip for profit. However, this can be a very risky endeavour, time consuming and labour intensive. Ultimately, with some careful research, and a bit of good fortune, there is definitely money to be made by purchasing properties that have been foreclosed upon.
What are Foreclosure Properties?
Foreclosure Properties are properties that have been seized by the bank. This is typically due to owners who have failed to make their mortgage payments on the property. The bank will seize these properties through the use of a property management company, and then will look to liquidate the property via a foreclosure auction, or by simply listing the property for sale. These properties often sell at a discounted rate as the bank is looking to liquidate the property simply to recoup the amount outstanding on the mortgage, regardless of the true market value of the property.
How do the Auctions Work?
Foreclosure auctions are held periodically at the court house on Lower Water Street in Halifax. They are conducted by the Sheriff’s office, and are quite strictly regimented and organized. The property auction must be advertised in the local media at least three times before the auction can happen. There is a minimum bid required, which is usually under $10,000, simply to recoup the sheriff’s fees. All are free to bid on a property, and it is simply an open outcry auction. In almost every case, the bank will be there to bid on the property in an effort to drive up the price to ensure they recover what they need to cover the outstanding mortgage. They many also bid in hopes of reclaiming the property and market it as a typical listing on MLS®.
What are the Risks Involved?
At the time of purchase there is a 10% deposit required, with the balance being due within twenty days of the auction. However, one of the greatest risks is that you are typically not able to see the inside of the home until after you have taken the sheriff’s deed – post-auction. Therefore, you are typically buying the home site unseen, and that comes with a great deal of risk. There are also the typical risks that come with purchasing a property for resale purposes. These include market risks, increasing renovation costs, and more. Investing in foreclosure properties is certainly not for the faint of heart.
Interested in learning more about investing in foreclosure properties? Want to know when the next auction is? Contact Sheila for a consultation session on how to get started.