Why we don’t recommend buying foreclosed properties that are occupied (even if they are cheap)

I’ve said it before, and I’ll say it again, we do not recommend buying foreclosed properties that have illegal occupants. In my opinion, the problems you might be facing down the road makes it not worth it. Don’t believe me? Just look at what happened in the video below…

Video courtesy of ABS-CBN News Youtube Channel

I can understand the frustration of “Edgar” for this particular foreclosed property he bought from a bidding for Pag-IBIG foreclosed properties.

This is very similar to the horror stories we’ve heard about buyers of occupied properties. They parted with their hard-earned money, but after several years, they still have no possession of the property.

This is why we don’t recommend buying occupied properties, even with the cheap price that usually come with properties like them.

As investors, we learned our lesson early from other investors, and we never purchased any that were occupied.

As a real estate broker (back when I was still active), I remember awkward moments with prospective buyers because they were surprised when I would recommend against buying a property that was occupied. This is just one of the reasons why I’m glad we have stopped brokering foreclosed properties.

So far, I’ve seen some banks who prefer not to sell properties that have problems like illegal occupants (they only sell a property if they have possession).

Most will just indicate in their listings that a property is occupied (among a number of possible problems) and that these are for sale on an “As-is, where-is” basis.

Which leads to a possible question on your minds right now:

“Why would anyone buy occupied properties? How can someone handle the problems associated with these properties?”

I’ll try to answer these next.

How to deal with occupied properties

Last June 2017, I noticed that majority of the foreclosed properties inside listings released at that time were occupied/had illegal occupants. Because of this, I sent an email reminder to all subscribers.

In case you missed that email, I’ll share it below:

Since a lot of you might be asking if its okay to buy foreclosed properties that are occupied (if the price was very low), here’s a summary of the advice I usually give…

Since foreclosed properties are for sale on an ‘as-is, where-is’ basis, you will have to be the one to eject the occupant(s) if you decide to buy an occupied property.

It can be very costly in terms of time (it usually takes years to have a successful ejection), effort, and money, not to mention the many sleepless nights.

It’s actually very dangerous if the occupants are hostile.

Now you might be asking this:

“Why are occupied foreclosed properties being offered for sale in the first place?”

The quick answer is – because some still do get sold. Some people actually buy these properties and they know how to handle them.

However, the only people I know who have had success with occupied properties are:

1. Those who are very experienced and know how to deal with illegal occupants, and come up with a ‘win-win’ agreement so the occupants will leave voluntarily and peacefully.

2. Those who have the means and connections that can help with the ejectment.

3.Those who are willing to pay those in #1 and/or #2

But here’s my advice: Just walk away!

While I mentioned that some people were able to deal with occupied properties successfully, I believe not everyone can do this, which is why I ended my email with the following advice:

I also know people who have bought occupied properties and they just ended up wasting their money, which is why I advice against it.

If you were to ask me, I prefer to just walk away and move on to the next property.

So that you can avoid these properties, this is the first thing you need to check as part of due diligence, which I’ll explain next.

Possession: The first thing to check as part of your due diligence

Actually, this should come as no surprise if you’ll refer to my property due diligence checklist.

As you can see, the very first item in my checklist is the question: “Is the property occupied?” (referring to illegal occupants, caretakers are okay of course.)

You can find this on page 2 of my Property Due Diligence Checklist.

I put it on top of the checklist so that if you find out that a property is illegally occupied, then you don’t have to waste your time, just move on to another property. This will save you from a lot of headaches and regret down the road.

Please take note, even if a listing indicates that a property is unoccupied, always take that with a grain of salt. The only way to be sure is by personally inspecting a property.

By the way, please be very careful when inspecting a property, most especially if the bank/lending institution does not have any caretakers on the property you are interested in.

I remember one time when we visited a property based on info from the bank that it was not occupied (this particular bank usually assigns a caretaker for each property), we were shocked when we realized we were not talking to the bank’s caretakers (turns out we were talking to the former owner’s relatives), so we immediately left and informed the bank.

In parting…

Again, if you do find a listing with a lot of foreclosed properties that are illegally occupied, even if it is so cheap, please remember my advice above. You should think long and hard before considering to buy an occupied foreclosed property. You can’t say I didn’t warn you!

29 thoughts on “Why we don’t recommend buying foreclosed properties that are occupied (even if they are cheap)”

  1. good day po ..
    tanong ko po ay, may kukunin po akong lot ..puro halowblock nalang natira, katabi po yun ng bahay namin,, dati syang rawhouse,, so ninakaw po lahat ng mga bubong,, e may duda po akong wala sa tamang sukat yong lot,, kapag pinasukat ko po ba at wala sa tamang sukat,, pwede po akong mapababa yong halaga ng pera sa contract ko kay pag ibig? salamat po ssD..

    1. Hi Garry, kung sa Pag-IBIG at nanalo na yung offer or bid niyo, tapos gusto niyong bawasan yung price kasi nalaman niyo na mas maliit yung sukat nung lote, sa tingin ko malabo na po kasi nga “as is where is” ang pagbenta nila.

      Suggestion ko, sukatin niyo muna bago mag offer/bid. Pag maliit nga yung lote, at mukhang hindi na makatarungan yung presyo, hanap na lang ng ibang property.

  2. Sir Jay, what if yung nka declare kay pagibig, occupied yung lot pero pag check namin, wla nman ng nkatira as if abandon na tlga yung bahay. Mgkakaroon pa rn po ba ng problema yun in the long run?

    1. Hi Rina, mas maganda pag ganun, ibig sabihin umalis na yung illegal occupant! Sana lang walang pumasok na iba, mahirap magpa-alis.

  3. Hello Sir Jay,

    Thank you for this info. I was about to buy a foreclosed property using my years of hard-earned money that was currently occupied. This is will be my first time buying a property and I didn’t know that it will be hard to eject current occupants. I have now understood the ” where is, as is” basis, seems to me that pag-ibig do not take responsibility for the current state of the property.

    Best Regards,

    1. Hi Raffa, you’re welcome and I’m glad you were able to avoid what could have been one of the biggest regrets one can have related to buying a property! Don’t worry, a better property is out there for you. I hope and pray you will find it soon and the transaction will be smooth and hassle free.

    1. Hi Hero, without possession simply means the bank/seller has not yet taken control of the property. For example, all properties with illegal occupants. By the way, properties that are locked and it is not clear if the property has been abandoned can still be considered as “without possession”.

  4. May nagmessage po kasi sakin sa cp ko na Law office sya at tinatanong kung kakilala ko si (pangalan ng kapatid ko, di ko na po babanggitin) regarding daw sa housing loan ng kapatid ko sa Pagibig…May ilang taon na po kasing di nakakabayad ang kapatid ko sa housing loan at gusto nga po namin iparestructure yung loan, Ang tanong ko po ay ito:
    1. Paano po nila nalaman yung housing loan ng kapatid ko?
    2. Gumagamit po ba ang Pag ibig ng law office pag nagpapaalis sila ng occupant?

    Sana po sir Jay ay masagot mo po ito kaagad.More power to you.

    1. Hi Ed,

      Sorry to hear yung sitwasyon ng kapatid niyo.
      1. Malamang ina-outsource ni Pag-IBIG ang delinquent accounts sa external law office kaya nalaman nila details ng loan ng kapatid niyo.
      2. Kadalasan ina-outsource ang ejection ng mga banko sa 3rd party law office so malamang ganun din ginawa ni Pag-IBIG.

      Suggestion ko makipagugnayan kayo sa law office na kumontak sa inyo, pero double check niyo din kung talagang sa kanila naka-outsource at sila ang kinuha ni Pag-ibig. Good luck po, sana maayos niyo lahat.

  5. Josephine Rivera

    Good day po. Bakit po ba hindi mapaalis ng pagibig fund ang mga nakatira sa property na na foreclose na?

    1. Sa tingin ko po malaki kasi ang gastos sa pag eject. Tsaka kailangan din dumaan sa korte (kulang sila sa manpower para askikasuhin yung daan-daan na for ejection).


    Kanina lang po may barangayang naganap kasama tanod at pulis. Yung inapply na property ng pinsan ko sa Pag-ibig Pampanga na nasa isang subdivision which is foreclosed na ay hinahabol ng dating may-ari.. They said that the property is owned by Tallano Estate. They want us to vacate the house since we already get inside it as advised by Pag-ibig that if the property is not occupied(also stated in Pagibig Properties For Sale-Unoccupied) then we need to squat the propert before the first owner of mortagage property squat the same property. According to Pag-ibig the former owner does not have the right to the property anymore.
    We show them the letter from Pag-ibig that we are now the new owner of it but still they want us to vacate and they keep insisting that the property is already owned by Tallano Estate but they cannot explain how did it get on that process from Pag-ibig to Tallano Title, hence they don’t want to talk with Pag-ibig, they just keep on insisting their right since they have the Title from Tallano Estate(which has no red riboon nor red seal), which by the way is not named to them but to Tallano. Lastly, according to them, Pag-ibig doesn’t have the right on that property. What should we do now?

    1. Sorry for the late reply. Sa tingin ko dapat kayo tulungan ni Pag-IBIG para patunayan na kayo na ang may-ari, dapat back-up-an nila kayo sa Barangay at sa mga Pulis na kayo ang legal na nagmamayari at ipakita niyo ang mga dokumento galing Pag-IBIG.

  7. good day sir, i need your expert advise with my problem,i brought foreclosed property in pagibig, i give the previous owner 2months to leave the house until this last week of oct. vibal conversation with homeowners but the problem is ayaw parin nila umalis sa bahay. then, nag desided kami nang wife q na ipabarangay na yung dati may ari this monday. what if hindi parin sila pumayag sir what is my next step to do?

    1. Yon na po yung payo ko sa article. Kung may kakilala kayo na kagaya ng mga sumusunod, sa kanila po kayo pwede magpatulong:

      1. Those who are very experienced and know how to deal with illegal occupants, and come up with a ‘win-win’ agreement so the occupants will leave voluntarily and peacefully.

      2. Those who have the means and connections that can help with the ejectment.

    2. Kirby B. Vitualla

      Good day sir, paano po kapag pinapaalis kami ng bagong owner ng foreclosed na tinitirhan namin even though Wala pa silang legal na documents na nagpapatunay na sa kabila na talaga yung bahay na tinitirhan namin ngayong. At a last month pa nagabiso na sila na kailangan na naming lumipat at maghanap ng mauupahan pero Sabi kailangan daw ng paper na moved in from Pag-ibig. And the thing is magagalit na Yung current buyer at pinapaalis na kami at binigyan kami ng one week na palugit. Should we stay even though they don’t have enough evidence that they are the current real owner ng foreclosed na bahay? And they threaten us na nagtatawag ng pulis at ipasara ang bahay para di na kami makapasok at Sabi sa dating may-ari putulan ng kuryente para mapilitang umalis. Kailangan pa po ba naming intayin ang memo ng Pag-ibig para sabihing sila talaga ang may-ari o aalis na kami Kasi pinagbabantaan na po kami. Sana po masagot

  8. Anawayne Jherwyn

    thanks for sharing 🙂 very helpful,,, sayang naman yung nakita kong bahay ang ganda ng location. Problema occupied 🙁

    1. You’re welcome Anawayne, I’m glad you found this helpful. Regarding the occupied property you found, okay lang po yon, there’s a better property for you out there. 🙂

  9. My brother just bought a foreclosed property from SSS. We find it hard to evict the tenant. Tenant just laughs at us and said there is nothing we can do to evict him. What should we do?

    1. Hi Raphael, really sorry to hear your situation. One thing you can check is if the SSS has a Writ of Possession from the courts. If yes, a sheriff can enforce it (but you will shoulder the cost).

      1. Actually SSS does not want to take part of the eviction process. They say it’s the buyer’s responsibility to evict the illegal occupants. Very bad.

  10. Hi sir, we got a loan for a foreclosed property in pag ibig. The occupant made a deal with us but after 1 a few months we cannot find him anymore. His things are still in the house and he’s using it like a storage space.

    Will it still be considered illegal if we go into the house, get his things and rent a storage space for him instead? The Barangay is not giving us any option except to find or file a blotter for the guy because they want us to talk first. They also told us that if in case the guy is living in another place, we will have to go to the Barangay there and initiate a talk.

    What’s the actual process for this situation?

  11. sir. i bought a small property 121 sqm. however, a portion of it has been encroached (around 12sqm) by a shanty. the surveyor told the owner that he encroached my lot but he did not mind. I visited thrice my property and i was not able to meet the owner. can you post some advice on how to deal with illegal occupants? thank you.

    1. Hi Robbie, my suggestion with encroachments would be to first have a friendly talk with the one who encroached. Discuss your options, which depends on whether you are going to use the encroached part immediately. If you won’t use it immediately, you can let them stay and they can even serve as your caretaker. If you will already use the encroached part, your options would be to ask them to leave, ask them to pay for it, or even ask them to leave with a little cash. 🙂

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