What are foreclosed properties and acquired assets (and which to avoid)?

So what exactly are foreclosed properties and acquired assets in the Philippine setting? Find out what they are, where they come from, and which to avoid.

The following is the written version of the video above, which I translated from Tagalog to English, with some editing for better clarity and context.

You can watch the video in YouTube through this link: https://youtu.be/ByHcNP5EqUE

What Are Foreclosed Properties – Definition

Jay, exactly what are foreclosed properties? How do you define a foreclosed property?

A foreclosed property, to be clear, starts with a property whose owner took out a loan from a bank, a real estate mortgage loan. And then the borrower was not able to pay the mortgage.

So what will the bank do? They will have to foreclose it. And the property ends up in foreclosure.

After the redemption period has lapsed, the property will become a foreclosed property.

What we must remember is that the bank is already the owner (the borrower is now referred to as the former owner). It’s no longer a property in foreclosure, the redemption period has already lapsed.

So the definition of foreclosed properties is that the title has actually been transferred to the bank (or is undergoing title consolidation).

That’s the simplest definition I have for foreclosed properties.

What I described above is an extrajudicial foreclosure and the legal basis would be Act 3135 as amended by Act 4118

What Is The Redemption Period?

The borrower has the right to redeem the property for 1 year if he is an individual (90  days for corporations). They can redeem the property by paying in full the entire amount that is owed.

Then if it is not paid within 1 year, it will become a foreclosed property and the title will be transferred under the name of the bank (this process is called title consolidation).

Again, for the details with regard to the right of redemption, see Act 3135 as amended by Act 4118

Foreclosure Properties: Why You Should Avoid Them

I would like to point out that the properties that are still in the early stages of foreclosure are different. These are often referred to as “foreclosure properties“.

These are the properties you will see listed for sale via foreclosure auction at the municipal/city hall where the property is located (to be conducted by the sheriff). You will see the announcements at bulletin boards around the municipal/city hall and even at the Hall of Justice (if there is one within the municipal/city hall).

Don’t focus on those, I would advise that you avoid these properties.

3 reasons to avoid foreclosure properties

1. First of all, the payment terms for those would be all-cash, and as far as I know, these have to be paid within 24 hours if you win the foreclosure auction.
2. Another thing, the property is most probably occupied by the borrower (if you buy the property at this stage, you will have to eject them).
3. In my opinion, it would be better to step aside and respect the borrower’s right to redeem. What I mean is, they still have a chance to redeem and take back their property, so let’s respect that and let them do it.

Other Ways Properties Become foreclosed Properties or Acquired Assets

Are foreclosed properties only those that end up with banks this way?

Or are there other entities that can be said to be sources of foreclosed properties?

There are other ways banks can end up as owners of these assets, although they are still referred  to as foreclosed properties.

For example, let’s say a company has an unpaid loan to a bank. Since they have no cash, they propose to pay though real estate they own.

The banks are open to this type of arrangement (referred to as Dacion en pago or payment in kind), as long as the value of the real estate is enough to pay off the outstanding loan.

So the bank will end up with a property. What will the bank do?

Then they will have to sell it and they refer to it as a foreclosed property or an acquired asset.

So foreclosed properties/acquired assets are properties that the bank has acquired which they will have to sell to recover the unpaid loan amount.

Where/who can get foreclosed listings

So when we say foreclosed property investing, basically, what we buy are those that have already been foreclosed by the banks and are cheaper or below market value.

How do we know what foreclosed properties does a bank have? Do you just go to the bank and then ask them for their listings of foreclosed properties?

Can anyone ask for the listings? Or do you need to be someone the bank considers as a VIP?

You can just go to the bank, they can provide the listings to anyone who asks for the listings of their foreclosed properties/acquired assets.

The only problem you should be aware of when going to the branches of a bank is that not all bank employees are familiar with how to get their latest list of foreclosed properties.

Sometimes don’t even know what foreclosed properties are.

So if you encounter this, I suggest that you ask the branch manager directly because they would be very familiar, but usually, they will just refer you to the head office because the acquired assets department is located at their head office.

So for foreclosed properties of each bank, regardless of the branch, they will have one list for the entire bank?

Let’s just say BPI, they will have a different list from BDO, and Union Bank will have another list right?

You can go shopping at different banks to see different properties available…. Or if you want to save time and effort, and don’t want to hop from bank to bank you can go to just go to foreclosurephilippines.com.

Jay, how many foreclosed properties do you have here? There, it says over 20,000.

Actually when I updated all listings, it can be over 30,000.

However, after 6-months has passed, I delete old listings (which means the list can go down to around 20,000)

That’s it, so ForeclosurePhilippines.com is like a one-stop shop.

~~~

For the full video recording of this interview where I answered 30 questions about foreclosed properties, I uploaded it on this page: