- The cost of a foreclosed property can be between 20% and 60% below its actual market value.
- This type of purchase offers security as the entire process is conducted before a public notary and backed by the financial institution offering the property.
When looking to buy a house, common concerns include high prices, which have risen by 8.44% in Mexico since the pandemic and by 4.72% in 2023 alone, according to the International Monetary Fund (IMF). In addition, fraud is also a major concern, as the Citizen Council for Security and Justice of Mexico City reported 230 cases last year, a 92% increase compared to 2022.
In this context, foreclosure auctions or bank repossessions emerge as an alternative for making a secure and affordable purchase. This option occurs when the original owner can no longer continue paying the mortgage used to acquire the property, prompting the financial institution that granted the loan to auction the property to recover its investment. There are two modalities: one where you acquire the litigation rights, meaning you will be the owner once the legal process is complete, and another where you participate in the auction once the bank recovers the property, which is the more recommended approach.
Since 2020, this type of sale has seen a 200% increase, according to various real estate agencies. Beyond cost accessibility, there are other significant advantages over conventional purchases; here are the most notable ones:
- Considerable Discounts: The main reason foreclosure auctions have become an excellent buying option is due to their prices, which can be found 20% to 60% below the actual value of the property. This not only ensures a highly profitable deal and a good return on investment in the future but also increases the chances of acquiring a home.
- Greater Appreciation: For a property to increase in value usually requires several years; however, when acquiring a property through a foreclosure, you obtain immediate appreciation due to the relationship between the amount paid and the original cost. Adding the option to sell at a higher price or rent it out for a period can result in secure and steady income.
- Avoid Paying Interest: For many, it may be a disadvantage that foreclosures cannot be purchased with mortgage loans; they only accept payments made directly. However, this is actually a benefit, as not being subject to a mortgage means you do not generate interest, and the cost of the property remains intact. Additionally, you do not have to worry about paying a down payment as you would with a mortgage, which would be around 20% of the total.
- Faster Purchase Process: This type of purchase has many negative myths surrounding it, one of which is that it is a very slow process, but it is actually quite the opposite. Depending on the type of purchase you make, whether litigation rights or a free house, the time can be 2 years for the former and between 3 to 6 months for the latter. This is the time it will take to become the owner of the property, which, compared to the up to 30 years of a mortgage, is relatively short.
It is important to mention that, just like with a conventional purchase, you need proper guidance to ensure that you are dealing with a reliable offer and to avoid falling victim to fraud. To stay protected, keep in mind the following recommendations:
- Seek Certified Sellers: These offers are usually made by banking institutions or, occasionally, recognized real estate agencies and always involve the presence of an authority. If another type of firm offers you a foreclosure, it is likely not trustworthy.
- Do Not Make Payments to Just Anyone: All payments should be made through nominative documents and always certified by a notary. Before signing anything, ensure that your contract does not include payments to uncertified third parties.
- Do Not Be Deceived by the Price: Although these properties are very cheap, they will never be below 50% of the original value, as it would not be profitable for the banks. Avoid offers that promise prices almost as low as giveaways.
- Be Aware, Foreclosures Do Not Accept Loans: No bank or real estate agency offering this type of purchase will accept a loan as payment, as they need to recover their investment as soon as possible.
- Inquire About the Transfer of Rights: When dealing with a fraudulent offer, they often do not mention the transfer of ownership or tell you it will be signed once you have paid. This is a red flag, as it must be signed at the beginning of the purchase process by law.
- Do Not Make Advance Payments: Lastly, if you are dealing with a scammer, they will likely ask for an initial payment, such as a down payment. However, official foreclosure auctions do not require such payments, as the settlement for the property must be made in full.
Keep in mind that if you choose to buy through this modality, there will be additional costs, such as overdue service payments and notarization; however, this also occurs in a standard procedure. Consider that it can be a great opportunity to acquire your own home, but always approach qualified institutions that provide support and confidence.
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Fuentes de consulta:
https://www.luumorealestate.com/que-es-un-remate-hipotecario
https://gutzabienesraices.mx/articulo.php?id=16
https://www.icasas.mx/noticias/5-ventajas-remates-bancarios/