What is seized real estate and is it a good buy?
Seized real estate is put up for auction on a regular basis by a wide variety of organizations including the Internal Revenue Service (IRS) and the US Customs Service. Some seized properties are foreclosures brought about by default on mortgage and loan payments, others are brought about by criminal prosecutions against tax defaulters and fraudsters.
The good news for buyers is that the US Government is holding in excess of $80 million worth of seized property and needs to dispose of it as quickly as it can. Where the property is buildings, the Government takes over the title and is responsible for security and maintenance. This means that these homes are often auctioned off at well below the market value in an attempt to attract a quick turnaround.
Conventional foreclosures are often in a “distressed” state when they come to market. The previous owners have been in financial straits and will have allowed the property to deteriorate perhaps not only in decorative order but also in terms of structural problems, electrics, plumbing, drainage and heating. These properties generally fall into three categories; insurable, insurable with repair escrow and uninsurable and are priced accordingly. The best bargains are in the uninsurable category however you won’t get a normal mortgage to buy these, you’ll need to look into loan financing if you can’t raise the cash.
Most foreclosures have clean title and can be occupied as soon as title is transferred upon sale, however in a few cases the title is clouded by liens. Liens are claims on the property where it has been used as security on loans and other financial transactions. If the title is not clear it may be advisable to avoid purchase as the process of unclouding the title can prove to be a costly exercise.
On occasion a foreclosed property may come complete with sitting tenants or reluctant previous owners claiming squatting rights. Depending on the local laws, this can be a protracted problem to solve and, unless you have experience of this situation it may be advisable to walk away rather than become embroiled.
Seized real estate is often the target of vandalism and the longer it stays vacant the less value it will have and the more work will be necessary to bring it up to standard. This is why the various agencies allow a very short period of time for potential buyers to evaluate the property and to make a bid. Sometimes the period will be only a matter of 12 days which is barely enough time to conduct a professional evaluation and to assess the cost of repairs in order to place an informed bid.
Nevertheless if you are organized and have the financing in place, if you are objective and realistic enough to judge the size of the task in front of you and you are clear how you will use the property once it has been renovated, there is no reason why purchasing a seized property should hold risks any greater than those you would normally encounter. Because of the enormous discounts possible, buying a seized property can represent some of the best value in housing available today.