Occupied Pag-IBIG Foreclosed Property Cannibalized/Damaged by Former Owner

If you are thinking of buying a Pag-IBIG foreclosed property that is occupied, think again! This might happen to you.

What happened?

• The new buyers purchased the foreclosed house and lot via auction from Pag-IBIG. At this time, it was still in good condition.
• When the previous owner left the property, the new buyers found it damaged, with fixtures removed, drains filled with concrete, and windows/doors removed, etc.
• The new owners estimate they will will spend over half a million pesos to repair the property.
• The new owners will also have to settle the arrears (outstanding utility bills) left by the previous owner.
• Pag-IBIG says the former owner’s actions can be considered as theft theft and vandalism.
• It appears any chances of getting the former owner to pay for the damage they caused would be difficult because they can’t be found.

My thoughts

I might be stating the obvious, but I believe this is another good reason NOT TO BUY Pag-IBIG foreclosed properties that have a status of Occupied – Occupant Undisclosed meaning the former owner is still there (or informal settlers).

In the video, the new buyers mentioned the former owners probably did what they did because they were not allowed to stay until the end of January. While it was good that the new buyers were in communication with the former owner, I guess things just went out of hand.

The property was basically vandalized/cannibalized by the former owner to get back at the new buyers.

While what happened was obviously a nightmare for the buyers, it could have been worse.

I remember one particular buyer who continues to make monthly payments on an occupied Pag-IBIG foreclosed property they purchased, yet after several years, they still can’t move-in.

The former owner simply refuses to leave. You can watch the video about this here: Why we don’t recommend buying foreclosed properties that are occupied (even if they are cheap).

As for the unpaid utility bills, you really have to check this, and if the seller (Pag-IBIG in this case) will shoulder the cost. This is just one of the many things you should check when doing due diligence before buying a foreclosed property. It seems Pag-IBIG does not shoulder arrears for their foreclosed properties. 🙁

How to avoid a similar problem

For Pag-IBIG

1. Caretakers – One thing that comes to mind is “Why didn’t Pag-IBIG assign caretakers to the property, just like what most banks do?”. Sure, that would mean more expenses for Pag-IBIG, but if banks do it, then that means the additional cost is justified/worth it right?
2. Do not sell occupied properties – With banks, they often sell only the foreclosed properties that have NO illegal occupants. I believe they do this to avoid complications and issues their buyers might face. This will obviously result in a longer time before their foreclosed properties are offered for sale to the public. But again, if the banks do this, then it probably means it is justified/worth it.

For interested buyers

1. Avoid Occupied Foreclosed Properties – Just as what I have often mentioned in the past, if a foreclosed property has illegal occupants, just walk away. There are other foreclosed properties that are NOT occupied, you just have to be patient. The headaches with occupied foreclosed properties are not worth it.
2. Don’t make assumptions – Look, I am not gaslighting the new buyers. But I believe it would be prudent to expect the worst. Buying an occupied foreclosed property means you are assuming the former owner will leave. Unless there is a very good reason for them to leave and you have a written agreement, you should never assume they would leave. And as long as the property is in their possession, no one can stop them from vandalizing/cannibalizing the property.

Cannibalized/damaged foreclosed properties are actually common

After inspecting countless foreclosed properties for almost 2 decades, I noticed cannibalized foreclosed properties are quite common.

It was either the former owner, or informal settlers, etc. who cannibalized the property. Like what I said earlier, banks avoid this by assigning caretakers.

As for damaged foreclosed properties, I believe it is mostly due to natural wear and tear coupled with neglect/lack of maintenance + anything of value are often stolen just like circuit breakers, windows/doors, etc. (again, this often happens with foreclosed properties without any caretakers).

Lastly, just like with the video, the former owner vandalizes the property on purpose (as a form of revenge I suppose).

For some properties, the damage is already too much, and it is no longer worth fixing. It would be better to demolish and build a new structure.

But as the saying goes, damaged/cannibalized foreclosed properties can turn out to be worth buying, IF the price is right.

We already experienced buying an old bungalow that was damaged beyond repair (it wasn’t a foreclosed property, but is sure looked like one!), but it still made sense to buy. Even if we write-off the house, the value of the lot still made it worth it. After a few years, we flipped that property for a significant profit.

Which leads me to my question, what if the cannibalized/vandalized house and lot from Pag-IBIG still made sense to buy?

Let me explain below.

Did they actually spend more compared to buying another house and lot?

Now I want to look at this objectively.

Did the buyer actually end up spending more instead of saving by buying a foreclosed property?

The only way to answer this is to compare it to buying another house and lot (in brand new or ready-for-occupancy condition) in that same village, and factor in the cost for repairs.

While the buyers mentioned they will have to spend half a million pesos to fix the property, what if the selling price of the property was way below market value, enough to offset the cost for repairs?

For example, let’s say a comparable and similar sized property in the same village was recently sold for Php5 Million. As mentioned in the video, their winning bid was only Php2.9 Million. So even if the cost for repairs was Php500K, they would have saved PHP1.9 million (PHP5M – Php2.9M – Php500k = Php1.9M) as compared to buying another house and lot. (Note: This is just an example of what’s possible.)

How I wish the video mentioned where the property was located so we can check if there was any possibility that they still might have saved a lot of money as compared to buying another house and lot.

Sorry, I couldn’t help it. At the start of the video, it was mentioned that instead of saving, the buyers spent more, without stating any proof (it would have been better if they had an example of another property in the same village that was recently sold).

Which is why I just had to make a counter argument.

If you want to see an actual example of how I was able to buy a below market value foreclosed property, check out this case study:

Conclusion – Summary and recommendations

I just want to repeat this until you listen: In my opinion, you should always avoid any foreclosed property that has illegal occupants. It is simply not worth it.

If the illegal occupant has left and the property has been cannibalized/damaged, it can still make sense to buy. That is, as long as the selling price is below market value, to the point that it can offset the cost for repairs.

The key is to always analyze and decide based on the numbers.

What do you think?

If you were in the buyers situation, what would you have done differently?

What do you think of Pag-IBIG’s response?

Let me know in the comments below.