What are the key techniques for selecting Non-Performing Assets (NPAs) when making a purchase?
Non-Performing Assets (NPAs) offer several attractive advantages, whether in terms of their relatively low prices or their prime locations. These factors make them appealing for purchase either as personal residences or as investments for future profit. However, it is equally important to exercise caution when selecting such properties. J.E.D.I. Asset Management would like to share key tips and precautions to help you make well-informed decisions and avoid potential mistakes when purchasing Non-Performing Assets (NPAs).
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Prospective buyers should personally visit the property to assess its actual condition and current usage before making a purchase decision. For properties such as houses, condominiums, townhouses, or commercial buildings, it is necessary to inspect the building structure, the age and condition of fixtures, plumbing, and electrical systems. If any part is damaged, the estimated repair costs must be factored into the total cost of the property. This is important because, under Section 473 of the Civil and Commercial Code, the seller cannot be held liable for defects once the sale has been completed.
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Choose the right location and surroundings. For business purposes, the property should have adequate parking for customers and be located along main routes. For residential purposes, proximity to children’s schools, shopping centers, and workplaces should be considered. For investment purposes, such as renting out the property, areas with high turnover of tenants, like those near universities or industrial estates, are ideal.
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Verify proper construction and permits. Buyers should check with the Department of Public Works or the local district office to confirm that the property was constructed with the proper permits, and that any modifications or uses of the building are legally compliant.
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Check for encumbrances and transfer of ownership. It is crucial to ensure that the property is free of mortgages or other obligations as collateral. For condominiums, buyers must also confirm with the juristic person (condo management) that there are no outstanding common area fees. Most importantly, a site visit should be conducted to verify that the property is vacant, as evicting occupants may require lengthy legal proceedings.
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Evaluate the market price of similar properties. NPA properties are not always the cheapest option. Market demand and supply also influence pricing. Therefore, when purchasing an NPA, buyers should consider comparable market prices in the same area, as well as the strengths and weaknesses of the property, in order to determine a fair purchase price.
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Before deciding to purchase a Non-Performing Asset (NPA), it is advisable to carefully review and follow these recommendations. Exercising due diligence and caution will help ensure that your purchasing decision is well-informed and minimizes the risk of mistakes.