Why invest in repossessed property?
According to the website, Money Saving Expert, repossessed properties are 10-30% cheaper than purchasing property that is sold conventionally. The reason for this is that the bank is primarily tryi...
According to the website, Money Saving Expert, repossessed properties are 10-30% cheaper than purchasing property that is sold conventionally. The reason for this is that the bank is primarily trying to recoup the money it has lent to the previous owner.
If the owner has 25% equity in a £100,000 property that is then repossessed, the bank is primarily concerned with recouping its £75,000. The lender must however be fair to the previous owner and make efforts to achieve the best possible price without unreasonable delay. This means that lenders must advertise the property widely. It also means that if they accept your offer they must continue to advertise the property for sale until you have exchanged contracts.
Research by the ratings agency Fitch demonstrated that 87% of homes repossessed since 2007 were sold for less than the outstanding mortgage. If you are looking to purchase a property and you are able to move quickly, buying a repossession is the best way to snag yourself a bargain.
If you have an offer accepted on a repossessed house it is wise to move quickly. Firstly, the vendor is not really in an exclusive negotiation with you. At the very least he will make a public notice about your offer. You will not be allowed to exchange contracts until the public notice period has been served (usually two weeks). During this time, other buyers are invited to better the offer made by you before you exchange contracts. In some circumstances, a higher offer is not necessarily considered to be a better offer. For example, someone with cash who offers a quick and definite completion may be more attractive than someone in a chain who needs to agree a mortgage. So you need to have a clear Idea of how you will finance the purchase:
Cash is king. If you are a cash purchaser you are uninhibited in how quickly you can proceed to purchase, subject to the public notice requirements. A cash buyer is likely to be the preferred choice to a someone looking for a mortgage.
A bridging loan is a loan secured against a property in exactly the same way as a mortgage. Bridging finance can be secured much more quickly than a mortgage. Bridging is generally intended to be a short-term solution until the property can be re-mortgaged. On the upside, bridging loans can be executed in days. On the downside, the arrangement fees and costs are quite expensive and you must be certain of your exit strategy.
This is the cheapest way to finance a property purchase over the long term. The problem of acquiring a property with a mortgage is that it is often perceived to be slow and subject to arbitrary exclusions. If the property is deemed uninhabitable a mortgage lender may not advance funds even though the defect is relatively minor. Some mortgage providers are happy to advance money once certain works have been completed, otherwise known as retention. It’s always best to speak to your mortgage broker if you intend to look at refurbishment projects.
How do I find a repossession property?
The easiest way to find a repossession property that is being marketed with an estate agent is to perform a search here on our repossession database. Repolist employs proprietary software that searches over 750,000 properties for sale in the UK and can also filters properties that have been repossessed on ‘Public Notice’.
Repolist has one of the largest selections of repossessed, refurbishment and auction properties in the UK today - start your search here.