Housing experts predict that the numbers of repossessed property in the UK will rise dramatically as the ‘credit crunch’ begins to bite. But although this is extremely unfortunate for people who have to leave their homes, it does provide a great opportunity for others to get a repossessed property at below market value.
There are lots of bargains out there, but how do you find a repossession bargain? Catherine Dawson, author of How to Buy a Repossessed Property Bargain, reveals her insider secrets to how you can buy a bargain property repossession:
1. Spread your net widely.
Contact all the local estate agents and auction houses, asking to be put on their mailing list. Tell them that you are interested in repossessed houses or ‘distress sales’, which is another term used for this type of property sale. Also, register online as you can receive email alerts about potential repossessions before they are more widely advertised.
Consider the price that you can realistically pay for a repossessed property and then add an amount to this figure that you would be able to negotiate off the asking price. This will enable you to obtain details of repossessed houses that are out of your price range, but may be affordable once you have negotiated on the price. The amount that you can add on to the price could be ten to 20 per cent of the asking price. But don’t be tempted to ask the selling agent to send you details of repossessed houses in all price ranges, or those that are far too expensive, because they will think that you are less serious about making a purchase.
2. Find out when repossession houses are advertised in the local newspaper and look for ‘notice of offer’ adverts.
These indicate that an offer has been made on a repossessed property and further bids are invited before the specified deadline. If your local newspaper publishes an online version, you can view past and current ‘notices of offer’ adverts that appear in the paper. Some of these will indicate that a property is repossession by using the terms ‘by order of the mortgagees in possession’ or ‘we are acting for the mortgagees’. Others will prefer not to indicate that the property is repossession. Using online sources such as these is useful to find out how the procedure works in your local paper and to see what houses have been advertised in the past and for how much. As many of these adverts state that higher offers can be made any time before the exchange of contracts, it may be possible for you to find suitable repossessed property on which you can still make an offer.
3. Do your market research.
Are house prices rising or stable in the area in which the repossessed property is located and are they likely to remain so for the foreseeable future? This is of particular importance in the current climate of market uncertainty, where prices are now falling in many parts of the UK. Although you should be able to obtain a repossessed property at below market price, if house prices fall rapidly in the area, you could be left with negative equity on the property and you may struggle to sell the property in the future. A comprehensive price analysis should help you to understand how the property market is performing in the area.
Find out more on how to analyse the property market in Catherine’s book, How to Buy a Repossessed Property Bargain.
4. Avoid unsuitable properties and locations.
There could be many reasons why a particular repossession is not suitable. This could include the following:
5. Check all building work and obtain an appropriate survey.
Some structural reports may alert you to problems that are too expensive and/or extremely difficult to rectify. In some cases, previous owners, who have struggled financially, may have been tempted to make alterations to their property themselves or use ‘cowboys’ who have not applied for the relevant permissions and who have undertaken shoddy and dangerous work. Although you will not be able to get back the money you have spent on the survey, it may be prudent, in this situation, to walk away from the repossession and find another repossessed property with fewer problems.
6. Make sure that you can move quickly on the sale.
When you are buying a repossessed property, many lenders who are selling will insist that there is a simultaneous exchange of contracts and completion. (Exchange of contracts occurs when identical copies of the contracts are signed and exchanged by the seller and buyer. This is the moment when the transaction becomes legally binding. Completion is the date by which you make full payment and the property is now yours.) Indeed, you may find that your solicitor, or conveyancer, also aims for this simultaneous exchange and completion as it avoids any problems regarding damage to the property between exchange and completion, it reduces the risk of the buyer pulling out, and it enables the lender to recoup its money quicker than it would normally do so.
Find out more about house buying, house selling and conveyancing.
7. Obtain relevant safety checks.
Some repossessed houses have been left in such a poor state that they are unsafe. Although the lender should make sure that the repossessed property is in a safe condition when it is put on the market, my research has shown that this is not always the case. You may find it prudent to obtain your own safety checks, for peace of mind. All safety checks and maintenance work must be carried by an installer who is registered with the appropriate government-approved body.
Published on: September 30, 2008