Buying a repossession property – key considerations
With repossession properties being sold on average at a third less than their market value, and in some instances even less, you are right to think that they offer excellent opportunities to investors, developers, first time buyers and a wide range of purchasers. However, they are not without a number of risks and there are a number of key considerations to bear in mind when purchasing a repossession property.
Gazumping – The mortgage company is obliged to obtain the best price for the property and therefore they will most likely insist on publishing a “notice of offer” in the local press, giving details of your offer made, and stating a time period during which they are still willing to accept higher offers. This leaves you open to the possibility of being gazumped and losing the property, or being forced to increase your offer in the face of rival bidders.
Unavailability of replies to enquiries – As the property is being sold by the mortgage company, who have no personal knowledge of the property they will therefore be unable to reply to any enquires raised. You should therefore carry out a thorough visit to the property to satisfy yourself in this regard and raise any queries you may have with either your solicitor or surveyor.
State of repair – The property may have been neglected by previous cash-strapped owners and may be in need of substantial repair. This could also affect mortgage valuations and in some instances, lenders may insist on retaining some of the mortgage advance until certain works are completed and they have been provided with confirmation, for example by way of a guarantee.
Essential services – Services such as gas, electricity and water may have been disconnected and therefore you could incur extra expense in having them reconnected, and encounter delays in arranging this.
Credit rating – If the previous owner had debts it is possible that creditors looking for them may contact you, as the new owner of the property, in person or by post. You may encounter difficulties in obtaining credit due to your address and it can be time consuming to have your information corrected.
Hire purchase items – If items are left at the property on completion (e.g. washing machine, sofa) then these could be the subject of hire purchase agreements and you should retain these for a reasonable period of time, even up to a year, as the lender may want to reclaim the items.
Move quickly – Exchange of contracts is generally requested within 28 days of making an offer, therefore you must have your finances in place and liaise closely with us to ensure that this deadline is achieved.
Repossession properties at below average prices can provide opportunities for some people to either get onto the property ladder or to benefit from an otherwise stagnant housing market. However one must be aware of the different issues involved, and you should liaise with our conveyancing team as soon as possible in the process.
If you propose to purchase a repossessed property either through an agent or at auction and wish to discuss matters further please contact anyone form our Property Team.