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Buying a repossessed property

Repossessed properties offer some of the best bargains on the housing market. Compared with average house prices in the UK, they offer savings of around 30 per cent of market value. However, buying a repossession can be far from an easy option and, if you're considering it, it pays to go in with your eyes wide open.

No time to lose
Unlike with a private sale, where a seller may spend considerable time and effort on their property in order to maximise its sale price, repossessions are priced low for a quick sale. The longer they stand empty, the more money the repossessor (typically a bank or other lending institution) stands to lose. However, with cheapness comes increased competition. It is highly unlikely you will be the only would-be buyer. It's also likely that if you hang around, someone else will snaffle the bargain. 

Fancy a new build?
Repossessions are often cast as doer-uppers, neglected by homeowners who fell on hard times. Indeed, many - if not most - of them are just this. Some, however, are new builds, abandoned by developers or buy-to-letters who have run out of money.

In line with the idea that many repossessions were previously owned by people who could not finance their upkeep, properties can be in a considerable state of disrepair. You may also find that the previous owners have stripped out all the fixtures and fittings before leaving. This can include not only white goods, but bathroom suites, fireplaces, tiles, light fittings and carpets. Although near-derelict or stripped-out properties carry the biggest discounts, they also require the largest cash injections by their purchasers. As with any property purchase, it is a mistake to buy something that you cannot afford to bring up to - and keep at - habitable standards. It is also worth noting that properties in the worst states of repair, particularly those without functioning kitchens or bathrooms, are unlikely to be mortgageable.

Get a survey
Before proceeding with a repossession purchase, you need to gather as much information about the property as possible. In the absence of a potentially helpful and knowledgeable current owner, getting a survey is more important than ever. Moreover, a repossession is more likely than the average property to be suffering from structural defects. As well as appointing a RICS surveyor, it can be helpful to take a builder and perhaps also an architect to view the property. This will help you come up with a realistic estimate for the cost of repairs before you put in an offer or go to auction.

Is the property a good buy?
A repossession may be a bargain in financial terms, but you need to ask yourself if it's somewhere you'd really want to live. Alternatively, if it's to be a buy-to-let, is there a good pool of potential tenants for it? Factors to consider include school catchment areas, public transport links, local crime levels and nearby employment opportunities. It's worth remembering that properties can sometimes be cheap for a number of reasons. Delving further into house prices in the UK and the local area can help you assess whether you are pursuing a genuine bargain or not.

Watch out for gazumping
Financial institutions selling a repossessed property want to achieve the highest price possible. For this reason, they rarely remove a property from the market after accepting an offer on it. This means you can expect the competition (if any) to continue snapping at your heels until exchange. The risk of losing your survey and legal fees is consequently higher than with the average transaction. As a result, it makes sense to push through to completion as quickly as possible. Buyers in Scotland, however, face a less pressurised situation, thanks to the country's tighter rules on property sales.

If the previous owner was a buy-to-let landlord, the property may be being sold with a tenant in situ. This can be a tricky situation and may affect your ability to get a mortgage. It is always worth seeking specific legal advice if you suspect or know that a tenant is living at the property.

Properties previously owned by someone who was in financial difficulties may be visited by bailiffs even after a sale has gone through. Make sure you keep evidence of your ownership of the property to hand. If you receive debt collection letters, ring the company that sent them and explain the new situation. On the same note, it's worth keeping an eye on your credit score to make sure it doesn't get mixed up with that of the previous owner. This is unlikely, but not unheard of.

Buying through an estate agent
While an estate agent may advertise a repossession sale in the same way as any other sale, it will not always do so. It is worth calling estate agents in your target area to see if they have any repossession sales not listed on their website or in their agency window.

Buying at auction
Banks and lending institutions may look to offload repossessed properties through auction houses, rather than via an estate agent. This speeds up the process even more and gives you, as the potential buyer, less time to research a purchase. However, you must not neglect that research. Auction listings are usually released around four weeks before the auction. This gives the organised buyer sufficient time to arrange a viewing and a survey, and to get their finances in line. This last is a must, because a successful bid at auction commits you to pay a 10 per cent deposit on the spot and then gives you between 14 days and six weeks to complete the sale and pay the balance. Finally, remember that auctions can be emotionally-charged events. If you haven't been to one before, it's sensible to do so before attempting to bid at one. It's also essential to go in knowing your absolute maximum and confident that you will not be swayed to go beyond it.

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Source: Nethouseprices 02/07/2018

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