Top Five Mistakes Buying Repossessed Property

publication date: Jan 15, 2018

Buying repossessed properties - the main mistakes

Many people will tell you how easy it is to buy properties that are being repossessed or are already in the hands of the lender. Others will charge you hundreds to thousands of pounds to ‘teach you’ how to buy repossessed properties.

However, you really don’t need to spend a lot of money finding and buying repossessed properties, you just need to understand how to find them and then appreciate the effort that goes into securing a deal.

Follow Kate’s top five mistakes that people make when looking to buy repossessions:

1 - Paying a Third Party hundreds to thousands of pounds to teach or find repossessions for you.

This is just not required! Repossessions are either bought BEFORE the seller is repossessed so that the mortgage is paid off OR they are bought after the property is repossessed. There are THREE ways that you can find properties that are being repossessed:

Do it Yourself
To find properties that MIGHT be repossessed, typically you leaflet an area where that you want to purchase in with an offer of ‘cash for properties’ and/or you put adverts in the property section in local newspapers. Bear in mind though for every 1,000 leaflets, you might get only 10-100 enquiries and from this you are only likely to get one property deal.

Contact the Lender Direct
Call your local lender or bank and be clear that you have a really good credit rating and that you have the money to buy repossessed properties. Lenders are unlikely to take ‘unrealistic’ offers as they have a duty to secure the best price for the property on behalf of the person being repossessed and have to prove this if questioned.

Lenders will typically sell repossessed properties via estate agents in a ‘good market’ or via auctions when the market isn’t so good. Some will outsource the sale of repossessed properties to third party specialists such as LPA receivers, so be prepared to be ‘passed on’ to other companies and deal with them directly.

Interestingly, during the credit crunch of 2007-2010, the most repossessions via Auctions took place between October and December 2008. Since this time, partly due to new rules imposed on lenders and partly due to the drop in interest rates, repossessions have fallen BELOW that of their pre-credit crunch levels!

Visit local Auctions
Lenders will often sell through auctions as here they can justify that they tried to secure ‘the best price’ for the person being repossessed. However you need to check the condition of the property and be clear on what is a ‘bargain’ price as many amateurs will shop for property this way and end up over paying as they don’t do their research and get caught up ‘in the auction moment’!

To help, make sure you visit the auctions beforehand – with NO MONEY – then understand what properties are good value and what aren’t. You can also sign up to which is a good third party list of all up and coming lots at auction. 

2 - Not using a specialist legal company

Buying a property that is either in the process of being repossessed OR has already being repossessed requires specialist legal checks to be done. For example, have all the debts associated with the property been discharged? Are all debtors aware that the property has been sold to someone else?

Kate once had a situation whereby a property had been sold and a previous owner had run off to Portugal with a new car, debts to the council etc. She was constantly harassed by debt collectors at weekends and even had her garage broken into at one stage by an unscrupulous debt collector checking to see if the car was still there. Fortunately Kate’s large, one eyed Alsatian who often answered the door with her to the debt collectors soon put them off turning up!

3 - Thinking all repossessions are a bargain

The lender has a legal duty to the person being repossessed to get the best possible price they can for a property. Just because a property sourcing company says ‘repossessed property at up to 40% below market value’ doesn’t mean it is. They also often charge thousands of pounds to find properties which is probably better spent by visiting auctions and talking to lenders directly and then getting an independent valuation. Even their ‘RICS’ approved valuation should be questioned. Every property has a range of prices, which can vary by 10-20% so make sure you buy at a value that has been INDEPENDENTLY verified by someone YOU have chosen.

4 - Assuming the person threatened with repossession will accept ANY price

Just because someone is being repossessed doesn’t mean they are daft. It can happen to anyone through sickness or just plain bad luck. Ideally offer a fair price that is up to 20% below market value and STILL means the person walks away with some money in their pocket for  a deposit for a rental property or a smaller home.


5 - Not checking a repossession prior to exchange

People can do strange things when the chips are down and repossessed properties might not have been secured properly OR may have been completely trashed prior to exchange or up to completion. Ideally give an incentive ‘bonus’ say £500-£1,000 to have the property in good condition on completion day.

Kate once went to buy a property that was so badly trashed, a car engine and all its oil had been left in the lounge, causing thousands of pounds of damage. All light fittings, flooring, sinks etc, had been taken out. Despite all of this damage the lender was still looking to sell the property for more than the mortgage and refused to sell it at the price THEIR OWN SURVEYOR suggested! Offering to get a second opinion at their own cost!  Kate refused and pulled out of the deal.

All our information is brought to you by Kate Faulkner, author of Which? Property books and one of the UK's top property experts.
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