Properties are usually repossessed when an owner has defaulted on their mortgage and fallen into arrears, or the mortgage lender, who – as a result - applies to the courts for the issuing of a repossession order. This is usually followed by an eviction order. That’s how most repossession houses enter the real estate market as houses for sale.
The sale of the property goes towards paying off the previous owner’s debts, and the lender is legally obliged to get the best possible price. In order to recoup their investment as quickly as possible, lenders will often price the property below market value to encourage a sale.
The advantage of selling repossessed homes at auction is that lenders can usually achieve a quick sale at a guaranteed minimum price. This is because the contract of sale at auction must be completed within 20 working days of the auction date.
Homebuyers should be aware that the process of purchasing property at auction is quite different from buying a home through an estate agent. Before you consider buying, try to attend at least a few auctions to get an idea of what the process involves. The biggest and most important difference is that buying at auction is legally binding, so you must do your homework about the property before the sale.
Types of Property Repossessions
Bank Repossessed Houses
Repossession properties become bank or government property as a result of the above. Bank repossessed houses are resold in order to recoup losses. And as mortgage companies and banks want to recover funds as quickly as they can, they often sell way below market price at local or national property auctions.
Private Property Sales
With people still facing financial difficulty, coupled with the slightly unstable state of the UK economy, the number of repossessed homes sold at property auctions has increased. Some repossession houses were owned by homeowners who fell behind on mortgage payments, yet many others are new-builds and flats from developers as well as buy-to-letters who have fallen on hard times.
If a bank can’t sell a property through an estate agent, often it'll go to auction for a quick sale. By registering with UK Auction List, you will have access to our Auctioneer Directory so you can contact as many auction houses as you want and ask for them to contact you as and when they receive repossession houses and other properties that may suit your requirements.
Repossessed House Auctions
The obvious attraction in repossessed houses and flats is the low reserve, reflected in the guide price. It’s low because although the lender has a duty to sell at the best price, time is money, and they will want to recoup their funds as quickly as possible. Which means that you can buy cheap houses and other properties at a UK property auction. It’s possible to pick up repossessed or distressed sale properties with up to 30% off the market price at residential auctions. For those willing to put the work in, both on research and repairs, these can represent some of the best buys on the market.
Find a Property
House in Repossession
Due to the fact that lenders will be looking to sell a property quickly in order to recover losses, the best place for them to sell is at a property auction. These ensure a repossession house can be sold quickly as the entire process from bidding to exchange can be completed within a month. The other advantage for the sellers is that there are no refunds, so you cannot change your mind once the hammer is down.
The risks of buying at auction are similar to those of buying through estate agents. It is important to make sure that you have undertaken initial research, such as:
Instructing your solicitor to check the property’s title deeds, investigate local searches and dig out any special conditions of sale.
Viewing the property yourself before placing a bid to make sure there are no defects.
For peace of mind, make enquiries on what caused a property to be repossessed.
Take time to do your research on the repossessed property of interest. The important thing to remember is that once the auction is over the contract is binding and you are not able to go back to the seller afterwards should any problem arise. There are no guarantees on the purchase and you must buy it as it is.
Also reemember that 'Repossession' doesn’t always mean 'bargain'. It's essential to view other properties and research the area thoroughly, just as you would with any other new house. A few quick tips for you:
Carefully consider its transport links, employment levels in the areas and whether the schools are any good.
Confirm that the previous tenants have handed over the keys and the property is unoccupied. If the repossessed property was previously owned by a buy-to-let landlord, it is possible that the property may be resold with a tenant in place.
A small fly in the ointment is that when you move in, some services, such as gas and electricity, may have been cut off. Most energy companies will switch you back on for free, but phone lines usually have a charge.
Check your credit rating a few months after you’ve moved in, just to make sure your finances don’t get incorrectly mixed up with the previous owners'.
Keep an eye out for red debt collection letters addressed to the previous owners. Give the companies a call (if it's clear who has sent it) and let them know the previous owners have moved, in case they send bailiffs round.
The downside is these properties often need a refurb. At best, they might feel a bit unlived-in. At worst, the previous owner could have stripped out all fixtures and fittings before leaving.
Buy a House
Buying Repossessed Houses
There are numerous reasons for buying at property repossession auctions. All sellers at auction are motivated to sell and want to sell quickly. Repossessed residential properties will often need renovation work which means there is an opportunity for the buyer to make some money and also increase the value of their property. Also once the hammer falls at a property auction there is no chance of going back on a deal so buying repossessed houses at auction gives a certainty of purchase.
Find Repossessed Houses
There are several things to look out for when identifying a repossessed home at an auction. Check the auctioneer’s catalogue. In some cases it will say “by order of the mortgagees”, in other cases it may say “by order of the receiver”. However, not all properties will have this information in the catalogue. If you suspect the property is a repossessed home, the easiest thing to do is phone up the seller’s solicitor and ask them who is the seller.
Property repossessions should be given a positive perspective as a source of unbeatable bargains for potential property investors and buyers, as well as those already in the business. If you are looking into purchasing a repossessed home at auction then you can search through our UK database of bargain homes and cheap properties to see what is available, and contact the auctioneers for further information.