It’s a sad fact that during the recession over the past few years a large number of homeowners have faced having their property being repossessed as they struggle to keep up with their mortgage payments.
Meanwhile, many would-be homebuyers have not seen the huge drop in house prices they had hoped for, and as a result are still struggling to raise the funds to buy a home.
Although there have been introductions of other schemes such as Help to Buy to get the market moving, could repossessed properties be an opportunity for first-time buyers to get on the property ladder?
Repossessed property: should you buy one?
Houses are repossessed for a variety of reasons. It could be that a homeowner has fallen too far into arrears, and their circumstances are not turning around. It could be that a developer or buy-to-let landlord is facing bankruptcy.
Although repossessions are regrettable, you shouldn’t be worried that you’re cashing in on the previous residents’ misery.
By supplying the cash for the sale of their old home, you’re actually helping to repay the majority of their debt.
Why are repossessed homes discounted, and by how much?
Estate agents may discount a property when they’re looking for a quick sale. On top of this, repossessed homes are often not in the most desirable condition so are more likely to sell for less than similar properties.
Although the homes will always be valued realistically, estate agents are often willing to accept offers below market price in order to attract cash buyers who can move quickly, if you’re really lucky you could knock the price down by 10-30%, however this isn’t always the case. In some circumstances, repossessed properties are in demand, and you may need to pay the full market value in order to beat off the competition.
Before deciding what to offer on a property, your first challenge is to find one in the area you want to live.
Finding a repossessed property
Although buying a repossessed property could mean you find a home for less than the typical market value, it’s not as simple as snapping up a bargain in the January sales.
If you’re a first-time buyer, you’ll likely be up against developers and landlords with cash to invest. They often have relationships with estate agents that enable them be the first to hear about bargains.
Firstly, its a good idea to get on first-name terms with estate agents in the area you wish to buy. Try to visit agents during the week, where you’ve a reasonable chance of meeting the manager, not the casual Saturday staff. Remember to include those agents with a tie to a particular bank or building society, as these agencies will be the main outlet for those lender’s homes.
Never skip the small ads at back of property section in your local paper although these days you’re more likely to find information online. One such website is www.whitehotproperty.co.uk where you’ll find discounted or incentivised properties.
Another source is property auction houses, although take care – at auction you’re likely to be rubbing shoulders with some real professionals.
Found a bargain? How to make your move
If repossessed property is for you, be prepared to move quickly — and moving quickly means having the money ready.
There’s usually no chain involved; you may be able to buy and complete within a week. It may sound like a bit of a rush, but it’s wise to move this fast, otherwise you could be beaten to your bargain by a better offer.
Finding a mortgage
Nearly every first time buyer needs a mortgage. However to an agent, this could mean uncertainty and delays.
Start by speaking to a mortgage adviser, so you know just how much you can borrow and whether there are any obstacles that are likely to stand in your way.
If possible try and get a decision in principle (a DIP) from a mortgage lender, which will whet your estate agent’s appetite. A DIP is not quite as good as cash, but it’s the next best thing: it shows them that you’re serious, have done your homework and have access to funds.
Speak to an adviser
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Many repossessed homes enter the market in a distressed state. Repairs may not have been carried out, fixtures and fittings could have been removed, and you’ll need to know if extra investment will be required.
Although you’ll want to move quickly, you should never just buy a property on a whim, particularly if it is in a state of disrepair. Don’t skip getting a survey done which should reveal any hidden defects – for an older, delapidated property it may be worth spending the extra money to have a full structural survey done. These can be expensive, but could save you a lot of money and hard work in the long run.
You may also want a builder to view the property with you to give estimates for the work as you go.
Another vital check to make is if the property you’re looking at is currently a rental property, make sure there’s no tenant in situ as this may cause complications along the line.
One final property-viewing tip: never smile or seem too delighted at the prospect of your bargain. Agents are experts at spotting any telltale signs that could lead to you making a higher offer when pushed.
Repossession bargains: what do you think?
Do you have experience of buying a repossessed property? Are you a first time buyer with lots more questions up your sleeve? Or have you been on the other side of a repossession and want to tell your side of the story? Please leave your comments below.
The above post is intended to be informative but does not constitute advice – financial, legal or otherwise. Any opinions given are the author’s own and do not necessarily reflect the views of SO Media or the Mitchell Farrar Group.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.