There’s no doubt repossessed properties can make great investments, but if you’re seriously looking to buy repossessed houses in the UK then you must consider these 3 pitfalls before you place any offers…
Pitfall 1 – Hidden Damages….
Repossessions Can Be Money Pits
Let’s consider for a moment why properties are repossessed. As it’s not like the vendor wanted it to happen….
Repossessions can be a real financial burden for a vendor, not just at the time with arrears that might have built up, but because in the UK, mortgagors are still on the hook for the total mortgage debt and any short fall from the sale, so the mortgage company will certainly come knocking to claim back the difference if they can.
But many vendors don’t realise this or choose to ignore it, and it’s a very emotional experience. So when the time comes and the bailiffs arrive at the door, often vendors haven’t left the place very welcoming.
As a real life example – When I was working for an estate agent in 2006 (in my first week at work) I attended a repossession eviction with my manager as the mortgage company had asked us to start marketing the property right away for sale
When we got there the bailiffs and lock smith had already arrived, but the owner’s hadn’t left. They had locked themselves in the house, and eventually had to be removed by the police as they were threatening the lock smith.
Talk about a baptism of fire for your new job!
When the situation had calmed down and we were able to get access to the house, we could finally see the state it had been left it.
It was a weird one, because the vendors had started to do renovations to the house but then had suddenly stopped halfway through (i’m guessing they had ran out of money hence the repossession).
The kitchen was brand new, nice worktops and they had even started a two storey extension at the side of the house.
But out of spite before the repossession, the vendors had decided to trash the place. They had scrapped all of the new kitchen surfaces, pulled up copper piping and stained all the carpets.
Now this was mainly superficial damage, but as the weeks went on and we had more and more viewings at the property, we noticed other damages and issues with the property where the vendor had clearly gone to town… broken window handles, blocked toilets and missing floorboards to name a few.
One thing I always took away from this, is don’t take things for granted as how you see them on first sight. When buying repossessed houses for sale uk, Second viewings are always advised as you usually pick up things you missed first time round.
there are hidden damages that you may not have been aware, problems caused by upset owners, that are only prevalent due to the unfortunate situations of repossessed homes.
Pitfall 2 – Gazumping
Repossessed Houses Don’t Always Sell To The First Buyer
Unfortunately as mortgage lenders need to be seen to get the highest possible price for repossessions, this often leads to bidding wars and gazumping. unlike that seen on other properties, due to the lack of moral compass most mortgage lenders have.
Most residential repossessed houses for sale uk, are sold by banks via Estate Agents, and you’ll notice that they rarely honour original bids, it’s all about getting the highest price
So you need to be careful when buying repossessions and be aware that your accepted offer doesn’t always mean a done deal.
Often higher offers can be placed at any point before exchange of contracts and this can leave you seriously up the creek if you have already paid out for surveys, searches and legal fees but haven’t yet exchanged and another bidder decides to put their hat in the ring.
Gazumping is rife with repossessions in the UK, and this leads on to pitfall 3
Get all your systems ready to go, and make sure you choose a solicitor that has dealt with repossessions before and understands the process. The quicker you can get the deal through and can exchange, the less risk of another buyer being able to swoop on in to your deal
Pitfall 3 – Speed of Sale Required
Most mortgage companies will only accept offers on repossessions with terms attached, and this is often that the sale must complete within 28 days.
So not only are you up against the wall with the risk of other investors gazumping your offer, but you will also need to get your skates on with the purchase.
Otherwise even without another buyer, you could see the property back on the market and your offer being declined if you can’t get the sale through quick enough.
Being in a position with funds available to invest is a must for repossessions. Either be a cash buyer or have your mortgage pre-agreed so you are ready to roll, otherwise you may find it difficult to get your offer taken seriously.
What Happens Next?
Buying repossessed houses in the UK offers lots of opportunities for building your property portfolio. so don’t let me put you off with these words of caution.
If you know what to look out for then they can make great deals
Or if you would like help in building a property portfolio and buying repossessions in the UK, then take a look here at how I can help save you time and make you more money .