There are lots of bargains out there, but how do you find a repossession
bargain?
Housing experts predict that the numbers of repossessed property in the UK will rise
dramatically as the ‘credit crunch’ begins to bite. But although this is
extremely unfortunate for people who have to leave their homes, it does provide
a great opportunity for others to get a repossessed property at below market
value.
Consider the price that you can realistically pay for a repossessed property
and then add an amount to this figure that you would be able to negotiate off
the asking price. This will enable you to obtain details of repossessed houses
that are out of your price range, but may be affordable once you have
negotiated on the price. The amount that you can add on to the price could be
ten to 20 per cent of the asking price. But don’t be tempted to ask the selling
agent to send you details of repossessed houses in all price ranges, or those
that are far too expensive, because they will think that you are less serious
about making a purchase.
2. Find out when repossession houses are advertised in the local newspaper
and look for ‘notice of offer’ adverts.
These indicate that an offer has been made on a repossessed property and
further bids are invited before the specified deadline. If your local newspaper
publishes an online version, you can view past and current ‘notices of offer’
adverts that appear in the paper. Some of these will indicate that a property
is repossession by using the terms ‘by order of the mortgagees in possession’
or ‘we are acting for the mortgagees’. Others will prefer not to indicate that
the property is repossession. Using online sources such as these is useful to
find out how the procedure works in your local paper and to see what houses have
been advertised in the past and for how much. As many of these adverts state
that higher offers can be made any time before the exchange of contracts, it
may be possible for you to find suitable repossessed property on which you can
still make an offer.
3. Do your market research.
Are house prices rising or stable in the area in which the repossessed property
is located and are they likely to remain so for the foreseeable future? This is
of particular importance in the current climate of market uncertainty, where
prices are now falling in many parts of the UK. Although you should be able to
obtain a repossessed property at below market price, if house prices fall
rapidly in the area, you could be left with negative equity on the property and
you may struggle to sell the property in the future. A comprehensive price
analysis should help you to understand how the property market is performing in
the area.
4. Avoid unsuitable properties and locations.
There could be many reasons why a particular repossession is not suitable. This
could include the following:
- Areas or properties that
have been flooded. You will find it difficult to obtain insurance for your
repossessed property, or you may have to pay a much higher premium.
- Areas of degeneration in
which property prices are falling and from which people are moving away.
Empty and boarded up repossessed houses attract vandals, squatters and
graffiti and they devalue the whole area. Rising crime levels are
off-putting for potential purchasers and tenants.
- A repossessed property that
has structural problems or damage that would be too expensive to rectify.
For example, some local authority housing constructed in the 1940s and
1950s were built of pre-cast reinforced concrete that are now suffering
from, what has been named, ‘concrete cancer’. This is a condition that
occurs in ageing concrete and is caused by the steel supports within the
concrete beginning to rust and react to temperature and water. The
concrete deteriorates over time, which eventually causes the structure of
the building to weaken, which can be expensive and time-consuming to
rectify.
5. Check all building work and obtain an appropriate survey.
Some structural reports may alert you to problems that are too expensive and/or
extremely difficult to rectify. In some cases, previous owners, who have
struggled financially, may have been tempted to make alterations to their
property themselves or use ‘cowboys’ who have not applied for the relevant
permissions and who have undertaken shoddy and dangerous work. Although you
will not be able to get back the money you have spent on the survey, it may be
prudent, in this situation, to walk away from the repossession and find another
repossessed property with fewer problems.
6. Make sure that you can move quickly on the sale.
When you are buying a repossessed property, many lenders who are selling will
insist that there is a simultaneous exchange of contracts and completion.
(Exchange of contracts occurs when identical copies of the contracts are signed
and exchanged by the seller and buyer. This is the moment when the transaction
becomes legally binding. Completion is the date by which you make full payment
and the property is now yours.) Indeed, you may find that your solicitor, or
conveyance, also aims for this simultaneous exchange and completion as it
avoids any problems regarding damage to the property between exchange and
completion, it reduces the risk of the buyer pulling out, and it enables the
lender to recoup its money quicker than it would normally do so.
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7. Obtain relevant safety checks.
Some repossessed houses have been left in such a poor state that they are
unsafe. Although the lender should make sure that the repossessed property is
in a safe condition when it is put on the market, my research has shown that
this is not always the case. You may find it prudent to obtain your own safety
checks, for peace of mind. All safety checks and maintenance work must be
carried by an installer who is registered with the appropriate
government-approved body.
Property up for auction has increased rapidly over the past
year and sellers’ lower expectations are helping buyers, but finding mortgage
finance is still vital.
The number of repossessed homes up for auction in London has more than doubled in the past
year, figures show today.
In the last three months of this year 455 repossessed properties have been
offered for auction, compared with 202 in the same period last year, which was
when the housing market was at its peak.
The data from auction experts EIG reflects the increasing number of
homeowners defaulting on mortgages.
And the growth in supply of distressed residential sales over the past year
is accelerating.
The number on offer in auction rooms soared more than 53% this quarter from
last quarter after waves of job cuts across London, many in the City.
Leading auctioneer Allsop, which will hold the last residential sale of the
year in the capital today, said credit crunched mortgage lenders are also increasingly
turning to auctions in a bid to claw back money on bad loans as fast as
possible.
Partner Gary Murphy said: ‘It’s indicative of how slowly estate agent sales
are moving and how much banks need cash that they would rather auction
properties.’
Nationally the percentage of repossessions going to auction has risen
steadily over the past two years from 13.9% at the start of last year to around
35 per cent now. At a busy Allsop auction at the Cumberland Hotel, near Marble
Arch, on Monday, more than 250 lots from around the country were on offer.
Several repossessed homes in London
went for bargain prices of up to 40% below the values currently given for
similar properties by estate agents.
A two-bed canal-side modern apartment in Islington sold for £260,000 when
local agents price similar homes at between £400,000 and £450,000. A
two-bedroom flat in a Victorian conversion in Tooting was bought for £165,000,
at least £80,000 below the estate agent value.
A Victorian townhouse in Kensington, split into five two-bedroom flats and
two studios, was snapped up for £2,030,000. But Mr Murphy said: ‘It’s a common
misconception that auctions sell properties cheap. They don’t, they sell them
at their true market value - what people are willing to pay. Estate agents are
still overpricing properties, auctions are realistic.’
Most buyers are professional investors but private individuals make up a
small and growing proportion of buyers.
‘It’s still difficult to get a mortgage so you need to have a lot of cash
and be able to move quickly,’ Mr Murphy said. But those in strong positions
realise auctions are a good place to buy a property at its true value.’
A handful of first-time buyers, some accompanied by their parents, attended
Monday’s auction.
Johanna Hooper and her boyfriend James Bull, both 25, wanted to get a feel
for how the process worked and an idea of prices.
Adam Taslaq, 24, bought a three-bedroom house in Colney Heath for £200,000
with the help of his father.
There were also people looking to relocate. Maggie Cahill, 60, moved to London from Yorkshire in
the summer to be closer to her family and where she grew up.
Ms Cahill, a retired banking customer services manager, is living with her
son in Hanworth, Middlesex, while she searches for a good-value property to buy
in Chiswick or Twickenham.
‘I know the area I want to live and I’m just waiting for the right lot to
come up. People are still refusing to drop their prices with estate agents so
that’s why I’m trying auctions. I made money on my property in Yorkshire because I bought in the last recession and sold
before the market really started dropping so I’ve got a good amount of cash. I
may even buy two properties - one to rent out.
‘The places I was interested in today were being sold by the police but they
were withdrawn at the last minute unfortunately,’ said Ms Cahill.
Johanna Hooper and boyfriend James Bull are first-time buyers trying to find
a bargain at auction. Trainee midwife Miss Hooper and City banker Mr Bull, both
25, want to buy a two-bedroom house in Battersea which they can do up while
they live with either of their parents in west London. They currently live in
Clapham.
‘I’m obsessed with getting a good deal,” said Miss Hooper. At the moment
we’re just looking but we’re aiming to buy by June when our rental lease
finishes. We’re hoping to buy something for £350,000. My dad’s acting as my
guarantor because I’m still a student and we’ve got a £50,000 deposit between
us.
‘At the moment we’re just looking but it seems auctions are the way forward.
We want to buy at least 15% below estate agent prices’ her father Bruce, 48,
said: ‘Every auction we come to there seems to be more people.’
As yet properties sold by private individuals keen on a quick sale are rare.
David Sandeman, managing director of EIG, said: ‘People can’t get their heads
around the fact they need to offer a low reserve price to attract bidders, but
that could change as people get more desperate to sell.’
A new auction house targeting vendors tired of being unable to sell through
estate agents is opening in Chiswick in the spring. West London Property
Auctions will hold its first sale on 9 March at Chiswick Auctions on Chiswick
High Road, with two others following in May and July.
All auctions will take place in the evening to cater for people working
during the day. Lee Osborne, director and co-founder, said: ‘People are getting
more realistic, they know property prices are coming down. Even though the
market’s in trouble people still have to sell and buy.’
First-time buyer Adam Taslaq bought a property at Colney Heath for £200,000
with the help of his father. Hobby-shop owner Mr Taslaq, 24, from Watford, said he had turned his back on high street
estate agents because he feels they are still overvaluing properties.
‘People won’t bring their prices down so it’s better to buy repossessions or
sell-offs at auction, where you get things at their real value. I’m lucky that
I don’t need to worry about getting a mortgage. My dad is helping me and we can
put down cash.
