In the past you may have heard people talk about buying a repossessed property which has made you think this is something you really need to do. The most common statement you may of heard is, “we bought a house really cheap, it was a repossessed property.” In the past this was very much the case, however these days there is an importance on whoever is acting for the lender to obtain the best possible price for the property.
There are a couple of ways in which you can purchase a repossessed home, for example at auction or through an estate agent. If you are considering buying a repossessed house at auction, I highly recommend that you carry out your own due dilligence prior to attending any auction as failure to do this could result in losing thousands of pounds. In this article we will look at some of the pros and cons that lay within the process of buying a repossessed property, through an estate agent.
As with anything in life there is a process to everything we do and buying a repossessed property through an estate agent is no different.
Process –
Put in offer
Offer accepted
Goes to Publc notice in local media
Opportunity for another buyer to put forward a better offer
Negotiaitions / Bidding war
Timescale – must complete within 28 days
Successful purchase and completion of property
Let’s take a look at each step of the process begining with, putting forward your offer. This will be like any other property buying stage whereas you negotiate and agree a price with the estate agent. It will probably be at this point you find out it is a repossessed property as the estate agent will inform you that they are dealing with a corporate client (a company that handles the sale of the house on behalf of the mortgage lender who repossessed the property initially).
Once your offer has been accepted it will go to public notice. An advert will be placed in a local newspaper notifying the public that your offer (it will state the amount in pounds) has been accepted, and that if anyone wishing to put an offer forward, the estate agent’s contact details of who is handling the transaction. It is at this stage you may very well enter in to a bidding war.
Within a short period of time it is common that the original buyer is contacted by the estate agent to notify them that a better offer has now been accepted on the property, and if that you (the original buyer) may wish to consider increasing your own offer. It is at this stage of a repossessed property buying transaction that I feel the house buyer is treated extremely unfairly. If you are to ask the estate agent what the better offer is, they will tell you that they can not disclose this information, therefore putting you in an awkward position of enhancing your offer. When you are bidding on a repossesseed property it is not always just the purchase price that is deemed a better offer. Timescale and the position that the other party may be in to complete on the sale of the property i.e. they do not need a mortgage, or they have already had a valuation on the property and may already have instruted a solicitor may be deemed as a “better offer”. A majority of the time you will find that it is the purchase price that has increased therefore you will need to increase your own initial offer. This is where some of the due dilligence you need to do at outset comes in to play, you will need to know what is the maximum price you are prepared to pay for the house. You may also find that the estate agent will come back to you on several occassions with the news you have been out bid therefore you may need to increase your offer on a number of occassions.
Whilst the bidding war is in progress you normally would have initiated the whole house buying process to comply with the 28 day timescale to completion that is required. Therefore one of the major implications of being out bid on a repossessed property is that you may have already incured costs i.e. Valuation fee, solicitors costs. As a result of being unsuccessful in buying the house you could find yourself out of pocket in the way of several hundreds of pounds.
Alternatively once you are successful in purchasing the house you will need to make sure that your solicitor gets all legalities completed in a timely manner.
I feel that there are still deals to be done when buying a repossessed property however carrying out a good amount of due dilligence intially will serve you well. Although you have seen that purchasing a repossessed property will come with it’s fair share of hassle, it may very well be worth it in the long run.