Buying a Repossessed Property
If you are looking for a cheap house you might be tempted by the possibility of buying a repossessed house or foreclosure. Repossessions are of course increasing at the moment so this could be the ideal time get yourself a bargain.
Buying a bargain does of course mean that somebody else is losing a packet. If you are of a religious bent you might argue that this is all God's will. If you are not religious then you might just see it all as Darwinian economics, the survival of the smartest (or the luckiest) which ensures that in future generations people will be smarter (or luckier).
Nevertheless, be all this as it may, there are possible pitfalls so take care, even if you are in the fortunate position of having some spare cash to buy a bargain home.
Repossessed or foreclosed properties can be a godsend for people looking for a house who can't afford one.
The number of repossessed properties is still on the rise according to the UK's Council of Mortgage Lenders. There were 12,800 repossessions in the first quarter of 2009, compared to 10,400 in the last quarter of 2008, and 8,500 in the first quarter of 2008.
So where do you have to go to get your hands on one ? And how do you do it ?
The first thing to realize that your desirable repossessed residence is owned by a bank not by a flesh and blood person. The person was booted out by the bank, so that they could sell the house at a loss, rather than let the person live in it. But that's bankers for you - totally useless in my opinion.
But I digress. The bank wants to sell the property and get it off its hands as it does not want to be bothered with maintenance or renting houses etc..
Before you start you will need to get an 'agreement in principle' from a mortgage lender, so that you know how much they are willing to lend you.
You should obtain a certificate that says how much you can borrow, which should convince the seller that you have the necessary ready cash to buy the property. This won't cost you more than a credit check.
Now you have to find the repossessed property of your dreams. They are advertised by smaller estate agents and websites such as Globrix and Rightmove, but they probably won't have REPOSSESSED plastered all over them. The ads. generally look cheaper however, with no photos and economical descriptions. You could also try asking an estate agent about repossessed or distress sales.
The next place to look is property auctions. Bear in mind, however, that property auctions attract property investors who know what they are doing and generally have access to a fair amount of cash. So make sure you do your homework first.
If you are think buying at auction is for you, then you need to check the catalogue which is produced weeks before the auction date and view the property you are interested in before bidding on it.
If you are buying from an estate agent then the process is not straightforward. First, after an offer has accepted on a repossessed house, the estate agent is legally bound to publish a 'Notice of offer' in the press. Other prospective buyers are thus invited to make a bid over a a period of seven days. This is a double-edged sword as, clearly if you see such a notice of offer on a house then you can make a bid yourself.
This process means that you are potentially in an auction, and even after the seven days the bank can accept a better offer if one comes along. It is important to realize that until contracts are exchanged, you do not have a legal right to actually buy the property. The bank of course is only interested in getting the best price for its property.
You will have 28 days to complete, but you could find yourself paying for a survey etc... only to be outbid on day 27.
Auction
Buying at auction is different from buying through an estate agent. Once the auction ends you are deemed to have exchanged contracts, neither party can change its mind. The transaction must be completed within 28 days.
This is more straightforward but you have to pay a 10% deposit on the day of the auction, which you risk losing if you do not complete the contract. So in some ways you are better getting any survey and legal work done before the auction - despite the fact that you don't know if you will win the auction or not.
The Property
Repossessed properties are generally in need of a fair amount of work so you need to factor this into your costs.
It is important to chase people up too, as the transaction needs to be completed in 28 days. You are recommended to chase both solicitors and lenders twice a week at least.
By:Adva Jones
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