Our Guide To Buying A Repossessed House In The UK

Our Guide To Buying A Repossessed House In The UK
For anyone interested in snapping up a property bargain, then this guide to buying a repossessed house in the UK could prove profitable.

Firstly, you’ll need to put aside the emotive image that comes with the words ‘repossessed property’ and you also need to know where you should be looking for them and how to go about buying a repossessed home.

That’s because once the lender takes ownership of the house, they will then look to quickly sell it on, so they can recoup the money they are owed.

And one of the big attractions is that the lender will usually price the repossessed home at below the market rate because they want to shift it quickly.

Also, because the property will be offered for sale almost immediately, it’s unlikely that any work will have been carried out to the home.

However, if you would like to save between 10% and up to 30% on similar properties in the area, then buying a repossessed home might be for you.

Repossessed property meaning

If you’re not entirely sure what a repossessed house is, it’s a property that has been seized by a mortgage lender – or another type of finance firm – after the previous homeowner has defaulted on their mortgage or other financial arrangements.

This means they stopped paying their mortgage for a range of reasons – including losing their job or getting divorced.

Buying a repossessed house in the UK

Be careful when buying a repossessed house.

One of the most popular routes for buying a repossessed house in the UK is to keep an eye on property auctions.

There are some popular sites that will list repossessed properties for sale to potential investors, though you’ll need to appreciate that buying property in an auction needs care and consideration. It can also be an intimidating process – particularly if a bidding war begins!

There are also specialist websites catering for those wanting to buy a repossessed home in the UK, plus some estate agents may sell a repossessed property but they may not actually advertise them so you will need to contact them to ask if they have anything available.

You’ll also need to consider that while you are buying a home at a discount, it’s likely that the previous owner has removed some or even all of the property’s fittings and fixtures.

Among these may be the bathroom suite, as well as radiators, fireplaces, light fittings and integrated white goods.

All of these will need to be repaired or replaced so the 30% discount will then be quickly eroded if you have to spend lots of money to make the property habitable again.

Buying a repossessed house from the bank

While the main route for selling repossessed properties is through auction houses, a bank or other lending institution may opt to use an estate agent.

One reason for this is that they may get a higher sale price because there’s an obligation to get the best price possible.

However, should the house not sell for the expected price, or if the mortgage lender really does want to achieve a quick sale to clear the debt, then the lender will move the property from the agent and switch instead to selling it at auction.

Is buying a repossessed house a good idea?

Analyse carefully all details when buying a repossessed house.

The question of whether buying a repossessed house is a good idea is certainly worth careful consideration.

That’s because the house may need redecorating but there are also other issues you’ll need to think about, including:

  • The utilities are likely to have been disconnected so you’ll need to negotiate to have them reconnected. (Just as a heads up: You may find that the utility providers will reconnect for free but others, including the telephone provider, may well charge a fee);
  • The credit rating for the address is likely to be very poor and you will need to monitor it.

However, it’s also important to appreciate that when you buy a repossessed house you are not responsible for another person’s debt, regardless of who is trying to collect any monies owed.

This applies to the utilities as well as the mortgage lender.

Essentially, do not open letters addressed to the previous occupant, particularly if they are debt collection letters and you should contact the sender to explain the situation.

Also, you need to be wary when bailiffs visit and explain to them what has happened, though you may need to prove your identity if they insist on entering your home.

The other big downside for the credit rating on the address is that occasionally you may find that your details get mixed up with the previous owner’s. This is more difficult to rectify so you really should keep a close eye on your credit rating.

How does buying a repossessed house work?

The process is very similar to buying a house from an estate agent.

The process for buying a repossessed house is just the same as when you buy a house through an estate agent or auction house – the only difference is that there are more issues to consider. However, that should be expected if you are enjoying a 30% discount on the home’s market value.

You will still need to have a cheap mortgage in place, have a survey carried out and you will be buying the property from the lender – not the previous owner.

Are repossessed houses cheaper?

As mentioned earlier, property experts say that you could save up to 30% when buying a repossessed house. So yes, they are cheaper.

However, there are two issues that you need to appreciate:

  • You may need to invest to give the property some TLC and bring it up to a habitable standard;
  • You also need to be aware that with a repossessed property, it will still be on the market in England, Wales and Northern Ireland until contracts are exchanged so you run the very real risk of being gazumped. This will not be the situation in Scotland since offers are binding on both parties.

In reality, buying a repossessed home at auction should be painless because both the buyer and seller will face penalties from the auction house if either party pulls out of the sale.

The other issue when buying at a property auction is that you will need to put 10% down as a deposit – with the balance being paid within 28 days.

How long does it take to buy a repossessed house?

It might be much faster to buy a repossessed house as there is no chain...

Since there is no chain, the length of time it takes to buy a repossessed house is less complicated.

If you have a mortgage, you will still need to have a survey carried out and have an experienced conveyancing solicitor deal with the legal paperwork.

As a cash buyer, you’ll still need the survey and a solicitor to work on your behalf.

So, when buying at auction the property could be yours in less than 28 days.

Finally, this is our vital guide to ensuring your repossessed home purchase is the success you want it to be:

  • Decide how much you can afford and have a mortgage agreed in principle;
  • Monitor auction houses and websites for repossession bargains;
  • Be aware that if you buy at auction, you have to meet the auctioneer’s 28-day deadline;
  • Appreciate that banks are quickly selling old and also new build homes;
  • Ensure that there is a real discount compared to similar houses in the area;
  • Calculate how much it will cost to repair, if necessary;
  • Visit the repossessed property at least once, preferably with a surveyor or solicitor;
  • Always, always have a full structural survey carried out of the repossessed property;
  • Remember that in England and Wales (and Northern Ireland) the lender does not have to take the house off the market until contracts are exchanged;
  • Have the utilities reconnected;
  • Regularly check your credit rating after you move in;
  • Watch out for the debt collection letters and let the sender know what’s happening.

Repossessed homes that are being auctioned

Be careful with the tenant situation when considering a repossessed house.

It’s also worth bearing in mind that among the repossessed homes that are being auctioned or sold off with agents will be those from buy to let landlords. They may have also run into trouble repaying a mortgage but there is another issue to consider.

That’s whether there are tenants in the property because you will need to clarify what their situation is before you even consider looking at the home and organising the finance to make a bid.

The tenants may not have moved out and this may cause a delay and the other issue is whether they decide to seek a legal right to remain in the property.

Usually, the situation is resolved between the previous owner and their mortgage lender before a property being repossessed is made available for sale. It’s always worth checking to ensure you are not making an expensive mistake.

Buying a repossessed house in the UK

If you want to buy a family home at a discount or whether you simply want to pursue a property investment opportunity, there’s no doubt that buying a repossessed house in the UK is an effective way of saving money on the usual property price that neighbours will have paid – but you need to do your research and tread very carefully, using the expertise of professionals such as conveyancing solicitors and a surveyor.

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