Repossessed homes: should you buy one?

Repossessed homes: should you buy one?

 Although buying a repossessed property can mean you find a home for less than its market value, it’s not as simple as snapping up a bargain in the January sales.

Houses are repossessed for a variety of reasons. It could be that a homeowner has fallen too far into arrears, and their circumstances are not turning around. It could be that a developer or buy-to-let landlord is facing bankruptcy.

Although repossessions are regrettable, don’t be worried that you’re cashing in on the previous residents’ misery. If you supply the cash for the sale of their home, you’re helping repay the majority of their debt.

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Why are repossessed homes cheaper

Estate agents discount when they’re looking for a quick sale. On top of this, repossessed homes are often not in the most desirable condition.

To attract cash buys from buyers who can move quickly, estate agents are willing to accept offers below market price

Your first challenge is to find one in the area you want to live.

How to Find a repossessed property

 If you’re a first-time buyer, you’ll be up against developers and landlords with cash to invest. They often have relationships with estate agents that enable them be the first to hear about bargains.

First, get on first-name terms with estate agents in the area you wish to buy. Try to visit agents during the week, where you’ve a reasonable chance of meeting the manager, not the Saturday staff. Remember to include those agents with a tie to a particular bank or building society, as these agencies will be the main outlet for those lender’s homes.

Never skip the small ads at back of property section in your local paper. Another source is property auction houses, although take care: at auction you’ll be rubbing shoulders with some real professionals.

So you found a bargain? Now to make your move

 If repossessed property is for you, be prepared to move quickly — and moving quickly means having the money ready…

There’s usually no chain involved; you may be able to buy and complete within a week. It may sound like a bit of a rush, but it’s wise to move this fast, otherwise you could be beaten to your bargain by a better offer.

So if you need a mortgage:

 Nearly every first time buyer needs a mortgage. To an agent, this means uncertainty and delays.

Start by speaking to a mortgage adviser, so you know what you can borrow and whether there are any obstacles to getting the lending you need.

Then get a decision in principle (a DIP) from a mortgage lender, which will wet your estate agent’s appetite. A DIP is not quite as good as cash, but it’s the next best thing: it shows you’re serious, have done your homework and have access to funds.

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The property:

 Many repossessed homes enter the market in a distressed state. Repairs may not have been carried out, fixtures and fittings could have been removed, and you’ll need to know if extra investment will be required.

Although you’ll want to move quickly, don’t skip getting a survey done to reveal any hidden defects. Try and get a FRICS or MRICS Surveyor to visit the property with you.  You could use to find one. Each Surveyor has a Minimum Professional Indemnity of £1 million with an excess of no more than 1.25% . 

 You might also want a builder to view the property with you and give estimates as you go. 

Another vital check: if the property you’re looking at is a distressed buy-to-let, make sure there’s no tenant in situ.

One final property-viewing tip: never smile or seem too delighted at the prospect of your bargain. Agents are good at spotting any tell tale sign that could lead to you making a higher offer when pushed.

The choice is yours…

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