Buy to Let landlords have long recognised the excellent opportunities for investment afforded by repossessed properties. For those who are new to investing or who have not gone down this route before, however, the purchasing process can seem daunting and there are a number of factors which many fail to consider. With mortgage companies unwilling to openly advertise properties as repossessed, how do you go about finding a suitable one and making the most of the often significantly discounted prices? In this blog post, we’ll highlight some of the key aspects to look out for and explain how to get a great deal on a property, whether you’re just making your first foray into the market or are looking to add to your existing portfolio.
There are a number of things to look out for when purchasing a property which may hint that it is a repossession. Even before you view the property in person, you may be able to tell from the language used to describe it, either on the estate agent’s website, or on sites such as Rightmove and Zoopla. As the mortgage company wants to get the best possible price, it’s not uncommon for them to invite further bids even when a good offer has been made. Whilst varying slightly by agent the language used is fairly similar, referencing the offer that’s been made and calling for other interested parties to submit their own offers.
When it comes to actually visiting the property, the signs are usually fairly obvious. When you arrive, look for boarded up windows and doors, or windows with metal grates over them. On the front door, there may be a sign notifying the previous tenants that they must collect their belongings; this is known as a Chattel Notice. Inside the property, you may see signs on toilets and taps, or even coverings to stop you using them. That’s because the systems will most likely have been drained. You may also come across the previous inhabitant’s personal belongings. If this is the case, looking around can be a somewhat eerie experience.
Motivated / Distress Sellers
Mortgage companies and banks are often unwilling to admit that they are selling a repossession, believing that the stigma around them will lead to a lower final price. These organisations don’t themselves sell the properties; they’ll instead use one of three methods. The most common is enlisting the services of an estate agent, especially for repossessions which at one point were owner occupied,
Properties which were instead formerly owned by Buy to Let landlords will usually be sold via LPA (Local Property Administrator) Receivers. Should a property fail to be sold through these means, the mortgage company may then opt to sell through an auction house, where some of the best bargains can be found.
If you decide to make an offer on a repossessed property via an estate agent’s listing on a property site or in a local newspaper listing, there are a few things to remember. Making an offer is no guarantee that you’ll get the property, as it is a legal obligation for estate agents to welcome extra offers right up until the point of contract exchange, a period which is limited to 28 days. The mortgage company or bank who uses their services will have only one aim; sell for the highest price possible. There is every possibility, then, that you’ll be gazumped on the 27th day.
Consider also that you will be expected to cover surveying costs, which you’ll have to pay whether you end up making the highest offer or not. Don’t be tempted to not hire a conveyancer; not getting a professional’s opinion on the state of the property is hugely risky. If you purchase a property that has numerous defects and issues which were not assessed prior to purchase, you could be left with a major drain on your wallet. When you visit the property yourself, you should also double check everything, ensuring the description is accurate and that any changes you’d need to make are feasible and affordable. It may be worthwhile having a second viewing to pick on some of the finer details you might have missed the first time. When it comes to the legal side of things, use a solicitor who has experience of repossessions and who can get the process completed quickly. That way you’ll reduce the chance of gazumping and ensure the property is yours within the 28 day limit. If you don’t secure a purchase within this time frame, the property may be relisted, even if there are no better offers.
Estate Agents vs Auction
If you’re new to investing, it’s probably safest to purchase through an estate agent. However, if you opt to use an auction, the process can be daunting and there may well be wealthier cash investors there to outbid you. Remember to look through the auction catalogue beforehand and visit the properties which interest you. As before, you’ll need to pay a conveyancer. Sticking to a budget is even more important when purchasing via auction. It can be incredibly easy to get carried away in the heat of the moment. If you make the highest offer it can be difficult to go back if you’ve changed your mind as you have to complete within 28 days of exchange. At the very least, you will not receive the 10% deposit back which you will have had to provide.
This is just some of the information you need to be aware of if you’re considering purchasing a repossessed property. If you have any questions, please feel free to contact the team at Mistoria. We have offices in Liverpool, Salford and Bolton, as well as sister branches Pick My Pad and Student Haus
We are members of ARLA and NAEA Propertymark which means we meet higher industry standards than the law demands. Our experts undertake regular training to ensure they are up to date with best practice and complex legislative changes so they can offer you the best advice. We are also backed by a Client Money Protection scheme which guarantees your money is protected.