David Barr
March 25th, 2021
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HOW TO FIND REPOSSESSED HOUSES FOR SALE
If you’re keen to get into property investment or just grab a deal, then you might consider looking at repossessed houses, as they can offer a great opportunity to grab a bargain. In this article, we’ll explore the reason investors are interested in buying a repo home, what banks do with them, whether it’s a good idea, and where you can find them.
It’s actually pretty simple, they tend to be far cheaper than properties that are on the open market. Although when a bank repossesses a home and looks to sell it they are legally obliged to act in the best interest of the previous owner, the speed of the sale is of the essence.
As a result of the bank needing to offload the property, they often sell it significantly below market value. This is obviously attractive to investors, but there are certain risks that come with buying a repossessed property, so it’s not as straight forward as it might seem.
If the owner of a property with a mortgage fails to make payment the bank may repossess the property, they do this in order to recoup their losses. They are legally obliged to attempt to get the best price possible, however for the bank time is of the essence. The longer they hold the property the more they are losing, two-fold, they have a significant amount of money tied up in the property that they could be earning interest on, and they also have to keep up with some of the fees such as council tax and ground rent.
As we’ve mentioned the obvious benefit of buying a repossessed home is that you can often get a great below market value deal – usually anywhere up to 30% discount! Of course, it’s a good idea if you are fully aware of the risks and have done your research before jumping in.
Buying a repossessed house isn’t quite the same as a typical open market purchase, there are a few things that you should be aware of before jumping in, here is a rundown:
Poor property condition
You’ve got to remember that someone who is having their house repossessed is going to be distressed, and they can likely see a repossession coming months in advance. This can result in the old owner of the property not giving it the level of care or attention that someone who is selling their house would, also put yourself in that position, if something goes wrong in the property, would you fix it, or be able to afford to?
For that reason, a lot of repossessed properties can be in relatively poor condition, and it’s not unusual to find a large amount of damage and missing fixtures and fittings, which you might need to adjust your budget for.
Is it a Buy To Let repossession?
A percentage of repossessed properties are owned by a landlord which means that they are classified as Buy To Let – and what that can sometimes mean is that there are sitting tenants still in the property. If this is the case, you’ll need to clarify what has been agreed with the tenants prior to purchasing as properties with tenants can cause delays when purchasing.
You’re expected to complete pretty quickly (28 days)
This shouldn’t be an issue when you’re a cash buyer, however when buying a repossessed property it’s typically done through auction, so you will expect to exchange and complete within 28 days of having your offer accepted – that can make it pretty tricky if you’re planning on getting a mortgage, so it’s good to have everything in place and agreed before bidding.
Big gazumping potential
As we discussed banks are legally obliged to get the best deal possible for the previous owner, so often they will keep the property on the market for the duration between you agreeing on a purchase and completion just in case anybody comes in with a better offer.
This opens you up for a much higher chance of being gazumped, so in order to ensure you get the property, you want to make sure that you rush the offer to the completion stage and become the new owner of the property as quick as possible.
There can be extra costs
Often with repossessed properties things like the utilities would have been completely disconnected which you’ll likely have to pay to turn back on again. As well as that, you need to make sure that you get a full RICs survey done, because, unlike a more typical sale, you won’t have the owner to ask questions on any of the properties potential defects, you’re going in fairly blind so you need to minimize the risk.
Now you’re aware of the benefits and risks, how do you find these hidden gems? There are a couple of ways that you can go about this. Here are just a few of our tips:
Online Property Portals
You can use Rightmove and Zoopla to find repossessed properties, although they might not be immediately apparent as that, sometimes it will be specified in the property description. These properties are typically listed at a lower than market value price, so will become immediately apparent as a good deal so you have to be quick! It’s best to set up alerts on the popular property portals so you don’t miss these opportunities as soon as they are listed.
Auctions
One of the most popular ways that banks will choose to offload these properties is by auction, mainly because it’s quicker and it requires a quicker completion from the buyer, and as we’ve said, time is money for them! You should look to sign up to popular auction companies, and most of them can run purely online now, whenever a new auction comes up make sure you check the stocklist and try and identify any repossession properties.
Contact Estate Agents
Another outside the box thing you can do is actually contact estate agents in the area that you’re looking for repossession properties. Banks do use estate agents to sell the properties, so if they know that they have a buyer lined up, without even having to go on the open market or spend time trying to find viewers and putting in extra effort, why wouldn’t they come straight to you?
LOOKING FOR A GOOD DEAL ON A PROPERTY? WE CAN HELP
If you’re looking for repossessed property, it’s likely because you’re looking to try and find a great deal on a property below market value. If this is your main aim, then you might benefit from signing up to property sourcing companies such as ourselves.
We don’t have repossessed properties as such, but we do get some fantastic properties that we can offer below market value due to being part of a group of companies that includes a cash property buyer.
In order for a quick sale, and not having to go to the open market, we can offer you a large percentage of this discount – and signing up to see our available properties is quick and easy! You can join our database here.
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