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Buying a repossessed house

A guide to buying repossessed houses in the UK.

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By Pete Mugleston   Mortgage Advisor

Last updated: 25th June 2019 *

Buying a repossessed house in the UK

We receive a huge amount of enquiries from people who are considering buying a repossessed home.

Whether you believe buying a repossessed property will work out cheaper or if you simply want to understand what risks, if any, exist when buying a repossession, the expert brokers we work with can offer you the right advice.

Once you’ve read through these details, make an enquiry so we can arrange for an advisor we work with to contact you directly and discuss your own circumstances.

In this article we will cover:

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If I’m buying a repossessed house, where should I look?

Repossession of a property is what happens as a result of a borrower being unable to consistently meet their mortgage repayments each month. In such circumstances, a  lender has a legal right to reclaim the security they hold in order to recoup the outstanding amount borrowed.

Taking back the ownership of a property is only half the job. The lender then has to arrange to sell the property as soon as possible with the primary aim of being able to cover all the outstanding debt plus any other costs involved during this process.

How to go about buying a repossessed house

Lenders generally sell repossessed properties through one of two avenues...

  • Sell the property through an auction
  • Use an estate agent

Read on for more information, or better yet, make an enquiry and the expert brokers we work with will talk you through the process of buying a repossession step by step.

Buying a repossession at auction

Auction houses can be a very effective way of buying and selling repossessed houses. Properties sold through an auction are usually advertised one month in advance, giving potential buyers plenty of time to view and arrange finance.

Some auction companies specialise solely in repossessed properties and there can be some potential bargains to be had. However, buying repossessed homes this way can also be quite nerve-wracking, therefore, it’s essential to do plenty of research in advance.

An effective way of buying a property at auction is with the use of bridging finance - it would typically allow you to get the money you need much faster than a conventional mortgage - for more information on bridging finance, read our informative article here.

Use an estate agent

Most lenders will also look to use the services of an estate agent when selling a repossession. However, it’s unlikely that an estate agent will openly market repossessed properties, therefore, if you’re looking at buying a repossessed house you should contact your local agent in the first instance and ask if they have any available.

If you’re looking at buying a repossessed property and would like to receive some advice beforehand, make an enquiry and we can arrange for an expert in this area to contact you direct.

Is it always cheaper buying repossessed houses?

It’s not unusual to see repossessed properties sell for anywhere between 20-30% less than their market value, however, there’s no guarantee that this will be the case.

A lender’s approach to selling a repossessed property is usually very different to an owner’s under normal circumstances.

Whilst a lender is legally obliged to continue to serve the interests of the owner by ascertaining the best price possible for the property, in reality, they will want to make a sale as soon as possible.

In this regard, a lender is unlikely to incur any more costs than necessary, therefore, will take minimal action in preparing the property before it is made available for sale. This, ultimately, could affect the resale value and offer the opportunity of buying repossessed houses from banks (or other lenders) much cheaper than might normally be the case.

What are the advantages of buying a repossessed house?

The is the main, perceived, advantage of buying a house that has been repossessed is the potential savings on offer, as discussed in the previous section.

Another clear advantage is the avoidance of becoming involved in a property chain. However, as outlined in the section below, there are also possible pitfalls of looking at this market.

What are the implications of buying a repossessed house?

Financial advantages of a purchase aside, there could be also quite a few problems with buying a repossessed house without the proper research and advice, namely:

  • Poor condition of the property
  • Buy-to-let repossession
  • Having finance in place
  • Potential for gazumping
  • Unexpected hidden costs

Poor condition of the property

It’s important to be aware that repossessed properties may not have received the same level of care when the previous owner vacated as you would expect during a traditional house sale.

It’s not unusual to find a lot of fixtures and fittings have been removed or damaged before you receive the keys. This is why viewing the property, if possible, before making a bid is fairly crucial so you can factor in any additional budget for unexpected renovation costs.

Buy-to-let repossession

If the repossessed property was owned by a buy-to-let landlord you need to clarify whether the sitting tenants have handed over the keys and vacated. If they have not moved out this could cause delays and difficulties if they seek a legal right to stay in the property.

This type of situation should normally be resolved between the mortgage lender and the previous owner before the repossessed property is made available for sale. However, it is important that you clarify this position before agreeing to any purchase.

Having finance in place

It’s advisable to have a mortgage agreement in principle before you start your search, particularly if you’re looking at a repossession purchase through an auction.

One of the benefits of buying a repossessed house via the auctions rather than an estate agent is that both parties are committed to the sale once the hammer falls. However, as the buyer, you are usually expected to exchange immediately and complete the sale within 28 days which means your mortgage really needs to be in place beforehand. The speed with which bridging finance can be arranged is the reason that it's a  popular choice for buying at auction.

Potential for gazumping

If you’re buying a repossessed house through an estate agent and a sale price is agreed, it’s important to understand that a lender will usually instruct the agent to keep the property on the market in the hope that a higher offer is made.

As the lender is legally obliged to secure the highest sale price possible for the previous owner they will have no misgivings about any potential gazumping scenario at any stage up until the completion of the sale to you, even if you have incurred legal and/or valuation fees.

Technically, this could also happen when buying repossession properties through an auction. However, in reality this is much less likely as penalties can be incurred for pulling out of a sale after the hammer falls for either party.

Unexpected hidden costs

If a property has been repossessed it’s likely that some, if not all, of the utility services have been disconnected and require reinstating. It’s also vital that a full structural survey is carried out on the property in order to ensure no hidden defects exist which may have prevented a sale by the previous owner.

Remember, the previous owner will not be available to walk you through any potential deficiencies or, for example, issues with neighbours over shared parking access. Best to get everything checked out in advance of completion.

Frequently asked questions

In this section, you’ll find the answers to some of the questions we hear most often from customers who are buying a repossessed property.

If I’m buying a repossessed house is the process different?

As you may have gathered from the information above, the process of buying a repossessed house can be a lot more complex than through traditional methods. There’s usually a lot more involved than simply picking up a property for a cheaper price.

What the timescale for buying a repossessed house?

Under normal circumstances when buying a property, timescales can be much more relaxed. However, when buying a repossessed house from the bank - whether through an auction or an estate agent - time is very much of the essence.

If your offer price is accepted through an estate agent, they are duty bound to put out a notice of offer in the local media inviting further bids. This means there is no absolute certainty that you have bought the property until the completion date when you are handed the keys.

What are the rules when buying a repossessed house at auction?

If you’re buying a repossession property through an auction, once the gavel goes down you have effectively exchanged contracts. However, this means you must leave a 10% deposit on that day and pay the remaining 90% within 28 days so it’s vital you already have your mortgage or finance in place.

If you’d like to understand more about the process of buying repossession property, make an enquiry and we can arrange for a specialist to get in touch.

Does buying a repossessed house affect your credit rating?

This shouldn’t really be an issue as debts should be registered against the individuals concerned. However, it’s only natural to harbour doubts when the previous owners obviously had quite serious financial problems which were still unresolved at the point they moved out.

It’s also possible that the previous owners may have had other outstanding debts registered against the address in addition to their mortgage.

The diligent thing to do is to check your credit record on a regular basis for the first few months after you’ve moved in to the property. If you spot anything that has been incorrectly registered against your name, speak to the lender in question immediately.

In addition to this, keep an eye on the post. If there is anything you suspect is a payment demand or from a debt collection agency, again, call the companies and inform them that the individuals they’re looking for no longer reside at that address and to amend their records.

If you receive any post for the previous occupants be sure to return it unopened with the words “not known at this address" on it.

Is it harder to secure a mortgage on repossession properties for sale?

No, not at all. Certainly, the fact the property was previously repossessed should have no bearing at all on your ability to secure a mortgage if you want to buy it.

Your application is assessed on your ability to afford the repayments along with your credit record and the level of deposit you are wanting to put forward.

If your credit record is clean, with a clear ability to afford the repayments and a healthy deposit there should be no reason why you shouldn’t find a lender willing to help you.

Due to the complexities of the process involved when buying a repossessed house, it may be smarter to seek the assistance of a mortgage broker who will be able to better advise you on which lenders will be able to offer the best deals.

If you make an enquiry we can arrange for a mortgage broker we work with to get in touch and discuss further with you.

Should I be aware of any additional implications when buying a repossessed flat as opposed to a house?

Not really, both types of property would generally follow the same process.

However, it is worth asking your solicitor to check whether there are any outstanding issues regarding any unpaid maintenance charges for the company servicing the apartment block which are still to be resolved relating to the property you are looking to buy.

Does buying a repossessed property in the UK differ from country to country?

There are some subtle differences, yes.

Buying a repossessed house in Scotland

Unlike England, when buying a repossessed house in Scotland the threat of being gazumped whilst trying to complete the sale is removed as once a price is agreed between parties that contract is binding.

Buying a repossessed house in Northern Ireland

Buying a repossessed house in Northern Ireland follows the same process as for England or Wales, therefore, the need to complete a sale before other offers are received is vital if you’re to avoid being gazumped.

If you’re looking at buying a repossessed home across different parts of the UK and would like to receive advice from a local expert, make an enquiry and we can arrange for someone to get in touch.

Why you should speak to a broker if you’re buying a bank repossessed house

Our customers consistently rate us 5 stars on Feefo, mainly due to our level of service that is tailored to your own specific needs, and with access to the most experienced brokers available that:

  • Have whole of market access
  • Have excellent relationships with lenders who specialise in repossessed properties
  • Are OMA accredited advisors
  • Can offer bespoke advice to customers who are buying repossessed property
  • Have completed a 12 module LIBF accredited training course 

Speak to a repossessed house mortgage expert

If you have questions and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 25th June 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.