A repossessed property is a home that has been reclaimed by the mortgage lender after the owner has failed to keep up with mortgage repayments. While the lender has a legal duty to get the best price for the property, they will aim to sell the repossessed home as quickly as possible. In this situation it is possible for a keen buyer to buy the property at or below market value.
Repossessed property can be found at online property websites, through Estate Agents and by signing up at property auction sites such as Future Auctions. When a suitable property becomes available, it is important to be able to move quickly to secure it. This means doing your homework about the location and the property itself.
Taking the five easy steps below, you will be able to find a good deal on repossessed property near you.
1. Get Your Finances in Place
Before you consider buying a repossessed property, set yourself a budget for your purchase. Be realistic about how much money you have to spend, making sure that you have money to cover all the associated fees and expenses, including a 10% deposit.
With your budget in mind you should arrange your mortgage finance (if required) and obtain a ‘decision in principle’ from a mortgage lender. This is essential, because you will need to present this paperwork when buying the property.
Bear in mind that many repossessed properties may have fallen into disrepair because their former owners have been unable to keep on top of maintenance. You should have a separate budget for repairs and maintenance and be realistic about how much renovation you can afford to undertake. Walk away from the deal if repairs will be too expensive for you.
2. Get All the Relevant Information on Suitable Properties
Information about repossessed properties in a particular area is usually available from local estate agents or auctioneers. Auction catalogues are usually available online 2-3 weeks before the auction and the reason for the sale should be indicated in the property’s sale pack, as well as a guide price.
It is worth considering more than one property at the same time because at this stage you cannot be sure whether you will be the successful buyer. Guide prices at auction may change right up until the day of sale, properties can be sold before you put in an offer or they can be withdrawn.
If you see an auction property that you like, make sure that you register your interest with the auctioneer as soon as possible (there is usually a form to complete) to ensure that you are kept up to date with any developments.
3. View the Property
Once you have found a repossessed property that interests you, arrange to view it through the Estate Agent or Auctioneer. You will need to make an appointment or visit at an agreed time with other interested parties.
At this point it will be useful to bring an experienced building contractor with you to spot any potential problems and estimate the cost of any important repairs. This may help save money you might otherwise spend on a survey for a property that is obviously not suitable or will require extensive renovation. Most tradesmen will view a property for a small fee.
You should try and view the property twice: during the day and at night. This may not be possible with restricted viewing times, but do what you can, especially if you are planning to live there. Think about issues such as the atmosphere in the neighbourhood, whether there is a lot of noise or commuter traffic, and whether the property has any obvious structural problems.
4. Sort Out Legal Checks and a Survey
Once you have found a property you would like to buy, you should instruct your solicitor to carry out legal checks on it. If the home is for sale through an Estate Agent, you might want to make an offer on it subject to survey and contract. Obtain the legal pack from the vendor’s solicitor and ask your solicitor to look through the special conditions of sale, title deeds, leases, office copy entries etc.
Your solicitor will arrange to do the usual property searches. Make sure that you have read and understood all the information provided by the catalogue and the legal pack.
If all the legal checks go well, arrange to get a survey done to check that the building is structurally sound and that there are no hidden problems such as subsidence, dry rot or damp. The costs of a survey will vary by surveyor and according to the size of the property, so shop around. If you’re not sure which surveyor to choose, your solicitor may recommend one.
If the survey results and legal checks are fine (and you are buying through an Estate Agent), your solicitor will finalise the details of the contract and you will proceed to exchange of contracts and soon after the sale will be complete.
5. Buy at Auction
If the repossessed property you hope to buy is for sale at auction, it may be possible to put in an offer before the auction begins. You should put your offer in writing to the auctioneer, who will liaise with the vendor. If your offer is accepted, contracts will be exchanged immediately and you must pay a 10% deposit, paying the remaining 90% within 20 working days.
If you decide to buy a property at the auction, complete a registration form and make sure you have brought relevant ID documents and a cheque or banker’s draft to cover the deposit. Get a copy of the addendum sheet, which will include last minute changes to the catalogue information. If you are the successful bidder, the addendum sheet forms part of the contract of sale.
Finally, when you are bidding, remember to stick to your budget. If you are successful, a member of the auction house staff will approach you to complete the paperwork. The 10% deposit is due immediately, and the remaining 90% is due within 20 working days.
You will be asked to provide ID and your solicitor’s contact details and you will sign the contract of sale. Your part of the contract will then be passed to your solicitor and the auctioneer will retain the vendor’s part to pass to the vendor’s solicitor. Assuming the funds are in place, the sale will be completed within a month.
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