One person’s disaster is another’s opportunity. As harsh as this may sound, it’s true and there’s no better example than those who look to purchase a property that has been repossessed by a mortgage lender. Following on from the financial crisis, there are a higher number of repossession properties on the market and unsurprisingly there are many buyers hoping to take advantage of lower prices.
- Lack of information. Usually when a property is sold, a seller provides quite detailed information about the property, including neighbour disputes, informal rights, works carried out etc. With a repossession property a buyer doesn’t get any of this information as the lender simply doesn’t have it to give. So it’s vitally important that a buyer makes their own enquiries as to these issues, with their surveyor and by talking to neighbours.
- What you see is what you get. Repossession properties are sold ‘in their current state and condition’. More often than not, if the property has been vacant for some time, the property will be in need of redecoration and general sprucing up and most likely clearance of rubbish. Usually the sale price reflects this, so brace yourself for some hard work post completion!
- Increased conveyancing risk. There can be increased risk with the conveyancing process, particularly around the time of completion. By the very nature of repossessions, there is a chance of entries appearing on the title from creditors, lenders, and the like. The easiest way to protect against this is to have as short a risk period as possible between exchange of contracts and legal completion, ideally exchanging and completing on the same day.
- Property may be ‘blacklisted’. If the repossessed owner hasn’t updated their details or arranged a redirect, you’re going to end up with a lot of post not belonging to you which may include demands for unpaid bills. You may have to deal with the address being ‘blacklisted’ for credit purposes.
- Timing is everything. Most lenders selling in possession will require an exchange of contracts within 28 days of receipt of the initial papers by a buyer’s lawyer. During that time, the property will remain on the market, putting a buyer at risk of being gazumped. This is always a tricky time, as lenders are duty bound to maximise the asset, which can mean that they will go with the highest offer despite a buyer with a lower offer being in a better position to proceed.
There are undoubtedly bargains to be had. But if you’re looking at purchasing a repossession property, do so with your eye’s well and truly open, rather than just on the prize.
Disclaimer: While we do all that is possible in terms of ensuring its accuracy, this blog contains general information only. Nothing in these pages constitutes legal advice. You need to consult a suitably qualified lawyer from the firm on any specific legal matter.
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