repossessed property

Guide to Repossessed Property for Property Buyers & Investors

If you are considering investing in property, be it residential buy to let property, property for redevelopment or even commercial property then taking a more detailed look at repossessed property and the investment opportunities repossessions have to offer could certainly be worth your while.

Investment Property Partners property investors guide to buying repossessed property covers a number of important factors that you may wish to consider if you are reviewing home repossessions and repossessed property investment opportunities.

Buying Repossessed Property

Repossessed property refers to the re-claiming of a property by the mortgage lender (the mortgagor) usually because the property owner (the mortgagee) has defaulted in some serious way on their contractual obligations.

Property repossessions can result from contractual breaches, for example – where the property or home owner defaults on their mortgage payments, or sub- lets the property without the permission of the lender.

When a property has been repossessed the mortgage company / lender will usually wish to recoup as much of their original loan as quickly as is reasonably possible.

The repossessed property will usually put up for sale, sometimes at auction, with the proceeds of the sale going directly to the lender to cover their original loan, or at least mitigate their loss.

Such repossessed properties can often prove to be an excellent investment for anyone purchasing them, although there are a number of pitfalls which you should be aware of.

What about Home Repossessions?

Home repossessions in the UK in 2012 amounted to 21,000 which is 26 percent lower than in 2013… there were also fewer mortgages in arrears at the end of 2014 than at any time since 2006.

Although the number of home repossessions this is small when compared to the total number of mortgages currently in place, it is still considerable.

Geographically, there tend to be more repossessions in London and the South of England, where house prices are generally higher and some borrowers have overstretched themselves simply to get onto the property ladder.

Properties most likely to be possessed are Local Authority, and Housing Association properties, buy-to-let properties, relatively new flats that were bought by investors from new, guest houses in holiday resorts, and more recently holiday homes abroad, particularly in Spain, Greece, Portugal.

The Advantages & Disadvantages of Buying Repossessed Property

The main advantage of buying a repossessed property to an investor is that of a low or lower purchase price… this is mainly because the property in repossession has to be disposed of quickly.

This “below market value” or BMV for such repossessions can give the property investor immediate equity in the property.

Property Damage

However, it is not pleasant to lose your home and the original home owners /property owners may in frustration have wrecked it before departing.

Although such repossessed properties can be as much as 15% below market value for a similar property in the same area, it is often the case that the greater the bargain the worse the condition of the property… we strongly recommend that you always thoroughly inspect the property before buying.

Preventing a Sale

You should also be aware that it is possible for the original owner to prevent the sale proceeding if they believe that the agreed selling price is too low.

Advertising your Offer to Others

It is also important to realise that the estate agents appointed by the mortgage lender to sell the property are within their rights to advertise your offer to a wider audience, and potentially to ask for a higher offer… and are often successful!

Always do your Research before you buy a Home Repossession

Finally, before you set out to buy your repossessed property bargain always do your research.

To be successful it is essential that you put a realistic business plan together that accounts for any professional fees, finance payments, repairs, renovation costs; and then build your budget to identify what you can afford.

In this way you’ll quickly identify how much you can afford to spend on the property to ensure a successful investment outcome.

Property Investment Solutions

As a leading independent property and land investment specialists Investment Property Partners offer expert advice and support to clients across our specialist areas of expertise helping them to achieve their investment objectives.

If you are a property investor searching for commercial property, residential buy to let or overseas property investment opportunities please contact us today to discuss how Investment Property Partners can help you.

Further reading…

More information about repossessed property and the repossession process… here →

More information about repossessions from Shelter… here →