A repossessed property is a home that has been seized by a lender after the previous owner defaulted on a mortgage or other finance arrangement, and therefore you could find that you bag a bargain by buying a repossessed home. However buying a repossessed property can also be a minefield and it is important to understand what to look out for.
- Speed – generally, lenders are keen to sell the property on as quickly as possible as it is losing money all the time the property stays empty
- Value – repossessed properties go on the market with an asking price that is often way below their true market value and that does not reflect recent sold property prices in that area
- Types of property – many repossessions were previously owned by borrowers who fell behind on mortgage payments and you could find yourself with a great doer-upper. But others are new builds and flats from developers and buy-to-letters who fell on hard times, or homeowners that need a quick sell due to divorce or death.
- Survey – don’t buy on a whim, it is worth getting a full survey to ensure there are no hidden horrors
- Credit rating – a consequence for buyers of repossessed properties can be that their details are muddled with those of the last occupant, and although this can be fixed, you should check there are no problems with your credit scores
- Empty property – if the property has been empty for some time, utilities such as gas and electricity, as well as phone lines, may have been cut off, and some companies have a charge for switching you back on
- Previous occupants – check out the situation with the current tenants and make sure the previous tenants have handed over the keys and the property is unoccupied.
The number of repossessions rises during times of general economic stress, but remember – always do your research. View the property and the area and work out what else is on the market and what they’re selling for.
Repossessions aren’t always bargains. Often these properties need a full refurb so make sure you have the time and resources available to be able to do so.