Is buying a repossessed house in the UK easy?
- By: Sangeeta Ranade
- January 2021
You may have heard more about buying a repossessed house lately in the news. A recent study from UK Finances found that repossessions have risen about 17%, in part due to COVID.
A repossessed property is one that has been reclaimed by the lender to recoup any outstanding debt. Once the lender reclaims the property, they will likely need to sell the house quickly to make up for the money they have lost.
There can be many benefits to buying a repossessed property, including potential savings and a fast process.
But is the process easy?
There are pros and cons to buying a repossessed home, but ultimately it can vary from situation to situation. Here are some common questions people have when considering buying a repossessed house.
Here is what you need to know when looking at buying a repossessed home.
What is the process like?
When buying a repossessed house, there are two different processes that you may experience. The less common way is to buy through an estate agent.
Ask local estate agents
However, as generally estate agents will not openly advertise a home as repossessed in the listing, you may have to contact them directly to get this information. You might even need to use some persuasion to get them to admit it!
If you are able to buy a repossessed home this way, you can avoid the stress that buying at auction may cause, but there is less uncertainty about the final price prior to the sale. Depending on your situation, this can be a good thing.
Try your luck at auction
You can also buy a repossessed home at auction house. Generally this process is a lot more transparent, and you know up front if a house is repossessed. Although auctions will typically move fast, you will have some time before to prepare.
Properties will usually be listed in advance online so you can do some research so you are best prepared for the auction itself. Although you can often save some money when buying a repossessed home, you won’t be able to guarantee what the amount you save will be.
You will likely have to pay a deposit on the day of the auction, and this is typically 10% of the total price. The remaining amount will be due within 30 days after the sale date.
These are standard price structures that most auctions follow. However, it is always important to read the auction’s terms and condition before bidding, so you’re not caught off guard by any last minute surprises.
Either way, you will likely want to consult with a conveyancing solicitor to check the property deeds and other important documents to ensure that you are buying a house without any hidden defects or potential issues.
Once you have bought a home at auction and the auction is over, you are legally obligated to proceed with the sale on your end, so it’s in your best interest to ensure that every possible issue is addressed prior to closing.
What are some advantages of buying a repossessed home?
One of the reasons why buying a repossessed house can be advantageous is the potential savings.
In fact, repossessed homes can be up to 30% cheaper, so depending on the circumstances you can save quite a bit. Typically lenders want to sell repossessed homes as quickly as possible so they minimize their own losses.
When buying a repossessed home through an auction, you will generally have a few weeks to prepare from the time the property is listed to the day of the auction. You can apply for a mortgage, and ensure you have the finances ready to pay the deposit after the hammer falls.
What are some challenges to watch out for?
There may also be some unexpected challenges and extra steps you might face when buying a repossessed home. One potential obstacle may be dealing with unexpected repairs or renovations.
Does the property need repairs
Some repossessed homes may be in perfect condition. However, many will have some or extensive repairs that need to be addressed. It’s always wise to have a structural survey conducted so that any damage may be assessed so you know exactly which repairs you will need to make.
There may also be unexpected costs that you would not need to budget for during a standard house sale. For example, you might find yourself needing to reconnect utilities such as telephone.
On occasion you can find providers who will do this for free, but you should plan on these costs when you are budgeting for the purchase.
Don’t get gazumped
One challenge that may arise during any home sale is the potential of gazumping. This is when you’ve made an offer and gotten a verbal agreement or acknowledgement, but another party makes a higher offer to the seller, which the seller then accepts.
This can happen any time before the contracts are officially signed, so make sure you are aware of this possibility and avoid it as best you can by investing in home buyer protection insurance.
Make sure the property is empty
You will need to ensure that the previous tenants have vacated the house. Prior to purchasing the home you should carefully look into the situation and determine what the circumstances are. If the tenants are unwilling to relocate, then you probably don’t want to buy this property.
Usually, this situation is resolved before the house is put up for sale, and you’ll likely not be responsible for this process. That said, it’s worth checking and being prepared for any potential situation, so you can either handle it, or avoid it.
So, is buying a repossessed house in the UK easy?
It can be worth buying a repossessed house, but it depends on several factors. You should always consult with experts, including a solicitor, who can help you watch out for any risks and prevent any regrets.
When buying a repossessed home, you are buying it as it is. You might get an incredible deal. However, if you don’t prepare yourself properly and do the research, you can find yourself stuck with a property you no longer want.
These days, buying a repossessed house is a more common experience so you have more options and resources to make sure you are getting the best possible deal without sacrificing the quality of your new home and the experience of buying it.