Solicitors Lancaster and Preston

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Key considerations when buying a repossessed property

Buying a repossessed property can provide investors and developers with an excellent opportunity to purchase an apartment or house at a significantly discounted price — in some cases, by as much as 30% less than their market value. Repossessed properties can also provide first-time buyers with a chance to get onto the property ladder. However, there are a number of key considerations that must be taken into account. This is because the process of buying a repossessed house is very different than through traditional methods.

Below we look at three of the most important factors that you will need to consider before buying a repossessed property.

#Key consideration 1 — the risk of being gazumped

Even though a lender has the right to repossess a property in circumstances where the borrower had been unable to meet their mortgage repayments, the lender is under a legal obligation to obtain the best possible price to cover any outstanding debt. This means that when an offer is made by a prospective buyer, the lender, or estate agent on their behalf, will usually publish a 'notice of offer’ in the local press inviting higher bids. In consequence, there is no certainty that your initial offer will be sufficient to secure the property, exposing you to the possibility of being gazumped and losing the property altogether, or being forced to increase your offer. Even then, the property will remain on the open market until completion.

#Key consideration 2 — the unavailability of replies to enquiries

As the repossessed property is being sold by or on behalf of the lender, who will have no personal knowledge of the property, they will be unlikely to be able to provide answers to many of the standard enquiries raised during the conveyancing process. This can include detail of any disputes with or complaints about neighbours, any notices or proposals that may affect the property, any rights and informal arrangements with neighbouring properties, or any alterations or changes to the property and whether consents and approvals were sought. This means that you must carry out a thorough visit to the property to satisfy yourself of such matters, and raise any queries that you may have with either your solicitor and/or surveyor.

#Key consideration 3 — the need to act very quickly

When buying a property under normal circumstances, timescales are relatively relaxed, typically to be agreed between the parties. In contrast, when buying a repossessed property, whether through an estate agent or auctioneers, time is of the essence. This is because the lender will want to recoup their money as quickly as possible. When buying a property at auction, once the hammer goes down, contracts are treated as exchanged. This means that you must pay a 10% deposit or reservation fee on the day, with the remaining balance usually payable within a period of 14 to 28 days. Even when buying a property through an estate agent, exchange of contracts is generally requested within 28 days of an offer being accepted, so you must have your finances in place so that you are able to proceed immediately.

There are a whole host of other factors to take into account when buying a repossessed property, where expert advice should always be sought first.

Legal disclaimer

 

The matters contained herein are intended to be for general information purposes only. This blog does not constitute legal advice, nor is it a complete or authoritative statement of the law in England and Wales and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its’ accuracy, and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should always be sought.