3 Potential Pitfalls to Consider when Buying a Repossessed House
There’s no doubt that repossessed properties can make great investments but if you’re seriously looking to buy repossessed houses in the UK then you must consider these three potential problems before you place any offers. These problems are hidden damage, gazumping and the speed of sale.
The one thing I took away from this experience is that you should never take what you saw at first sight, for granted. When you're buying repossessed houses for sale in the UK second viewings are advised. You want to give yourself the chance to pick up on the things that are easily missed the first time around.
Often there will be hidden damage caused by upset owners who have found themselves in the unfortunate situation where their homes have been repossessed.
It's an unfortunate truth, that because mortgage lenders need to be seen to get the highest possible price for repossessions, there are often bidding wars and gazumping is common (if you're not sure what this we've written an article on gazumping and how to avoid it). Both of these issues are a lot more common with repossessions than with other types of property. And yes, some mortgage lenders appear to lack a moral compass.
Most residential repossessed houses are sold by banks via Estate Agents and they rarely honour the original bids. It’s all about getting the highest price.
So, you need to be careful when buying repossessions and be aware that your accepted offer won't always mean a done deal as higher offers can be placed at any point before an exchange of contracts. This can leave you seriously up the creek. You might have already paid out for surveys, searches, legal fees, but if you haven’t exchanged and another bidder decides to put their hat in the ring then it's game over.
Gazumping is rife when it comes to repossessions in the UK.
Get all your systems ready to go...
- Make sure you have a solicitor that has dealt with repossessions before, who understands the process.
- The quicker you can get the deal through and can exchange, the less risk of another buyer being able to swoop on into your deal.
Speed of Sale
Most mortgage companies will only accept offers on repossessions with terms attached. One of these terms is often that the sale must complete within 28 days.
So, not only are you up against the wall with regard to your risk that other investors will gazump your offer, but you will also need to get your skates on with the purchase.
If you fail to get the sale through within the time limit then, even without another buyer, you could see the property back on the market and your offer declined.
When purchasing a repossessed property you must have available funds to invest. You need to be a cash buyer or have your mortgage pre-agreed.
You need to be ready to roll, or you'll find it difficult to get your offer taken seriously.
What Happens Next?
Buying repossessed houses in the UK can offer a lot of opportunity for building your property portfolio, so don’t let me put you off with these words of caution.
If you know what to look out for then they can make great deals.
If you're actively looking for deals at the moment, then take a look at the post we wrote on how to find repossessed houses for sale in your area.
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