Repossessed houses can offer a lot of potential for property investors in the buy-to-let market not least of all because they are often sold below market value. The truth is however that mortgage companies and estate agents will do anything in their power to hide the fact that they have been repossessed.
So the secret is in knowing how to find them, right?
Keep on reading and I'll show you exactly what to do...
1. Dealing With Mortgage Companies
Mortgage companies often try to hide the fact that they are selling repossessed houses as they feel it may devalue the property and lead to a lower sale. Often these are known as below market value houses.
This is misguided as, in my opinion, when buyers know it’s a repossession it can generate a lot more interest and push up prices (good old supply and demand).
But until mortgage companies have a change of heart it can be difficult to spot which sales are repossessions. That is unless you know where to look.
This is where I would like to give you the upper hand in your property search and help guide you on how to find repossessed properties for sale.
So, mortgage companies will choose to sell the properties in one of three ways...
Estate Agents
As a rule of thumb, most individual repossessions that were once owner-occupied will be sold by estate agents.
LPA (Local Property Administrator) Receivers
Most portfolio properties that were on buy to let mortgages and owned by landlords will be sold by LPA receivers.
Auction Houses
Auction houses tend to pick up all of the properties that fall through the cracks and can’t be sold for a suitable price using either an estate agent or an LPA receiver. This is because, when it comes to auctions, all being fair and equal, are used when a mortgage company has tried to sell a property for the best price and failed. Remember, auction houses are still a very good way of picking up a bargain, buy to let property.
2. Focussing on Estate Agents
For the purposes of this post, however, as buying properties at auctions and through LPA receivers is more specialist than the average investor may want to try, I'm going to concentrate on estate agents. I mention those other methods just so you are aware they exist.
When I used to work for an estate agent in 2006-2007 we dealt with quite a few repossessions. The script was always the same, ‘Don’t tell any buyers it’s a Repo’! ... and this message was passed down to us from the bosses.
So as an agency we were told to market a repossession as normal and manage the viewings, same as every other property.
This is all well and good until you get to the property and you have to explain why the windows have boards on (note: not all repossessions do, so keep a look out for other tell tail signs), the toilets and sinks have what looks like police tape across them saying ‘do not use’ and the place looks like a ghost scene with personal items left throughout the house. The feeling is clear, it's not lived in.
It’s a weird feeling and quite eerie, and pretty hard to explain to interested viewers without them asking the question....
"is this a repossession..?"
You see mortgage companies aren’t that hands-on with repossessions. They have to be seen to get the best possible price but they're no experts in selling houses, they're finance companies. As such they like to pass the buck on to agents to do the work. The problem is that then they often tie the agent's hands throughout the whole process and have a tendency to stop them from doing their work properly.
This relationship leaves trails, signs that the property is a repossession. And these signs are very difficult for the estate agent to hide as much as they might want to.
Some properties are more obvious than others. But, if you know what you’re looking for then you can turn detective, spot the signs, get a deal. If you have the right property investment education then finding repossessed properties for sale will become much easier.
3. How To Spot Repossessed Houses for Sale
There are things to consider when trying to spot repossessed properties that are for sale and the first thing before you even get to the viewings stage, is the probable auction strategy of the mortgage company promoting the sale.
As the mortgagee (lender) needs to be seen to achieve the best possible price (as they are legally bound to do), they always invite extra bids on a property once an offer has been made until the sale is exchanged.
This can be infuriating for buyers and agents alike as it slows the process, can often cause sales to fall through... and it doesn’t always lead to a better price.
I’m afraid that this just part of the game when buying repossessions...
Local/Online Advertising
So as part of this process the estate agent will often be asked to put an advert in their local paper and on a property listing sites such as Rightmove and Zoopla.
For Example...
So the first thing you have to do when you're looking for repossessed houses for sale is to check your local property listings online for wording similar to the above and your local papers for 'public notices'.
If you don't live in the area in which you want to invest and don’t know what the local papers are then it’s worth calling estate agents in the area and asking which papers they use to list their public notices/final offer notices for repossessed houses for sale.
Alternatively, there are websites which list all local papers for the country and of course you can always contact the papers directly to see if they will send you copies.
For More Information See:
What Should I Look For When Viewing The Property
The next avenue to explore in your quest to spot repossessed properties for sale is by knowing what to look for when you’re out viewing or, if you’ve got good eyesight, you can sometimes spot some tell-tail signs in the pictures included with the property listings.
These signs (in no particular order) are...
- Metal grates or wooden boards on windows and/or doors
- ‘Do not use’ tap on plumbing items as the water has been drained down to prevent leaks
- Chattel Notices in the window giving owners notice to collect personal belongings
4. What Happens Next?
So now you know how to find the repossessed houses in your area and what to look for when you're out viewing.
But be careful! Not all repossessed properties are gems. For more information check out my post on how to spot the pitfalls of investing in repossessed houses and ask yourself whether buying a repossessed property really fits in with your buy to let strategy.
If you would like help in finding your next buy to let investment or building a property portfolio, then take a look at how I can help save you time and make you more money with your investments.
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We also look at ways to increase your return on investment with any of the properties you may be considering and we also have a couple of cheat sheets and downloadable documents.
As a previous estate agent that deals with repossessions, can you tell me on what basis the agencies are given the contract to sell these properties by the mortgage providers and if there’s a way to circumvent this process!? Do the agencies bid for the sale of each property individually or do they have contracts with certain providers in certain areas?! If the mortgage provider is legally bound to achieve the highest market price, is there not a way to approach them directly!?
Hi Mark,
Typically most agencies are selected or contacted by the mortgage companies to sell repossessed properties, it is rarely a case of the agents contacting the mortgage companies or bidding/tauting for properties to sell if it were.
As part of the process of a Mortgage Lender being ‘seen’ to get the best possible price for a repossession, most mortgage companies select the largest estate agent in an area and tend to stick with them if they are doing a good job.
They don’t want to deal with property sales, that’s not their business, they just want the repossession sold quickly so they can write it off their books and move on.
It may seem quiet a cold approach to it, but there large corporations and aren’t really bothered in finding the agent that will provide the lowest commission etc.. just one that will stand the best chance of selling it the quickest.
When you consider the number of properties a mortgage company may have repossessed over a period they often work with 3rd party companies called LPA Receivers who look after the management of the properties and the sale to take the burden and responsibility away from the lender
These receivers may have some properties in the same area, but mostly they will be spread out across the country and sold at different times throughout the year.
Because of this it is easier for the Receivers to further outsource the sale by using larger Estate agents who cover more than one area (groups like Countrywide estate agents for example), than it would be for them to use a single agency branch estate agency, when they may not need to sell a property in that area again for a while.
Hope that makes sense and gives you an idea on how they tend to work
hi, just looking for some advice. We put an offer in on a repossessed house, we had all finances in place and we don’t need to sell another house. However, our offer was rejected for a much lower offer, £15000 less, as they were cash buyers. I thought they had to, by law, try get as much as possible for the house. Is this right, is there anything that we can do?
Hi, it’s a tricky situation, but the short answer is ALL offers are required to be put forward to the seller.
As part of this process in a repossession, the selling agent is the mortgage company and they will make the decision on the best offer, not the end person actually getting repossessed.
They do need to be ‘seen’ to be getting the best possible price though, but also in a suitable time frame.
Part of this process involves them putting notices in the local paper of the offer they have received, and inviting higher offers, as well as updating the property description on any advertising.
The downside to this is that although most of the time they go with the ‘highest offer’ this is not always the case.
The distinction here between offers is that the other buyer is offering cash and may have committed to a quick completion of a couple of days or weeks.
This may be a better ‘offer’ in the eyes of the seller ‘the mortgage company’ because if your using a mortgage, something might go wrong with a survey, you may not get finance or they may pull the offer at the last minute.
So often a cash offer can be more certain and they will accept this over a higher mortgage offer on occasion, depending on the property in question, it’s condition and the history of its listing (maybe they have just been stung by another mortgage buyer not being able to complete on the deal).
There are lost of factors that go in to it.
If you expect foul play you can ask the agent to confirm or prove they have given your offer to the seller, but your unlikely to get much joy from this route unfortunately
I hope that helps give you more of an breakdown on the possible situation and has been helpful
Great article. Like all property investments, it’s about finding the right deals. Not all repossessions make good property investments.
Thanks Jamie, couldn’t agree more