Your Guide to Finding and Buying Repossessed Homes in the UK
Repossessed houses and apartments can provide excellent investment opportunities, often available at below-market prices.
However, finding these properties can be challenging, especially as mortgage companies and estate agents may not be transparent about their status. This guide will walk you through the essential steps to identify and purchase repossessed houses across the UK, with a specific focus on the London market, as the amount of available properties here will be largest in the country.
Understanding Repossessed Properties
Repossessed properties are homes that have been taken back by the lender after the owner fails to keep up with mortgage payments. While these properties can often be acquired at a discount, it’s important to understand the risks involved. It is a very stressful process for the previous owners and occupiers and these situations come with added risk compared to a more standard property sale.
Why They Can Be Good Investment Properties
Investors are drawn to repossessed houses for several reasons:
- Lower Purchase Prices: Repossessed homes are often marketed cheaper and sometimes sold below their market value (known as BMW) allowing for a potentially lucrative investment.
- Refurbishment Potential: These properties often require work. They may have been left vacant for many months or even years before they are sold, this can mean more than a simple redecoration is required.
- Quicker Purchase: For investors looking to build a portfolio quickly. A focus on these properties can help speed up the buying time. By the time a repossessed property comes on to the market, it is ready to be sold and the bank will have a process they need to follow but you can be assured that the property will sell and the bank is motivated to sell quickly at this stage, whilst being seen to get a suitable outcome for the previous owner
- Available Opportunities: For larger scale landlords, institutions and investors looking to invest a significant amount over a short period it can be hard to find a large enough volume of property that fits all their criteria of discount, speed and potential to add value. Some larger investors therefore may seek out repossessed properties to buy as they know they fit this wide criteria.
Methods To Find Repossessed Properties
To find the best opportunities you may have to look across a range of places. Unless you are building a portfolio in a large area like London, the amount of repossessed properties on the market for sale at any given time might be quiet low in smaller cities. Here are a couple of methods to get straight to the right opportunities:
Estate Agents
Estate agents play a significant role in selling repossessed properties and for good reason. They have an obvious path to selling properties on the open market, have a duty of care to the seller (the bank) and have buyers already registered looking for property.
However, it can be challenging to identify which properties are repossessions when you are looking in your local estate agents window as they do not openly identify them as repossessed. .
There are some signs however that a typical estate agent listing might show that can give you an indication the property might be a repossession.
- Double-check the property listings wording. When a repossession is being sold, the estate agent may use wording in the listing like “in possession”, “sold by receivers”, "Mortgagees in possession are now in receipt of an offer", or similar.
- Look for visual signs on pictures. You may see tap-over taps in the kitchen or bathroom indicating the water system has been drained and turned off to stop any emergency leaks from damaging the property if vacant.
- Look for signs in windows. You may see a notice in the window called a “Chattel notice” indicating to previous occupants a timeline to collect items.
- Look for boarded-up windows. Not always a sign of repossession, but where a property is at risk of being broken into, this is a common sign and an indication it couple be a refurbishment and a repossession for sale.
Auction Houses
Auctions can be a great way to find cheap repossessed houses, especially those that may not sell through traditional channels.
When properties are repossessed and not sold through a high street estate agent, they may end up at auction. As the bank needs to achieve a sale and within a quick timeline, waiting on the market to simply find a buyer at some point in the distant future isn’t an option. An auction can help the bank sell quickly, with full transparency on the offers being made and at this stage the bank have usually reduced the selling price to be more realistic to finding a quick sale.
This can be especially true if the property is tenanted, requires serious refurbishment, has squatters or the property legal title is very complex or missing key parts.
An auction can act as a clearing house, finding any buyer willing to offer with the highest bid at the time. If there is no competition, houses and apartments can and do get sold cheaply, rather than marketing at a fixed price and hoping to attract buyer interest with a local estate agent.
Repossessions are often sold with the major national auction companies and large London based auction houses.
Mortgage Companies
During a repossession process a lender has a duty of responsibility to the previous owners to be seen to get the best possible price and outcome when they sell the asset. There are a number of reasons for this, but simply, it means the lender cannot be seen to sell the property at a significant discount, off-market and with no advertising.
This is why you see the majority of repossessions come on to the open market and not sold behind closed doors.
However, in some nuanced circumstances you may see some larger portfolios sold directly to buyers, as well as some tenanted properties and some outlier type properties, where a sale on the open market might actually be detrimental to the seller or occupiers of the property (if it is not vacant).
It is in these outlier cases that engaging directly with mortgage companies can be a way to find some repossessed properties for sale.
There is no quick path to this. Good connections and relationships with banks already can help here, as the only times I have seen these sales happen is where a buyer has a previous track record, has funding available and is ready to exchange and complete quickly.
This is not a route for new buy-to-let investors or first time landlords.
There are some simpler ways to find repossessed houses and apartments for sale if this is your current position as mentioned above with the open market route of estate agents and auction houses.
LPA Receivers
Local Property Administrator (LPA) receivers manage properties on behalf of lenders and can be a valuable resource for investors looking to acquire repossessed homes.
If the previous owner had a large property portfolio that went default, had a mixed portfolio of residential properties and commercial properties and the situation is quite complex or they have a specific lender that chooses this route, then LPA receivers are one source of sourcing repossessions for sale.
Like working with banks directly. It is only typically a route for larger, more experienced investors and not for a first-time landlord.
Potential Pitfalls When Buying Repossessed Houses
Understanding potential pitfalls can help mitigate risks associated with purchasing repossessed properties. Here are a few of the major concerns buyers should consider:
What To Look For During Property Viewings
- Always conduct a thorough inspection before making an offer. Repossessed homes can have hidden damages that aren't immediately apparent.
- Look for signs such as water damage, mould, or structural issues, as these can significantly impact your investment and maybe more common if the property has been vacant for a long period of time
- If possible, arrange for a second viewing to catch anything you might have missed the first time. Doing viewings in daylight is helpful and accessing all rooms including lofts, cupboards and cellars so you get a clear view of the whole property is ideal.
Gazumping
Gazumping occurs when a buyer's accepted offer is surpassed by a higher bid before the sale is finalised. This is particularly common in repossessions.
Ensure your finances are in order and ready to go. Having a solicitor experienced in repossessions can streamline the process as is recommended. You don’t want to loose a potential property deal simply because you choose the cheapest solicitor who was available at the time. Go with experienced solicitors.
If you are tempted to do the opposite, gazundering, then think again. Very few lenders or banks will accept a reduced offer at the last minute. Remember they have to be seen to get the highest price for the previous owner and they sell the property as seen, so a last minute negotiation is unlikely.
Speed of Sale
Many mortgage companies require a quick sale, often within 28 days. Be prepared for a fast-paced buying process, so whether you’re a cash buyer or using a pre-agreed mortgage, having your finances sorted can help secure your offer and get you to completion without getting gazumped.
Housing Trends, Mortgagors and Repossessions
Each year, the UK government conducts the English Housing Survey, which provides valuable insights into the housing market. The latest report, released in December 2023, covers statistics from 2022-2023 and indicates that there were 24.4 million households in England living in self-contained accommodations.
In 2022-2023, owner-occupation rates in London were lower (49%) compared to the rest of England (68%). Additionally, only 24% of London households were outright owners (no mortgage) versus 37% elsewhere in the country. The proportion of mortgagors was also smaller in London (25%) than in the rest of England (30%).
A significant issue is the disparity in mortgage costs. The average (median) mortgage payment was £173 per week, but in London, this figure rose to £256. Since 2020-21, average weekly mortgage payments in London have surged by £89, from £244 to £333. In contrast, the rest of England saw a modest increase of £27, from £163 to £190.
Regarding arrears, approximately 34,000 mortgagors (0.5%) reported being in arrears in 2022-2023, a figure consistent with the previous year's 0.7%. Notably, the proportion of mortgagors in arrears has remained at or below 2% since 2011-2012.
This data is particularly significant for London, highlighting why repossessed houses and apartments tend to appear more frequently in this region than elsewhere.
You can see the current mortgage possession claims and repossessions across London here.
Conclusion and Next Steps
In conclusion, finding repossessed houses in the UK can be a great way to turn run down properties back into homes and can be a good approach to sourcing for property investors.
But it’s important to consider, much more than the reason a property is for sale, does it actually suit your strategy. Is the property suitable for a buy-to-let, purpose built student accommodation, holiday let or a HMO?
Don’t simply buy because the property is a discount on paper. Make sure to consider all aspects of the property that are a fit for your strategy and that the financials make sense for you.
Especially if you are investing a significant amount on the purchase. The average house prices in parts of the country like London can be expensive.
So don’t overpay. Stick to your budget. Check the local rental yields (here are the latest London rental yields and weekly rents) and proceed with buying a repossession with caution.
If you would like help sourcing property investments that are pre-vetted, researched and ready to buy, you can contact us and register to speak with a 1-2-1 sourcing consultant here.