February 2024

In recent years, the UK housing market has seen a significant rise in repossessed properties, presenting both challenges and opportunities for prospective buyers. As a conveyancer with years of experience navigating the intricacies of property transactions, I have witnessed first-hand the evolving landscape of repossessed properties and the unique considerations they entail. In this article, we will delve into the world of repossessed properties from a conveyancer's perspective, providing valuable insights and guidance for property buyers who are exploring this market segment. Understanding Repossessions: What Buyers Need to Know As a property buyer, it's crucial to have a solid understanding of what repossessions entail and how they differ from traditional property purchases. Repossessed properties are homes that have been seized by lenders due to non-payment of mortgage loans by the previous owners. These properties are often sold at a discounted price in order to recover the lender's losses, making them an attractive option for buyers looking to secure a bargain. As conveyancers, we are not able to form opinions of property values but a recent study by Money Saving Expert has suggested that these properties are being sold, in some cases at discounts of up to 30% off the market value. Therefore, as an example, a typical property valued at £250,000 could be sold for as low as £175,000. As with most things, property law related, the process of repossession is complex and long winded. We will, for the purposes of this article, only look at buying a repossessed property. Where to find repossessed properties? Once a property has been repossessed, the lender is keen to sell the property as quickly as possible. This is so that they can receive the money they are owed as quickly as possible. For most lenders, the preferred option is to sell the property through property auctions as this enables them to gain the most interest, sell at the highest price (it is common for property auctions to generate bidding wars) in the shortest time frame (auctions can require buyers to complete the purchase as quickly as 14 days). If the property is being sold through a traditional estate agent, it is important to remember that the agent is duty bound, not to remove the listing or stop marketing efforts even after an offer has been accepted. This is to ensure that the property is sold for the highest price possible. The only point in time when you know the property can be truly yours is once you have exchanged contracts. The key therefore is to be prepared before you start the process of buying an auction property and having a fast conveyancing solicitor on your side. At Express Conveyancing, we help hundreds of buyers, purchasing auction properties to exchange contracts quickly. If you are considering a repossessed property, obtain a free, no obligation conveyancing quote below. We will now look at the conveyancing process when purchasing a repossession property in detail. The Role of Conveyancers During any property transaction, the conveyancer is responsible for ensuring the legalities are in order before a property changes hands. These very broadly include conducting comprehensive title checks on the property and advising buyers on the risks with a particular property. The Repossession Process Unveiled - Overview of the Repossession Process in the UK The process of repossessing a property in the UK typically begins when a homeowner falls behind on their mortgage payments. After a series of missed payments, the lender may initiate legal proceedings to repossess the property, ultimately leading to its sale on the open market. Legal Aspects and Implications for Buyers When Buying a Repossessed Property From a legal standpoint, purchasing a repossessed property involves a unique set of considerations that buyers must be aware of. For example, since the property is being sold by a party who has little to no knowledge of the property, buyers should be prepared for the possibility of encountering issues both with title matters and other physical aspects of the property with very little recourse to the seller in the future. It is worth at this point to remind our readers that a property could have a good title (there are no obvious issues with the property where the deeds are concerned) but have significant structural issues. The same is true in reverse. A common misconception with property buyers is that a conveyancer will be looking at both these aspects. This is not true. Since conveyancers are not experts in structural matters, you must always appoint a RCIS surveyor whose role will be to assess the structural soundness of the property. This is especially the case when buying a repossessed property as (a) the lender will have no knowledge of any issues affecting the property and (b) you are expected to purchase the property as seen. Any issues which you do not identify prior to exchange of contracts will be your responsibility and could end up costing you thousands in the future. Benefits of Buying A Repossessed Property Financial Savings: How Repossessed Properties Offer Value One of the primary benefits of purchasing a repossessed property is the potential for significant financial savings. Since these properties are often sold at a discounted price, buyers have the opportunity to secure a bargain and potentially acquire a property that may have been otherwise out of reach. Opportunity for renovation and adding value Repossessed properties also present buyers with the opportunity to unleash their creativity and customise the property to their liking. Whether it's a simple cosmetic makeover or a more extensive renovation project, repossessed properties offer buyers the chance to transform a property into their dream home. This can sometimes be a trap for the non-discerning purchaser. Construction costs have increased exponentially in recent years. Be mindful about the type of property you are purchasing though as we have seen ample instances where the discount achieved on market value is negligible when compared to building costs. A good and common example is a new boiler and heating system. The typical cost of installing a new boiler is around £6,000. On a property that is worth £100,000, this equates to 6% of the value of the property! Access to Desirable Locations and Property Types In addition to financial savings and renovation opportunities, repossessed properties also provide buyers with access to desirable locations and property types that may be in high demand. Whether it's a spacious family home in a sought-after neighbourhood or a charming cottage in the countryside, repossessed properties offer a diverse range of options for buyers to explore. While repossessed properties offer undeniable benefits, it's important for buyers to be aware of the potential risks and pitfalls associated with these types of properties. For example, buyers may encounter issues such as property damage or neglect, which could require costly repairs or renovations. Expert Tips and Insights for Successful Repossessed Property Purchases Based on my experience as a conveyancer, I've compiled a list of expert tips and insights to help buyers navigate the world of repossessed properties with confidence: Conduct thorough due diligence: Before committing to a purchase, it's essential to conduct thorough due diligence to uncover any potential issues or concerns associated with the property. If you are buying through auction, you must carry out an auction legal pack review before you bid. Seek professional guidance: Working with an experienced conveyancer can provide invaluable support and guidance throughout the transaction process, helping to ensure a smooth and successful outcome. Have your finances in order: The seller (lender) will require you to exchange contracts as quickly as possible. Having a great conveyancer on your side will make little difference if you have to delay exchange, waiting for a mortgage offer to arrive. Carryout a Survey as early as possible: A survey would typically take around 2 weeks to complete. Organise this as soon as possible. It is not uncommon for access issues where repossessed homes are concerned which could delay your survey taking place even more. Budget for additional expenses: In addition to the purchase price of the property, buyers should budget for additional expenses such as repairs, renovations, and legal fees. Case Studies and Success Stories Real-Life Examples of Repossessed Property Purchases To illustrate the potential benefits and challenges of purchasing a repossessed property, let's take a look at a few real-life examples: Mr Smith: Mr Smith purchased a repossessed property in February 2019 for £74,000 through auction which he successfully resold in 2023 for £190,000 having carried out some work to the property since buying. The Keith family: The Keith family successfully bid on a property through auction at £165,000 as an investment however, they were not aware that the auctioneers fees would cost them an additional £19,000. They also were unaware that the tenant at the property which they were hoping would be a turnkey investment for them, has been in significant rent arrears which cost the Keith family even more for eviction proceedings. Ms Jones: Ms Jones was bidding on a property that was being sold through auction by a lender having repossessed the property. This particular property had several charges registered against the property and it was unclear whether the primary lender was the mortgagee in possession or whether it was another interested party. The condition of the property was that it had been seized part way through extensive renovations and due to the nature of the sale it was unclear as to whether planning consent and building regulations had been adhered to. Whilst the property was sold with vacant possession (i.e. no tenants present in the property), the contract stated that no refuse nor personal effects would be removed from the property and further that they seller could give no warranties for items in the property nor confirmation if any were subject to hire purchase or credit agreements. Looking at the property particulars, it looked as though high specification kitchen units, appliances, bathrooms suites and other fixtures and fittings were partially installed and so the potential of the hire purchase/credit agreement and also the lack of planning and appropriate building regulations could be incredibly costly to the incoming purchaser should these need to be rectified. What appeared on to the untrained eye as a property mostly renovated to a very high specification with a few finishing touches, could have needed a full schedule of works right back from the planning stages. From example 2 and 3, we cannot stress enough the importance of having the auction legal pack reviewed by a conveyancer before you bid at auction! *All three case studies above are of real events. The names however have been changed to maintain client confidentiality. In conclusion, navigating the world of repossessed properties requires careful consideration and expert guidance. As a conveyancer, I've seen first-hand the opportunities and challenges that these properties present, and I'm committed to helping buyers make informed decisions and achieve their homeownership goals. By conducting thorough due diligence, seeking professional guidance, and managing expectations, buyers can unlock the opportunities that repossessed properties offer and embark on the journey to homeownership with confidence.

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