When a house is repossessed, it is the mortgage lender who will, more often than not, be selling the property. The process of buying a repossessed property takes a slightly different form to that of buying a regular property. Without the correct legal advice and guidance, you could end up out of pocket or, worse still, without a property.
Buying a Repossessed Property
Repossessed properties can often end up costing a lot less than regular sales because the lenders will want to sell the house as quickly as possible, although at the best price possible. As such, the lender selling the property will impose strict deadlines for exchange of contracts and completion. If you are reliant upon mortgage finance for your purchase, it is therefore imperative that you have this in place and are certain that your lender can achieve a quick turnaround.
The (usually) less-than-market price of a repossessed property reflects the fact that the seller will have no knowledge of the specifics of the property usually found in the Property Information Form. It is therefore advisable to have a professional survey completed on the property before any offer is made, as most lenders will not accept “subject to survey” offers from potential purchasers. You may also consider speaking to the neighbours about the area and carry out a full set of searches.
After your offer has been accepted, most lenders will leave the property on the market in case a higher offer comes in. This common practice may not seem fair and may leave you out of pocket but, with the correct legal advice and representation, a quick turnaround can be achieved to help protect against this.
A large number of repossessed properties are sold at auction. If you are looking at purchasing such a property, you should consider our Auction Property Sales and Purchases page in conjunction with the advice on this page.
Unlike in regular purchases, the buyer need not be concerned as to whether the sale price is sufficient to discharge all the financial liabilities registered against the property. Provided the property is sold by the proprietor of a first legal charge that pre-dates the other registered interests, the sale by a mortgagee in possession will override these. Our conveyancers will make sure this is the case for you.
From a practical perspective however, buyers of repossessed properties often find themselves receiving letters, telephone calls and even visits from the previous owner’s creditors. In such circumstances, you should refer them to your conveyancer, who will explain to them that they remain the responsibility of the previous owner.
Buying a Repossessed Leasehold Flat
Repossessed leasehold flats present particular issues, as it will be necessary for your conveyancer to consider information from the freeholder and/or management company. Some lenders are reluctant to provide this information due to the costs usually involved, whilst others will insist the buyer pays for it. We will always insist that the seller provides this at their own cost.
It is not unusual for there to be arrears of ground rent and/or service charge on repossessed property and sometimes the buyer is expected to discharge these. On regular sales, it is quite common for retentions to be held by the buyer’s conveyancer towards any service charge balancing payments that may be demanded after the end of the financial year. It is rare for lenders to agree to these retentions, leaving the buyer liable for any balancing payments that may be demanded at a later date. We will endeavour to obtain as much information as possible for you about these possible additional costs before exchange of contracts, allowing you the opportunity to renegotiate the price to take these into account.