UK Repossessed Houses: do They Still Represent the Best-valued Properties?

By: Submissions

Jake Moore writes: “Repossessions typically come to market 30% under their market value. “  - This commonly used statement is absolutely correct, however, doesn’t fairly paint the picture of the risk vs reward.

Let’s start with desert; reward!

• Low prices. Obviously, low prices. Due to the nature of repossessions, there are enormous discounts that can be achieved. When the lender, being a bank, mortgage provider, or whoever, repossesses the property, they typically look for a quick sale to recover the loaned funds. Which is to us, an opportunity!

• Less waiting. As mentioned above, lenders typically look for quick sales. If you have the funds and are looking to get involved in a property investment, this can be pivotal. You can monitor auctions and when the right property comes along, you can become the owner within weeks or even days.

• Variety of choice. Anyone can get involved with repossessions if they commit the time, as there are so many variations of entry levels. Patches of land go for under £500 at repossession auctions more frequently than you would expect. At the other end, you can also pick up mansions like this £30m repossession in London! http://www.dailymail.co.uk/news/article-2478329/30m-mansion-North-London-Britains-expensive-repossessed-property.html

• Highest bid wins. Repossessions are usually sold through auction. This means you do not have to have the right connections or go through other companies to get the right deal. Once you are in the room (or online auction (http://repossessedhousesforsale.com/), the highest bid wins!

Obviously, if you understand, or have the right advice about valuing a property’s worth before auction, then there is a killing to be made in the market.

However, you must understand or have the right advice, as there are several ways problems can arise in this unregulated market…

• Unpredicted renovation costs. The rule of repossessions is: They are sold as they are. Many houses will have hidden damages, if these are structural damages it can result in a renovation bill bigger than the discount!

• Gazumping. If you buy outside of auction, gazumping is a common problem. Gazumping is when a deal has been agreed and the seller pulls out last minute and transfers the sale to another buyer. This tends to happen with repossessions, as the property is a collateral of a loan meaning the lender is obliged to use their best efforts to attain as higher price as possible for the property so will usually take the biggest and easiest sale.

• Less time. Although this exact point is listed as a benefit above, it can also be a negative, dependent on the buyer. If you are not well practiced in valuing properties there is less time to inspect and find the flaws that save you from a bad investment.

• Over-bidding. Despite the potential for a bargain, you need to have complete confidence of the value of the house and stick to your budget. Too often a buyer will commit at auction and later discover the properties actual value is less of that which they paid.

• Competition. It is now common knowledge that repossessions represent some of the best property value available in the industry meaning competition is thick, so always be on the lookout. However, in a post Brexit Britain, we may find ourselves in a relatively competition free industry again if, as many are predicting, the housing market should fall!

As a repossessed property specialised, I would recommend repossessed property over any form of property investment, if you can find the right deal. But there are drawbacks, which need to be carefully considered and overcome!

By Jake Moore

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