buying a repossession - what's the process?

[chickpea]

As you can probably tell, hubby and I are thrashing out various options for acquiring another property to rent out.

We are interested in one that has been online for a few weeks now.

It's a repossession, by all accounts. We drove past it on Friday night and it was clear that someone was viewing it. We called the agent on Saturday morning to arrange a viewing, only to be told that an offer had been accepted on it.

The property is still showing as "for sale" (not under offer or sold etc) online, and doesn 't have any notice of an offer anywhere as far as we can see.

Just exactly how do repossession sales work?

Do we have a right to view and make an offer within the 7 day period of notice? If we do, does the 7 day period start again?

What's the best way to approach trying to buy a repossession - offer high, or offer cleverly and be prepared to enter a bidding war?

And given all of the above, when do you start the legal side?

[Richlist]

I've bought repossesions directly via an estate agent and from auction.....the system varies between the two.

As you are interested in a repo from an agent my understanding is that it works as follows. They will have been instructed to obtain the best possible sale price. A low offer when the property has just gone on the market is unlikely to be accepted. If they have already received an offer that has been accepted they will not tell you what the offer is.Even if you offer a few 000's more you may still not get the property because they will look at your situation, how likely you are to complete, wether you are a cash buyer etc etc and way up who the best buyer is likely to be. As mortgagees in possesssion they have to take into account any delays ......which are likely to cost them more in service charges, insurances, standing utility charges etc. Its a bit of a lottery unless you are on very friendly terms with the agents.

You will normally only have 28 days to complete the purchase so no point in bidding if you don't have your finances already in place.

[Grampa]

With a repossession the lender has to archive as much as possible and normally it is a requirement for the EA to advertise any offer in the local press for one or 2 weeks.

[chickpea]

Thanks for your replies, Rich and Grampa.

We've finally managed to speak to the A again.

For various reasons, it feels a *bit* like they are being obstructive over this particular property - possibly because they have a "mate" interested?

We have now made it clear that we know how the process works (thanks to your replies!) and all of a sudden, we have been given the chance to view. (the offer is due to be made public in the local property paper next Tuesday, so we have a week to get things in place).

Next question....

Without knowing at the moment what the offer is, what sort of figure should you be working on with a repossession? With an asking proce of £140k, would we expect to offer above that, or very close to?

Obviously we'll know what's on the table next week, but we need to crunch some figurs before then to see if it's even in our ball park.

Thanks in advance for any hints and tips you can give us on this.

[Melboy]

It could go to sealed bids if more than 3 people are interested.

If you do this have your solicitor's name and address on the bidding letter plus state finance is in place to purchase as you will be expected to complete within 28days. This will give you an edge over the competition.

In my experience of buying repo's a Cash buyer will always win over a BTL mortgage bidder even if the mortgage bidder has put in a slightly higher bid.

..........and as always do your homework and have a property survey carried out or experienced builder with you to suss out what you are buying.

[Richlist]

Without knowing at the moment what the offer is, what sort of figure should you be working on with a repossession? With an asking proce of £140k, would we expect to offer above that, or very close to?

Every property is unique and there is no way anyone on a forum is able to give you good advice on that point.

I've often been amazed to learn that repos i've bid for (& failed to win) have sold for many 000's OVER the asking price.......usually bought by inexperienced buyers who have watched Sarah Beeney or other property programmes and think making money from property is easy.

You need to be very clever.....you need to know the area/ the street, what the property is worth and most impotantly how much you need to spend on it before you can begin to estimate what you are prepared to pay for it. Many inexperienced people vastly under estimate the cost of repairs &/or renovations hence their eager willingness to part with large sums of money and pay well over the true value.

Beware.....its an easy way to loose a lot of money.

[chickpea]

Sorry - I worded my question about what to offer badly.

What I meant was not how much should we bid on this particular property, but is there a general expectation for repossession (eg like the offers over system in Scotland)?

Does the advertised price generally indicate what the lenders are looking for? Does it reflect market value, or does it reflect what they hope to recoup from the money owed to them? (if I'm still not being clear, I apologise - my head is a bit overflowing with the info I'm trying to take in very quickly).

How on earth does anyone get a plan of action together in such a short time-frame? Are we at a disadvantage for coming in after an offer has been made, from the point of view of pressure to get our plan together...or should we just stay calm and do what we need to do and accept that we may miss out because of the time factor?

Aaaaaaaargh!

The house is a mid-terrace, asking price £140K. Next door sold 6 months again for £168k (which is perhaps reflective of it's condition, as it is single glazed and slightly shabby outside) BUT the house we are looking at needs some roofing work (maybe even a new roof) and a cosmetic overhaul at least. (can't say without viewing it - we only did a drive by and nosey through the front window tonight). 3 bed terraces in the next street are selling for £250k. Rents for a 2 bed in the town are between £600-650 pcm.

We know the area (lived here for 12 years) and it's very desirable. House prices haven't suffered as badly as the rest of the country (Zoopla actually reports a rise in the last year, if that is even worth noting).

We would have to get an advance on our own mortgage in order to get the deposit together - is that completely insane?

Is this just a ridiculous idea from start to finish? (I think I know the answer already...)

[Richlist]

What I meant was not how much should we bid on this particular property, but is there a general expectation for repossession (eg like the offers over system in Scotland)?

Does the advertised price generally indicate what the lenders are looking for? Does it reflect market value, or does it reflect what they hope to recoup from the money owed to them? (if I'm still not being clear, I apologise - my head is a bit overflowing with the info I'm trying to take in very quickly).

My experience is of repossessions offered by estate agents as .....'offers required over £xxx

Does it reflect market value ? thats for you to find out....

Is it what the lenders are looking for ? No.....its a value applied by the selling agent based on what they think they might sell it for.

How on earth does anyone get a plan of action together in such a short time-frame?

Answer = hard work. The most important bit being to establish as accurately as possible how much the repairs &/or renovations are going to cost & from that you can work out the maximum you should offer.. Thats why one poster has already advised you to involve your builder.

Are we at a disadvantage for coming in after an offer has been made, from the point of view of pressure to get our plan together...

No

[chickpea]

Thanks Rich - for all your advice.

Yes, we will get our builder to have a look at the property before we think about an offer.

I'm all up for hard work - just not sure how best to get all the plates spinning in the air at once! Lol.

[Richlist]

Thanks Rich - for all your advice.

Yes, we will get our builder to have a look at the property before we think about an offer.

I'm all up for hard work - just not sure how best to get all the plates spinning in the air at once! Lol.

I would imagine that......assuming you make an offer and its accepted then, you will be expected to:

1. Place a LARGE holding deposit with the agent.

2. Simultaneously exchange & complete within 28 days. So you need to ALREADY have your finances in place because you will be unlikely to organise anything by way of deposit or full purchase price from a lender within the 28 days.

3. The vendors will reserve the right to continue to market the property for better offers UNTIL exchange of contracts takes place.

4. Your legal fees may be higher than normal given the shorter time frame.

5. The legal pack from the vendors solicitor may well contain other onerous requirements that you will have to accept if you want to proceed. Often repossessions do not follow normal selling criteria.

Good luck

[chickpea]

Thanks.

Spoken to our builder this morning, and booked a viewing for Saturday.

How much does it cost to have gas/electric/water/telephone reconnected?

I've had a quick Google but can't seem to find anything more than "some companies are happy to reconnect for free, but you'll have to pay for the telephone".

Bit concerned that the roof issues will mean the mortgage lenders put a retention on their lending. We have the cash to have the property re-roofed but perhaps not as much spare cash as might be retained. (or is the retention figure roughly what needs to be spent to make the property sound?)

Obviously also worried that we could lose all our legal fees by being gazumped, especially if we don't play very cleverly with the offer we may make.

I know from everything you've already said that repos have an inbuilt risk - I can totally understand how and why. I guess there's always going to be a first time when you're starting in the property business.

[Melboy]

Your biggest problem as I see it is having the finances in place.

I have often beaten higher prices submitted by those who have to have a mortgage as a lower offer cash buyer. "Cash is King" in my the property game, well, it is the way I see it.

Don't forget the EA will forward onto the mortgage company the offer results and it is the mortgage company who makes the ultimate decision on who they wish to sell to and in my experience it is always the person who can proceed the quickest with the Dosh.

Most utiliies charge now for re-connects but try and haggle with a utility company by saying you will sign up with them.....you never know.

[Richlist]

How much does it cost to have gas/electric/water/telephone reconnected?

I've had a quick Google but can't seem to find anything more than "some companies are happy to reconnect for free, but you'll have to pay for the telephone".

* Water......surely just needs turning on at the stop cock located in the street ?

* Telephone.......if its already wired into the property & there are phone sockets surely you don't need to worry about connection costs......thats up to the tenant.

* Gas & Electric......I'd imagine that the cost depends on the work involved.

[chickpea]

Your biggest problem as I see it is having the finances in place.

I have often beaten higher prices submitted by those who have to have a mortgage as a lower offer cash buyer. "Cash is King" in my the property game, well, it is the way I see it.

Don't forget the EA will forward onto the mortgage company the offer results and it is the mortgage company who makes the ultimate decision on who they wish to sell to and in my experience it is always the person who can proceed the quickest with the Dosh.

Most utiliies charge now for re-connects but try and haggle with a utility company by saying you will sign up with them.....you never know.

That puts us out of the running, then. We don't have the cash, end of.

That said, I keep reading of people in this situation who have got to the day before exchange and still been gazumped - how does that work, if getting their cash quickly is what the mortgage companies are interested in?

If the offer that's going to notice goes towards exchange, what's to stop us buying time to get our finances in place by doing exactly as I've described above (assuming that the other party aren,t cash buyers)? What purpose does the notice period serve, if anyone can come in at any time during the 28 days and offer higher?

[Melboy]

What purpose does the notice period serve, if anyone can come in at any time during the 28 days and offer higher?

Normally this doesn't happen unless there has been a delay by the buyer.

The 7 day notice is is required in order for anybody to put forward a higher offer because the mortgage company has to obtain the highest price possible on behalf of the mortgage in re-possession. Also this done to show that a public announcement has be made under the code of conduct for selling a repo.

I have seen enough "shady deals" over the years by insider trading thankyou and the 7 day notice has put paid to this practice also any EA must declare an interest if they are putting an offer forward...by law.

I have never been gazumped when buying a repo. property. Once the EA and the mortgage company have acccepted my offer it has always gone smoothly to completion. It is extremely unlikely that an EA would consider a gazumping offer during the purchase process and why should they on a done deal??

If you have seen a 7 day notice Tracey and you feel you could offer a higher price than by law the EA must put your offer forward to the mortgage company concerned.

[chickpea]

What purpose does the notice period serve, if anyone can come in at any time during the 28 days and offer higher?

Normally this doesn't happen unless there has been a delay by the buyer.

The 7 day notice is is required in order for anybody to put forward a higher offer because the mortgage company has to obtain the highest price possible on behalf of the mortgage in re-possession. Also this done to show that a public announcement has be made under the code of conduct for selling a repo.

I have seen enough "shady deals" over the years by insider trading thankyou and the 7 day notice has put paid to this practice also any EA must declare an interest if they are putting an offer forward...by law.

I have never been gazumped when buying a repo. property. Once the EA and the mortgage company have acccepted my offer it has always gone smoothly to completion. It is extremely unlikely that an EA would consider a gazumping offer during the purchase process and why should they on a done deal??

If you have seen a 7 day notice Tracey and you feel you could offer a higher price than by law the EA must put your offer forward to the mortgage company concerned.

Thanks Mel.

You make the process very clear. I was concerned from reading posts in various other places that describe how buyers have been gazumped right up to the day before they were due to exchange on a repo. It didn't seem to tally with the idea that the lenders want their money asap - that's why I asked for clarification. There's no way I want to go through the process and risk losing a couple of thousand pounds if it allows anyone to come in at the last minute and take the property from under us. Nor would I feel happy doing the same to someone else (my question was a hypothetical one).

The notice is due to appear in the property mail next Tuesday.

We are viewing, hopefully with our builder ,on Saturday - as is another interested party, we're told.

I am baffled by the EA - we rang up about this property last Saturday, to be told "it's under offer and you can't view it" quite firmly. Likewise, we called several times yesterday about it, to be told again that it was "sold, I believe". Meanwhile, the other party managed to book a viewing for Saturday. It was only when my husband finally managed to speak to another person in the agency and mention that he knew it was a repo,that we finally got the go-ahead to view it...but now they are saying they can't possibly manage a viewing until Saturday.

If you're interested, the property's on Rightmove - in Cowbridge, Vale of Glamorgan. 2 bed mid terrace £140k.

[Melboy]

Mmmm! We all know without stating it why the EA is reluctant to show anyone else around especially if the present buyer is known to the EA and perhaps also the buyer may well be a "special customer" of the EA.

I have experienced this personal service before.

The EA would be treading on thin ice if he / she didn't allow future viewings or submission of offers during the 7 day notice period because they would be breaking the law as it stands and would be heavily fined if they do not follow procedures and it could be proven that offers were not passed on.

Mel's tip for you: If you make an offer then the EA must notify you in writing that your offer has been received and logged by them.

[chickpea]

Thought I should come back and update my post.

We got to view the house. It was quite obviously a mental health case situation - the house was totally uninhabitable, you could see daylight through the roof, mould and damp and holes everywhere etc.

The agent said that they'd had lots of interest and offers of £130k, but the lenders wanted more.

The offer that was on notice was an asking price offer of £140k - from a couple desperate to get into the town, who were going to do it up while living at their parents.

With the work that needed doing (already £40k at a guess) and the retention the mortgage lenders would slap on it, it was a definite non-starter for us.

[Melboy]

The offer that was on notice was an asking price offer of £140k - from a couple desperate to get into the town, who were going to do it up while living at their parents.

So why wasn't it sold at the asking price to the people who offered it?

I have dealt with this type of situation many times over the years and only once have I got it seriously wrong on a judgement call of "shall I...shan't I".

In my experience people who are going to "do up" a basket case of a property get it wrong time and time again at undervaluing the costs of the work involved.

Walk away Tracey and watch from the touchline.

[chickpea]

As far as I can tell, the notice wasn't a 7 or 14 day one either, Mel - it was simply higher offers before exchange.

The other lower offers seem to have been from developers with trades at their fingertips (we viewed at the same time as an electrician with his own business). The figures simply didn't stack up, so it was a very easy one to walk away from for us.