The most recent Allsop auction took place on December 15^th and 17^th 2009 and saw 415 lots offered for sale, a drop of 62% on the same time last year when Allsop were offering 1,100 properties for sale at auction.

This dramatic difference illustrates what is happening in the repossessed property market, which can by summarized as follows:

• Levels of repossession sales at auction peaked in Q4 of 2008 but have fallen sharply since
• Volume of residential auction sales as a proportion of all recorded sales rose from 1.2% to 4.7% in Q4 of 2008 but has since dropped back to 4.1%
• There has been a sharp fall in buy-to-let buyers, with 86% of purchasers at Allsop residential sales buying as private investors

This fall off in sales of repossessed properties can, in part, be explained by the increasing pressure placed on lenders by the government to assist owner-occupier borrowers to avoid the ultimate sanction of repossession.  Increased politicisation of the largest lenders became inevitable as they merged with the Lloyds Banking Group, and ultimately became 43% state owned.  And, of course, Northern Rock had already been nationalised.  As is the way of the world, state owned organisations are politically driven rather than commercially motivated.

2009 Government Measures to Support those at Risk of Repossession

• £200m mortgage rescue scheme targeted at the most vulnerable households on incomes of £60,000 or less a year who are entitled to be re-housed under homelessness legislation. Eligible households apply to their local authority either to sell an equity share or the entire interest in their home to a housing association and remain in occupation at a rent.
• On January 5 2009, changes came into effect on Income Support for Mortgage Interest (ISMI), cutting from 39 to 13 weeks – the time before homeowners who lose their jobs receive financial help with the interest payments on their mortgage. This is only available to homeowners who have an outstanding mortgage of less than £200,000.
• The Homeowner Mortgage Support Scheme (introduced in April ’09) allows households which suffer an income shock to defer part of their payments for up to two years.

You could be forgiven for thinking that the foregoing means that levels of repossession are falling.  You would be wrong.  Although the number of repossessions forecast for 2009 has been reduced from 75,000 to 65,000, the number of repossessions recorded by the Council of Mortgage Lenders continues to rise. What has fallen dramatically is the proportion of these properties offered at auction. Experts predict, however, that 425,000 borrowers are likely to end 2009 more than three months in arrears with their mortgage repayments.

So, could we see a return to the previous trend of auction houses being the place to go looking for investment properties?  It’s a case of watch this space.  The next Allsop residential property auction takes place on 9th and 11th February, 2010.

Property Earth is a website that specialises in chain free properties sourced from a variety of markets that include unsold builders’ stock as well as lender repossessions.  At the time of writing their site features properties from the far south west of England up to Inverness; they also have properties in Northern Ireland.  To receive regular updates on available properties you simply need to register for email alerts.

Whitehot Property has, in collaboration with their parent company, movewithus, established relationships with builders and lenders that allows them to sell repossessed, probate, and part-exchange properties directly.  They are, if you like, the middleman.  To find properties in your desired area you simply enter the postcode and,  once again, registration for regular updates is a simple process.

Its important to note that neither of the above companies make a charge – you sign up and you get alerts, then its up to you what you do with that information.  There are other sites out there but beware many of them make a monthly or annual charge for the information.  If you are seriously into property redevelopment then perhaps it would make sense to pay for these services but for the average man in the street why pay when there is no need to?

The very simple truth is that the internet is a superb tool for finding any type of property, you just need to keep your wits about you when searching.  If somebody asks for money upfront, be wary.

Finally, don’t forget your local newspapers and estate agents!  Estate agents don’t always advertise the fact that they have repossessed properties on their books, so its worth phoning to ask.  As for local property auctions – they are rarely widely advertised, so it pays to look closely at the small ads in the property section of your local paper.

Whatever you do and however you find your property, we urge you not to neglect the ‘pre-flight’ checklist outlined for you in our article Buying a Repossessed House at Auction.

But where do you find them?

It’s all very well, isn’t it, being told that if you buy a repossessed property you’ll pay around 30% of its market value when what you really need to know is how to find these superb value properties.

The traditional way to find these houses was to visit property auction houses in your preferred area but, as with every other area of life, the internet has changed things a little!  Having said that, by concentrating on only one resource you may miss out on a really good bargain so it pays to spread your net widely.  What follows is our guide to the top repossession property resources.

Pre-Sale Essentials

It’s a large topic that’s best dealt with across two or three posts.  We’ll start with a look at traditional property auction houses.  Before you start your search, however, it pays to have all your ducks in a row!   Some of the major points have already been covered in the article on repossessed house auctions, however, it won’t hurt to reiterate them here:

1. Go to an auction house to get a feel for what happens and how the auction process works.  If you’ve never been to a property auction before your first visit can be a little intimidating – even though there’s nothing to be worried about.  So get this first visit out of the way before you actually go to buy.
2. You need virtually instant finance to buy a property sold at auction.  On the day of the auction itself you will be expected to pay a deposit, which is usually set at 10%, and the balance of the finance is required within 28 days.  Therefore, it is vital that you arrange your mortgage before attending the auction.
3. Have the property surveyed before the date of the sale.  A mortgage lender will insist on this anyway.
4. To find out what properties are listed with the auctioneers in your area of interest you need to order their catalogue.  Some auctioneers are purely local, whilst others deal with house sales nationwide – a quick phone call is all it takes to get the information you need!

Auction Houses

The following auctioneers carry repossessions:

Allsop

MustBeSold

Savills

Barnard Marcus

Our Advice

1. Complete the ‘pre-flight’ checklist detailed above.
2. Search the Allsop site, which lists completed auctions.  This gives you a feel for what properties are going for ‘on the day.’
3. Log into the suggested sites on a regular basis.
4. If you see a property that fits your criteria, attend the auction on the day specified.

Next time: How to Use the Specialist Websites

Usually, the estate agent is the first port of call for buyers. However, in January of this year the number of repossessed homes being sent to auction rose dramatically. The beginning of the year is traditionally slow in terms of property sales, yet 465 property lots were on offer in London during January – 364 of these were repossessions.

At the end of 2008, repossessions were 40% up on the year before, and this was reflected in the large number of repossessed properties sold at auction: an incredible 3078 in November and 813 in December. Auction property sales were 40% higher in 2008 than the year before, and repossessed properties made up one third of these.

With repossessions forecast to reach 75,000 this year, up 30,000 on 2008, the chances are that more people than ever before will visit property auctions rather than estate agents to find a home, especially those on a tight budget. These people will have a wide range of properties to choose from: at the beginning of 2009, auction houses were having to include extra slots in their sales to fit in all the lots.

It is no wonder that private buyers are flocking to the property auctions in droves: repossessed homes often represent very good value for money, selling for anything between 20% – 50% below their true market value. This is also a good way for established landlords to pick up cheap property to add to their portfolio; many lots are repossessed buy-to-let properties.

Although buying a property at auction, whether residential or commercial, can represent good value for money (and does so in many cases), it is wise to proceed with caution – especially if you are a novice bidder. Make sure you have seen a property inside to check it is in a habitable state and have a survey done if possible, set a limit and stick to it regarding bidding, and make sure you have finance in place – a 10% deposit will be required on the day and the balance payable within 28 days.

It can be hard to raise the finance needed to buy at auction: many high street lenders have tightened their lending criteria as a result of the credit crunch and require a large deposit of 20% or more: unfortunately, this can pose a huge problem for many first time buyers.

Robert Sinclair, director of the Association of Mortgage Intermediaries (AMI), comments:

“Properties marketed through estate agents sell better when occupied, in good repair, and well-decorated.

Repossessed properties often fail to meet these characteristics, therefore the auction approach provides an effective route to market for those prepared to consider purchasing such properties.

This also speeds completion, thereby reducing maintenance, interest, and marketing costs, so reducing potential residual debt - especially in a declining market.

Whilst the numbers are going to auction are increasing, this is usual at this stage in the cycle and does provide a valuable conduit to keep the number of unoccupied properties at a minimum.

Those looking to offer at auction do have to have a good idea of what loan they may be able to afford and working with a whole of market intermediary can help in developing a robust plan”.

There are both benefits and risks to buying a repossessed property at auction, yet with common sense the risks can be minimised and a bargain can be had. In the last 4 years, repossessed properties going to auction have increased by 400%, and with such properties priced keenly in order to make a sale, it can pay off to buy at auction rather than through an estate agent.

The housing market is in crisis, estate agencies are closing hand over fist and unemployment’s rising. To top things off, hikes in the cost of living are making life very difficult for homeowners who stretched their finances too far when house prices were high.

But there’s a bright side to every story. The positive slant on this awful situation is that there are an increasing number of opportunities for buying a repossessed house. If buying a home of your own has been an unreachable dream for the past decade, it might soon be a reality. Interest rates are at an all time low and mortgage rates should eventually follow. If you’re a first time buyer without a property to sell, the world’s your oyster… provided you can borrow the money.

Obviously there are advantages and disadvantages to buying a repossessed house or flat. The smoother you can make the process and the more pitfalls you can manage to avoid, the more successful your first step onto the property market will be.

Most people think auctions when they think about repossessions. And that’s a good place to start. The USA has a database of repossessed homes but the UK doesn’t, and many UK repossessions are sold at auction by lenders.

Household name auction house Allsops is an independent property consulting company with a solid reputation for residential property auctions. Probably the UK’s biggest, they sell around a billion pounds’ worth of homes a year at auction, spread across seven massive auctions a year with between 250 and 350 properties at each auction. A good choice if you feel safer dealing with a well known brand name. But there are also local property auctions in most major towns.

Estate Agents also sell repossessions, although they don’t always proclaim the fact. You’ll have to actually go in and ask. Another route into buying a repossessed house is to simply ask around the banks and building societies in the area you want to buy, personally. While they don’t openly advertise repossessions they need to sell the repossessions on their books and they’ll probably be happy to give you details. Another simple way to find repossessed homes for sale is check for announcements in the local papers. Offers are always publicised in case a better offer comes along, to ensure the best possible deal for the seller.

The internet has revolutionised buying repossessed houses. There’s a good choice of specialist online providers who collect together UK house repossession auctions in one place so you can search them effectively from one place, Repossessedhousesforsale.co.uk is one. They hold a database of UK auction properties including details of local auctioneers and auction dates, and provide links to online auction catalogues, property details and guide prices. A great way to save time.

Whichever route you arrive at an auction by, buying a repossessed house at auction can save you a fortune in estate agency fees. But it’ll still cost you money and you need to be prepared.

The same as an ordinary house purchase, buying at auction requires a deposit. You’ll generally need to fork out 10% of the purchase price, which means you need to have a firm grip on exactly what you can bid based on how much cash deposit you can scrape together. You pay the deposit as soon as you’ve bought a property, before you leave the auction house.

After that you have 28 days to pay the balance, no excuses. Buying a repossessed house at auction is a legally binding contract and you can’t back out. Because the wheels of mortgage lenders tend to turn very, very slowly it’s wise to get your loan agreed before you go anywhere near an auction house.

In difficult times auction mortgages are as rare as ordinary mortgages. There are fewer deals around and – perhaps unsurprisingly – nobody seems to be advertising auction-specific deals. The first port of call should be your bank. Provided you have a good relationship with them, they should be able to give you a very quick decision about whether or not they’d be prepared to lend the money to buy a repossessed house.

Once you know what your bank can or can’t offer, it’s a good idea to let a Mortgage Broker loose on your case. Independent brokers, unlike tied brokers, have access to the entire UK mortgage market and can trawl around to find you the best deal. And they know the lingo, which helps. A tip: remember to tell your broker that you want a mortgage specifically for buying a repossessed house at auction. He or she will co-ordinate your mortgage approval date with your chosen auction date so everything is ready in good time.

But what of the future? Will we all be knee deep in low cost repossessed houses and flats for the next decade? Are property prices due to keep falling, or will they recover? Predictions are mixed.

Savills is another of the property big boys, a leading name in UK residential estate agency and commercial property. While they don’t auction repossessed houses they do a great deal of research into the housing market and their views are well respected. In an article published in The Times on 14th November 2008 Savill’s Head of Residential Research Yolande Barnes said,

“… the roots of Britain’s downturn lie in the credit crisis and the consequent withdrawal of funding by lenders… The UK housing market really is a different country: in the US as many as one home-owning household in 16 has defaulted on its mortgage or faces repossession, compared with fewer than one in 200 in Britain. To predict that the UK housing market will fall by 40 per cent and remain at these new, corrected levels is to ignore the role of finite supply and the use of equity.” In other words, don’t be fooled by all the doom and gloom.

Sadly Yolande seems to be swimming against a pessimistic tide. The majority of experts insist that the housing market is broken, and will remain so for the foreseeable future. It appears that things could swing either way. Whoever’s right, it doesn’t change the fact that buying a repossessed house, in today’s market, can net you an excellent deal. Provided you can find the finance!

To find out more about house repossession aucitons, visit our forum.

Do you agree with Sadly Yolande’s opinion about the UK housing market?

House Prices for Repossessed Houses sold at Auction

The latest Allsop auction offered 1,100 properties for sale with 18 homes selling for less than £100,000. Lets take a look at the investment opportunity that this offers.

Lot 786 - Three bedroom flat in council block in Brixton. Estimated value in Oct 2007 was £180,000. Sold for £79,000 – Council flat, with its proximity to Brixton Station and Victoria Underground makes this a very cheap London purchase. When you take a look at asking rents for 3 bedroom properties in Brixton on the Gumtree.com the price varies but the lowest of the low is still around £220 per week.

Now lets take a look at this as an investment. In simple terms £220 per week = £11,440 per year, less vacancy of say 2 weeks you are at £11,000 per year. You must also take into consideration insurance and repair which might equate to £750 per year on average. Management fees? So you are netting approximately £10,250 per year. Therefore £10,250 / £79,000 = 13% yield. Which is excellent. Compare this to what you get in the bank and at some point this flat will rise in capital value. It looks like a good investment if you can get a mortgage.

Lot 101 – One bedroom flat in part timbered block in East Dulwich. Estimated value in October 2007 was £240,000. Sold for £100,000. Located in Zone 2 with 6 trains an hour to London Bridge. If you search through Gumtree.com for 1 beds in East Dulwich the lowest asking price is approximately £180 per week. This low rent equates to £9,360 per annum less vacancy of two weeks per annum, call it £9,000 per annum. Again, you must also take into consideration insurance and repair which might equate to £500 per year on average for this smaller property. Management fees? So you are netting £8,500 per year. Therefore £8,500 / £100,000 = 9% yield. Which is very good. It looks like a good investment, if you can get a mortgage at a rate of say 6.5% then you would be able to pay your interest off and some of the capital.

Lot 766 - Two bedroom flat in Victorian semi in Forest Gate. Estimated value in October 2007 £235,000. Sold for £95,000. Trains are direct to London Liverpool Station with typical off peak service of 6 per hour. Searching the Gumtree.com finds rental levels for 2 bed properties at an average low of £175 per week but this is a Victorian semi and if you search for that specifically in Forest Gate rental levels seem to be closer to £210. We will assume £195 per week which is £10,140 per annum, less vacancy of £390 (2 weeks rent) and repairs insurance of £750 and we net approximately £9,000 per year. Therefore £9,000 / £95,000 = 9% yield. Again very clean and easy investment not using wild assumptions.

We don’t know the condition of any of the properties. We have assumed reasonable condition but you should probably expect to pay a further £1,000 for the one beds and maybe up to £2,500 for the 3 beds to bring them up to rental standard. Maybe change the kitchen benches over, paint the walls and doors, buy some blinds and if your furnishing it, get some IKEA furniture. Or save money by doing it yourself, but remember every week its not complete you have lost that amount in rent. Time versus money is crucial when looking at investments.

Freehold or leasehold? Freehold is worth more as you do not have to pay any leaseholder a service charge yearly. If these are leaseholds with less than 80 years on the clock then automatic renewal of the lease has expired and you will have to take into consideration marriage value, so you could be up for an additional £3,000 to £8,000. So take a look at the lease expiry date.

Upon writing this, we do not feel that the rental levels could be looked upon as high. In fact we assumed the lowest levels for each product given its suburb when compared to the many entries at the Gumtree.com

So maybe its time to buy as house prices are low? Better than interest in the bank and then wait for the capital value to climb!

When do you think house prices will hit rock bottom?

To find out more about repossessed house prices, visit our forum.

Buying at a repossessed property auction can be a great way to grab yourself a distress sale or repossession bargain. In fact, almost all of the UK’s cheap property is sold via auction.

A legal commitment to buy

When your bid is accepted at a house repossession auction, you’re legally committed to buy. In law, your final bid is viewed as the exchange of contracts… just like that. You can’t pull out of completion without paying damages.

The big advantage to house repossession auctions is, of course, that you can’t be gazumped. And, unlike with a standard sale, the seller can’t withdraw at the last minute. Obviously this is completely different from buying through the normal channels.

Get your finances in place up front

house repossession auctions carry a heavy financial risk. When you’re buying a repossessed house, auction finances must be in place and you must be ready to go to completion within the timescale specified; usually 28 days. No excuses. And you must have your deposit ready on the day of the sale, typically 10% of the purchase price.

Set your top price and stick to it

Because of these obligations, it’s vital you set your top price in stone before you set off to house repossession auctions. Decide what you can afford and base your bid on what you think the property is worth to you. Bidding over your top price can get you into terrible trouble, so take someone with you to help keep your bidding under control if you think you might get carried away!

Repossessed property auctions – always do the legwork first

Never bid blind at house repossession auctions. Before you bid, make sure you’ve researched the property you intend to bid on. Get surveys. Instruct your solicitor to check the property’s title deeds, investigate local searches and dig out any special conditions of sale. And view the property yourself before placing a bid.

The cost of being prepared is much less than it will potentially cost you if you buy a repossessed home at auction and discover later that it’s about to be leveled for a new motorway, or about to fall down because of subsidence.

How do I find out where repossession auctions are held?

Keep an eye on your local papers, contact estate agents, ask lenders, talk to auctioneers and search online to find out when and where local repossessed property auctions are taking place.

Leading Repossessed House Auction Sites:

• government-auction.co.uk,

• repossessedhousesforsale.co.uk

• Reporadar.co.uk

• Allsop.co.uk

To find out more about house repossession aucitons, visit our forum.