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