IT’S often said that “one person’s misery is another person’s opportunity” and that can certainly be the case for house purchasers in today’s difficult market.
There has been a big increase in the number of repossessed homes coming on the market locally and bargains can be picked up, but, are there any particular issues which you need to be aware of when you are buying a repossession?
Once a lender has gone through the long procedure of taking possession of a house, they have a legal duty to sell it for the best price they can achieve in as short a time as possible. This is because the mortgage debt is only cleared after a sale has been completed. Generally an asset manager will be appointed and the property will be placed for sale either through an estate agent or it will go to auction.
If you are buying through an estate agent the process isn’t really all that different to a normal purchase, but there are some things to think about. It is likely that you will not be able to get as much information about the house as usual as the lender has never lived in it.
For example, if an extension has been built or alterations carried out, you can usually check the details with the vendors and obtain all the paperwork. With a repossession, the lender may simply not have this information. The principle of Caveat Emptor or “let the buyer beware” means that you must do thorough research before you commit to buy.
Always get a survey done and don’t forget that a basic valuation report for your mortgage provider may not give you all the information you will need. Remember that the electricity, gas and water are likely to have been disconnected.
There may well be issues which cannot be fully tested until after you have completed the purchase. Make sure that your solicitor has done all the searches and is happy for you to sign the contract. It’s often not possible to renegotaiate the terms as standard contract documents are frequently used by asset managers.
One big problem to be aware of is that you might be gazumped. If a better offer comes in, the lender will pull out of the sale at any stage up until the contract is legally binding.
If the property is being sold at auction the same rules apply. You must get your survey done and your legal enquiries all completed in good time. When the auctioneer’s gavel drops you are legally bound to complete the purchase. You must have all your finances in place including a deposit which must be paid there and then in the auction room.
If your bid is not successful you will lose the survey and legal fees that you have paid. Set a strict upper limit and don’t get carried away at the auction. Reserve prices can sometimes be very low but in the adrenaline fuelled atmosphere of the auction room it is tempting to pay more than you intended. Never ever buy on impulse.
Don’t assume mortgage finance will necessarily be easy to obtain. Lenders might hold a retention if work needs to be done to reinstate the property. It’s good advice to discuss your plans with your mortgage provider at an early stage.
Even once you’ve bought the house there are other things to think about. You will probably have to arrange for the services to be reconnected. This may be an additional cost and some of them may not be in a safe condition. Likewise, leaking pipes might only be discovered after the water supply is turned back on. Check with the credit reference agencies if the property is blacklisted as this can cause problems.
You may also have to deal with demands arriving in the post for the previous owner. It is illegal to open post addressed to someone else but don’t just ignore it. Return it to the sender if their details are on the outside of the envelope marked “addressee not known”. There are even tales of debt collectors turning up on the doorstep.
So, it is possible to benefit from someone else’s misfortune and grab a bargain, without the difficulties of getting involved in a chain, but be prepared , do your research and go into the process with your eyes open.
Peter Woodhead, BSc, MRICS, an independent Chartered Surveyor. For further information or advice contact him at McAfee Professional Services, Coleraine, Tel: 028 7034 2247.