Buying a repossession - what are the problems ?

HOORA

I have found a property in a road I like. It is on the market for 210 although that would probably be around the Sep 07 price not todays. I would say that in that road, a ready to move in property like this (good kitchen, 2 decent bedrooms, 1 tiny box bedroom, cellar, period property) is probably worth 175-180 now. Naturally they will fall further.

However it has had one sale fall through as the prospective buyer felt it had too much work on it to do (says the EA) and is back on the market. It is a repossession and vacant and in the possession of the company. I would be getting a full structural survey done - it is an end of terrace period property.

I have yet to view the property but will do so this weekend. Ive told the EA my position - 40k cash and a mortgage in place but to not expect anywhere near asking price, but I can complete very quickly. He said it does need a lot of work - new kitchen, new bathroom, total redecoration - it looks like it hasnt had work done to it for years and is in a state of disrepair.

But from the sound of it there is SO much work that would need doing, what is a realistic offer these days ? Would I be laughed at if I offered 125k ? I think there could be 30-40k of work to do to it, but even so I would probably only have 28k if I put down a 10% deposit of 12.5k in that position, and less if more deposit.

Im a first time buyer who has saved very hard for nearly 3 years, and I dont have any experience of property nevermind repossessions.

There is no record of sale after 2001 so cant look up bought price but would expect that it sold pre 2000 for around 90-100k probably less, so am wondering how much the company that possesses it is actually owed.

ANY advice appreciated.

SquatNow

I doubt you'de get it for £125.

Also note that you'de need some of your 40k for the remedial work.

If you really want it, wait for it to go to auction the second time. (First time it will have a reserve, which it wont reach!)

Incisor

View it first. If you want to start making your plans before you have viewed it, but if you want useful opinions, view it first and give us some indication of what you have seen.

HOORA

Many thanks - I will let you know once Ive viewed.

It isnt up for auction - the EA has been instructed to sell by a certain date then it will go to Auction (I cant buy at auction as I dont have the full amount in cash).

I have an upper limit that including all fees, furnishings, redocoration and anything to be added all in to be 185k, so if there was only 25 k of work to do to it I would willingly pay more than 125.

I also want to live in whatever property I buy for a minimum of 10 years.

However houses sold in 2000 on this road just like this for 90k, and in 2001 for 125. Therefore I would not expect a mortgage company to be owed more than that. If I gave them around what they are owed plus a little bit, bearing in mind one sale has fallen through, what do you reckon the repossessors would do - hang on for more or get rid?

Also - what are the pitfalls of buying repossessed ? thanks

Trollfever

(I cant buy at auction as I dont have the full amount in cash).

Get your mortgage, solicitor and surveyor sorted and you can.

More info can be found here:

http://www.barnardmarcusauctions.co.uk/


If you have a Rightmove link folks will give you the Property Bee history, if any.

bo_drinker

It may have had re mortgages over time and now owes them more than it is worth. I would go in at 125, they can only say no. Say you spend 40 on it then it's at 165 done, where is the market going to be then. No one knows.

HOORA

thanks.

More info - I have gotten SOME info from Landregistry but no prices. I think it was worth £3.00.

The property was bought in 1997 - so market value then would have been under 85k.

Remortgaged in 2003.

There was a charge put on the property in 2006 - I presume to build the extension that is there/do some internal conversion, or maybe to start a business that has gone wrong because in late 2007 a Bankrupty Notice was put on it and in Dec 2007 a BANKRUPTCY RESTRICTION then placed.

In 2006 I would say from nethouseprices the average price in the three months before the charge was placed was 157k to 190 k range. So in theory there may have been up to 100k equity that may have been released (what a mistake that was). I feel sorry for the previous owner, but not for the loans company.

Anyway - the Personal secured loans company is probably behind the bankruptcy. Is an undischarged bankrupt still liable for any monies not recovered by the house sale ?

Does this info change anything ?

bo_drinker

I think they are, they have to declare earnings etc but how strict it it I don't know. Many do the homework and stay under the threshold until the creditors get bored and back off. This was the case a long time ago, things may be different now.

Premier_2

HOORA wrote: »

...Does this info change anything ?

Not really. The property would have been valued by the EA at £210k in it's current condition based on recent sale values of similar properties and making allowance for any work needed.

If the highest offer the EA can attract is just £125k, expect it to go to auction (where it may even have a reserve on it to avoid it being given away for peanuts)

GDB2222

There is nothing to stop you buying it at auction, but you will need to spend some money up-front to get your mortgage offer in place before you bid. This puts you at a disadvantage compared to any cash buyers around.

Lenders tend to be quite realistric about what they can achieve at auction. Surveyors tend to overestimate how much a house's value is reduced if work is needed, as they deduct the cost of the work from the value of the house if in perfect condition. In practice, buyers tend to pay more, for example because they can do some of the work themselves.

I would offer what you want to, as there is no penalty for under-offering.

HOORA

Well, I went to view the house and took lots of pics. I liked the layout, but there are several real problems. Well - they might not be if you are a builder I suppose.

Not lived in since at least Feb 08 and is smelling a bit dank and damp.
Obviously no mains electric, gas or water working.
Previous owner has had more than one brush with the law on some serious criminal matters as well as being made bankrupt and professionally struck off by his professions' legal body for malpractice.
The cellar is 'partially converted' (EA). It is actually still a building site left halfway through the job.
There are a lot of things left inside the house and in the garden, including the kitchen appliances, kids slide and toys outside, and even previous owners sleeping bag where he was dossing down in the front room.
Every single room is in need of being ripped out and redecorated.
New (total) kitchen needed.
New Bathroom needed.
Looks like there is a problem with the gas pipes feeding in to the cellar. The electric mains feeding in crosses over the gas pipes. Hmmmmm.

Previously agreed for sale to a price not too far off the asking price. However buyer pulled out after full structural builders survey was completed - although that was supposed to be the 'amount of work needed' not the cost, or because it was structurally unsound - according to the EA of course.

I am prepared to do work myself, but even so I dont think I was too far off with 40k spend required to make it habitable. More for a really outstanding finish.

It has not been instructed for auction.

I put in the offer on the day for 125k. He didnt dismiss it out of hand but told me the Large Bank that repossessed is unlikely to accept. Provided proof of mortgage availablility etc so am waiting till Monday or Tuesday.

I was absolutely amazed that he still felt it was worth over 200k when a house almost identical in the same terrace (in mint condition which could be lived in straight away) was prepared to sell at 175-180k (I know because I made an offer just under this).

Have my surveyor and solicitor ready to go. Did laugh when my solicitor told me EAs in this town hate my surveyor as he just hammers them down on price.

Any advice more than welcome. Especially if you have or know someone who has purchased a repossession. Thanks.