Bidding on a repossession house

AJRFulton

Hi there,

I will be a cash buyer and I've bought a few flats in the past in move in condition. I'm fairly familiar with this market. However repossession/renovation is new to me.

I'm after a slightly bigger 'stepping stone' property to live in for 3-4 years whilst I plan to self build my own house, and I have seen a repossession house come up for sale in the area I live (West of Scotland). I feel this is an opportunity to learn a few things that will prove useful when self building and get a perfect stepping stone house.

Firstly it is a council style house, and close match houses in the area have sold for, in 'move in' condition for between £62-£77k in the previous 3yrs. At present there is a house of exact same build and lay out for sale for offers over £64k, that would only require personalisation (ie a small bit of painting and decorating). The home report values this property at £71k, and everything to do with the house is listed as a '1', the only '2' is the wooden shed outside basically needs TLC. It is typical for ex council houses to be sold for 5-10% below home report value in this area.

So onto the house I've seen, it is a repossession at offers over £42k - the home report values the house at £45k. I'm fortunate to have family members who are roofers and builders and I've sought their expert opinion - both have given the house the all clear structurally, although the chimney needs capped (or removed altogether). However, it isn't a major job.

So what does the house need done. Well it was built in 1960, and much of the decor is still original. Basically it needs everything ripped out, new toilet, kitchen, radiators, plasterboard/plaster and new double glazing, as well as a partial rewire. It may need some floor boards repaired and the conservatory (which is bizarrely modern attached to a house that looks very 1960's inside) needs a small bit of tidying up. With the 55yr old plaster board being removed, I'd take the opportunity to do some slight reconfiguration of the upstairs.

The house has been clad in thermal cladding, which has 22 or 23yrs left of a 25yr guarantee. This was remedial work carried out by the council on all ex properties 2-3yrs ago.

Bearing in mind once complete the house will be valued at about £73-74k but realistically will sell for £65k, what is a fair price to offer?

I was thinking around £35k, which is a fair bit under the asking price.

Mr.Generous

they usually go over the asking price round here, and they never call them repo's - Corporate sale is the pc term. I'd be very surprised if It went under budget, they usually end up with several offering over the asking price and go to sealed bids.

Doozergirl

I wouldn't touch it, given the low value, but there you go.

New build and renovations are different creatures, new build being a lot simpler in many respects. Low value houses are a risk in many respects, with the end value often being less than actual build costs, which makes renovation budgeting a bit dodgy. There also isn't a lot of demand on resale as if people can afford to buy a house they can usually afford higher mortgages than this sort of house comes in at.

They are long term rental rental investment properties but that also comes with risk. The tenants for them aren't the most reliable and are much more of a financial risk when they steal all your appliances.

PasturesNew

Most people would buy something like that to keep as a rental or to live in it themselves I suspect, rather than to do up and sell on,

You really need to be having this discussion with all your local estate agents, see what they think. They know who buys what and why.

AJRFulton

I am going to be living in this property, 3-5yrs would ultimately be the plan, then probably renting it out afterwards, although we may look to sell - it would depend on the market. The area isn't bad, just very rural hence low house prices. I probably haven't made that clear in my original post.


The reason why I am looking for a stepping stone house - I've outgrown my current abode - My parents own a small holding with out buildings, I have land and planning there to build a house but.... I am waiting the outcome of nearby quarrying/landfill operations before deciding what to do. The variable is they decide to extend the landfill - which obviously effect the desirability of a down wind new build. However the other variable is the quarry is an area of scientific interest due to being a fossil bed. We expect to know what is happening over the next 3-5yrs.

G_M

I assume it's being sold traditionally - not via an auction?

1) Make list of all the work you'd need to do
2) get your builder family members to help you cost it out
3) check the legals all seem OK
4) work back from your estimated value post renovation, deduct the figure in 2) above, deduct another (10K?) contengency; deduct an amount to compensate you for the time & stress of renovation and that's your final top offer
5) take your figure from 4) above, deduct £10K and offer that. Then work up if necessay to the top offer figure. Then stop.

davidmcn

Also bear in mind whether there's any other interest - these sorts of properties often go to a closing date, in which case you only get one shot and are more likely to have to bid at or above the HR valuation.