Buying from an Bankrupt vendor - things to be aware of

g000444555 · 5 December 2019 at 11:21PM

I am thinking to buy a property from an bankrupt vendor. I am a first-time and novice buyer and am unaware of the pros and cons of this kind of transaction and whether there is anything I should be particularly careful about.

I like everything about the property except the fact that it's in non livable standard and abandoned for some (less than 5) years. Despite the terrible condition I believe I could bring it to a livable standard and the price difference would worth it. However, I am not sure whether the bankruptcy of the vendor could affect me in any way. The property is significantly damaged internally as the previous tenant seemed to vandalise it on purpose by tearing off the doors and breaking anything he could. Obviously, the latter is factored into the asking price and I would be happy to fix the issues having budgeted the amount from the price drop.

Here is the information provided by the agency:

- The property is being sold on behalf of the Trustees in Bankruptcy.
- The property is to be sold as seen
- The property has been drained down and services shut down, the services cannot be turned back on until completion. We cannot offer any guarantees for the services.
- Due to the nature of this sale limited enquiries will be answered by the vendors solicitor.

I know that the property has been in the marked for several months and the price was recently reduced because it wasn't able to sell.

Other than the fact that it would be worth doing a detailed survey in this case due to high risk, are there any other suggestions?
As a novice buyer what should I make sure to consider before buying it and does it worth the risk?

diggingdude · 5 December 2019 at 11:24PM

you need a good survey and to be getting it at a good prove to be worth the hassle

Thrugelmir · 5 December 2019 at 11:24PM

Do you require a mortgage?

davidmcn · 5 December 2019 at 11:30PM

If it's actually not in habitable condition then you won't be able to buy it with a mortgage.

Davesnave · 6 December 2019 at 1:31AM

This is not a first time buyer property.

A house like this will go to a cash purchaser who will have the skills, experience and contacts to sort it out at the best price. If you are contemplating a 'good survey' it sounds like you don't have those contacts, who would have examined the house for you by now.

Those who have looked didn't bite at the old price, so the benefits are probably marginal unless the price has fallen dramatically.

The house can't be made habitable before completion, so if there's a mortgage involved, it's a non-starter.

Pick something easier as a first buy

g000444555 · 6 December 2019 at 9:38AM

These are all great points, thank you so much for your comments!

I do require a mortgage. Given the market I don't think there will be many people with that kind of cash at hand willing to buy it without mortgage.

Another factor is that the market seems to be in decline and experts predict a drop of 10-15% within the next 2-3 years. Basically, the next year 2020 is dejavu of 2009. So this makes me wonder whether I should wait despite the fact that I am looking to buy my very first house.

I was thinking in this case to reduce my deposit in order to have the budget to do the works before moving in.

The price dropped by 7% from their original asking price because they couldn't sell it for months. Zoopla evaluates the property for 20% higher than the current asking price, however, it obviously isn't taking into account the fact that it's not habitable and literally abandoned.

One more thing I noticed is that there is an active company registered at that address, even though I am not sure this should raise any concern. According to the company's house records there were two more companies in the past that got dissolved recently while another one that is still active has been moved to a nearby address that is also on sell.

Generally I am a DIY person and would enjoy making it habitable. Ones I enable the services (electricity, water, internet), clean it up, and change the locks, I believe the house would qualify as an 'under construction' temporal accommodation.

There are some cracks in the walls which don't seem to be structural. I would expect the detailed survey to reveal what's the case. I don't have the connections who could undertake the task for me or even inspect it however I do know some people who know other people who could do that, if needed so down the line.

My understanding from the above advices is that this is a no go for a first-time buyer and I might not even be able to get a mortgage for it. Perhaps it would be a better idea to go for an easier buy. I might still make a non-generous offer, just to see if I can get it for an even better deal.

AdrianC · 6 December 2019 at 9:55AM

g000444555 wrote: »

I am thinking to buy a property from an bankrupt vendor.
...
Here is the information provided by the agency:

- The property is being sold on behalf of the Trustees in Bankruptcy.

So the vendor is NOT the bankrupt themselves, but their trustee in bankruptcy.

Think of it as buying a repo.

There will be a similar onus on the trustee to get the best possible price, so there is a risk of being gazumped at the last minute, right up until exchange. If it's been on the market for months, unsold, and has been reduced in price - that's less likely.

knightstyle · 6 December 2019 at 10:01AM

Another problem with this sort of purchase is that the sellers agents are duty bound to get the best price so if, at the last moment, someone offers a few grand more than you you loose the purchase and have your expenses to pay.
This happened to a friend who was buying a repossession. However that then fell through and the house was up for sale at a lower price several months later. Too late for my friend as he had already bought another house.

davidmcn · 6 December 2019 at 10:05AM

g000444555 wrote: »

I do require a mortgage.

In which case, if it doesn't currently tick the boxes for being "habitable", forget about it.

Given the market I don't think there will be many people with that kind of cash at hand willing to buy it without mortgage.

There doesn't need to be many, just one. I think you're underestimating the number of developers or landlords who will have deep enough pockets to buy and refurbish with cash (or borrow against other properties).

One more thing I noticed is that there is an active company registered at that address, even though I am not sure this should raise any concern.

No, it's irrelevant.

I might still make a non-generous offer, just to see if I can get it for an even better deal.

You'd be wasting everyone's time if you still needed a mortgage.

AdrianC · 6 December 2019 at 10:14AM

g000444555 wrote: »

I do require a mortgage. Given the market I don't think there will be many people with that kind of cash at hand willing to buy it without mortgage.

I think you'd be surprised. Sounds ripe for a builder to refurb and flip.

Another factor is that the market seems to be in decline and experts predict a drop of 10-15% within the next 2-3 years. Basically, the next year 2020 is dejavu of 2009.

The only person who thinks Crashy is an expert is Crashy. Ignore him and his ilk.

Zoopla evaluates the property for 20% higher than the current asking price

The only thing less reliable than Crashy's predictions are Zoopla estimates.

One more thing I noticed is that there is an active company registered at that address, even though I am not sure this should raise any concern. According to the company's house records there were two more companies in the past that got dissolved recently while another one that is still active has been moved to a nearby address that is also on sell.

Well, it explains his bankruptcy...

Generally I am a DIY person and would enjoy making it habitable. Ones I enable the services (electricity, water, internet), clean it up, and change the locks, I believe the house would qualify as an 'under construction' temporal accommodation.

There are some cracks in the walls which don't seem to be structural. I would expect the detailed survey to reveal what's the case. I don't have the connections who could undertake the task for me or even inspect it however I do know some people who know other people who could do that, if needed so down the line.

My understanding from the above advices is that this is a no go for a first-time buyer and I might not even be able to get a mortgage for it.

That's going to be your risk. Lenders really don't like big projects. They want to know that, if they need to repossess, they can easily sell and recoup their money.

GDB2222 · 6 December 2019 at 10:27AM

I like everything about the property except the fact that it's in non livable standard and abandoned for some (less than 5) years.

Everybody here seems to be assuming the property is unmortgageable, based on what you wrote. I'm no expert, but I thought it depends on things like whether there's a working kitchen and bathroom, even though you might prefer not to use them?

Besides that, the lenders might keep back some of the money until work has been done. Would you have a temporary source of funds - bank of mum and dad perhaps?

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Buying from an Bankrupt vendor - things to be aware of

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