FREE Book Reveals How To Invest In Property Without Deposits Or Mortgages

Buying Repossessed Houses? Read This First

Buying repossessed houses used to be the "holy grail" for a property investor. I don't actually believe this any more and I'll tell you why in a moment. That said, there are definitely some bargains to be had and we'll tell you exactly how and where to find repossessed property for sale.

Risk factor 2/5

Fairly low-risk, as long as you've done your due diligence.

Cash flow 4/5

Some repossessed property can be very high yielding, if this is what you've set your sights on.

Capital rating 3/5

If you keep your eye on the market, big discounts are possible. Release them by refinancing or trading.

Time intensiveness 3/5

Time required to monitor the market and do your research. It also depends how much work is required after you buy a repossessed house.

Location

Fairly location independent although you'll find more repossessions in urban areas.

Repossessed property: what is it?

A property is repossessed when the owner can no longer keep up payments on it. They can be owner-occupied homes or new-built or let properties owned by developers or landlords who have fallen on hard times.

Once the lender regains possession, it will use one of a variety of means to dispose of it so that they can recover their debt.

Lenders have a responsibility to get the highest price possible for the properties they repossess. However, because they also need to get their capital back as soon as possible, the properties often end up selling for well below market value.

Discounts of 10-30% are not uncommon.

If you buy a repossessed house, it will usually require some refurbishment. At the very least, central heating and plumbing systems will usually have been drained down and the utilities disconnected.

It is not uncommon for disgruntled owners to strip the property of fixtures, fittings and even central heating systems. Some even cause intentional damage!

So be prepared to budget for some repairs.

Check out these repo honey-pots...

These are the most common places to find repossessed homes for sale:

Certain local estate agents have contracts to dispose of repossessed property. Estate agents are obliged to market repossessed homes for sale for a minimum period of time before accepting any offer.When an offer is accepted, lenders are obliged to place a "public notice" to advertise it in the local paper and/or on a property website, in efforts to generate more interest.Normally contracts can't be exchanged until a week after the offer has been accepted. You are at risk of being gazumped right up until exchange as lenders must consider all offers up until this point.
Lenders will often put properties to auction if they fail to sell via an agent. Auctions can be a bit more secure as you exchange on your bargain when the hammer falls and don't risk being gazumped at the eleventh hour as you do with agents.
The internet is another source. Whitehotproperty.co.uk is a middeman that sells repossessed property on behalf of lenders and some developers. [Editor NOTE March 2016: this site now appears to be defunct but a quick web search should reveal current sites providing a similar service.]
The site has a great feature where you can search properties that are in their public notice period. Many properties advertised on the site have buyer incentives like stamp duty or legal fees paid.

Is it really all it's cracked up to be?

As I said before, I am not convinced that repos are worth chasing. At the end of the day they are on the open market and you'll be up against other buyers also looking for a bargain. This can push the price up until what originally looked like a bargain, no longer is.

For that reason, instead of buying repossessed houses, I still favour having below market value deals come to me, rather than having to compete with other bargain-hunters.