As figures reveal a rise in repossessions in 2024, we look at the option of buying a repossessed property from a lender or a receiver.
It is often the case that a repossessed property is cheaper than buying from owners. Lenders will be keen to realise their asset, pay off the mortgage and return the balance to the former owner.
For buyers, this can offer a chance to secure a property they might not otherwise be able to afford.
How is property passed to a lender or receiver?
If a homeowner defaults on their mortgage, they will usually be given several opportunities to pay, including scheduling affordable repayments. If they are unable or unwilling to meet the lender’s minimum requirements for repayment, the lender has the right to take the property.
Lenders can appoint a receiver to deal with the management and sale of the property or they can deal with this themselves.
They will usually move quickly to put the property on the market so that they can finalise matters with their borrower.
What are the differences when buying a repossessed property?
When a property is sold by a lender or their receiver, there will usually be limited property information available as they will have no personal knowledge of the property and the borrower will not be involved in the sale process.
The lender will also be in a hurry to sell and you will usually be given a deadline of 28 days in which to reach exchange of contracts.
Your solicitor will check that if the lender is the one to execute the transfer document (and not the borrower), the correct process is used so that the property is properly transferred and all existing mortgages removed.
What do I need to be aware of when buying a repossessed property?
Repossessed properties come with a substantially higher level of risk for potential purchasers. If you are considering buying a repossessed property, you need to be aware of this and have a comprehensive survey carried out as well as engaging experienced conveyancing solicitors who understand the extra work needed in dealing with this type of purchase.
The borrower may have failed to sell the property themselves for various reasons, for example, structural problems, legal issues such as a defective title, problems with planning consents or a short lease.
It is important to carry out as many investigations as possible to try and establish if there are any issues you need to be aware of, as you will not know whether previous attempts to sell have been unsuccessful.
Your surveyor and solicitor will also do their part to try and uncover any problems. Despite the tight timescale, it is essential that the process of surveys and due diligence is gone through thoroughly and that you are not pressured into exchanging contracts before you are happy that you have as much information as is available.
It may also be the case that the former owner has stopped making payments relating to the property, for example, service charges and ground rent payments. Your solicitor will investigate this and request that the lender clears any outstanding sums together with any interest or penalties.
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If you would like to speak to one of our expert property lawyers about buying a repossessed property, ring us on 0333 3055 189 or email us at info@leadingpropertylawyers.co.uk
