House Repossessions And How Can They Benefit Me?

House repossessions are houses, and in some cases flats, apartments, bungalows etc. that have been repossessed from the owners by the mortgage lender on the property. The most common cause of house repossessions is non-payment of the monthly mortgage instalments by the owners, either because they choose not to pay or because they are financially unable to pay.

While the repossession of a property can be devastating for the owner it can benefit a buy to let landlord immensely. This is because when the repossession order has gone through and the mortgage lender technically owns the property, it needs to be sold so that the mortgage lender can recoup some of their losses. 

And this is where you, as a buy to let landlord, benefit…

Buying House Repossessions

When a mortgage lender decides to sell their house repossessions they generally do so through a property auction. Each property they enter into the auction will have a current market value and a guide price. The guide price is calculated according to the amount outstanding on the mortgage, the current condition of the property and the local property market.

Generally speaking the guide prices for repossessed houses sold at auction are around 35% less than the true market value of the property. Saying that, properties that are in poor condition or that were close to the end of the mortgage terms when repossessed can be given guide prices up to 60% lower than the market value. So at best you could get a £100,000 property for around £40,000 and at worst it would only cost around £70,000.

The only drawback to buying house repossessions at auction is the potential competition from other buy to let landlords.  If the property being sold is an attractive investment the selling price can rise quite a way above the guide price. Even so you’d still make a saving on the market value.

Using the Estate Agent Route

Occasionally mortgage lenders with quality house repossessions to sell try to sell through an estate agent before going to auction. Strangely though, the estate agents that accept repossessions rarely put them in branch windows or include them on their advertising pages in local newspapers. This means that if you want to know about repossessions being sold by estate agents you normally have to make a specific enquiry.

Buying house repossessions through an estate agent will still bag you a substantial saving, although it might not be quite as large as it would have been at auction. Using this route is less stressful and less intimidating though, and the properties are generally in much better condition.

If you find a property being sold through an estate agent that interests you don’t wait for it to go to auction just so you can save a few thousand pounds. For one, the property may never go to auction and two, there may be a lot of competition for it at auction and you end up getting outbid.

Whichever route you choose to buy house repossessions you are guaranteed to make a considerable saving on the market value. Yes, it is regrettable that someone has lost their home but as a business person you are in it to make money and buying repossessions is one of the quickest ways to start doing just that.