Purchasing a Repossession
In some ways buying a repossession is great.
You know you’re getting a great deal, if you have done your due diligence.
You know the transaction will be quick- normally 28 days from accepted offer to completion.
A lot of the pre-purchase work may have been done for you, so this could be a fabulous way to buy an investment property.
Or you could end up in a bit of a bidding war, possibly paying more than you should.
The pressure of moving quickly may have you overlooking important steps or tasks that should have been completed.
Some of the rules around purchasing a repossession applied by the sellers or agents can be confusing and may feel like they are not being completely honest.
If you don’t have your power team in place, you may struggle. There are penalties that could be applied which cost you money and you could lose the deal also.
Given all this I still think buying a repossession property is a quick and good way to buy.
For example, a property I am currently purchasing is through a normal private treaty purchase (buying through an agent after seeing it). I had the offer accepted in January and hope to complete the purchase in May. That’s 4 months and is quite normal with some purchases and some of the processes you go through. However, I feel 4 months is too long and will not be using those particular solicitors again!
I bought another property that had the offer accepted in December 2023 and I had the keys to the property in January 2024. Just 5 weeks!!
That was not a repossession. I watched it every step of the way and ensured the progression of the purchase went through promptly. I even walked into the sellers’ agents to collect the keys hours before they were even aware it had completed!!
The things you must be aware of when buying a repossession are that as soon as you have the offer accepted, the seller, usually a bank or their selected agency will publish the purchase price. This means anyone else looking at the property can see that and could go in and offer more and outbid you. The seller will not take it off the market until you have exchanged contracts between the solicitors.
If there are more than 1 interested parties in the property, then the agents will ask each one if they would like to increase their offer to their best and final offer. These offers will then be presented to the seller, and they decide which they will accept.
It’s very unusual that you will be told what the other best and final offers are. The Agent is trying to get a better offer.
It’s not always the highest offer that is accepted as the seller will have their own criteria. It may be that they want the person who is in the best position to move forward quickly, such as a cash buyer. Being a cash buyer normally means that you have the full purchase price in the bank, and you can prove it. It doesn’t mean you will walk in with a suitcase full of money and plonk it on the agent’s desk! In fact, this is not legal nowadays with all the money laundering checks it might not go through.
It could be that they have dealt with you before and because the last purchase went through quickly and smoothly that they prefer to do business with you. Agents are always looking for the easy route.
It could be that the offer they accept is the amount they wanted or more.
There is no way of knowing for sure what the sellers criteria to accept an offer is.
Now once you have the offer accepted you must move fast to exchange contracts. This is because although you have been told they accept your offer , they leave it on the market till you exchange and someone else could still come along and offer more than you did so they will consider it
You must do all the due diligence and checks before you proceed to exchange.
Over the years I have carried out these and lost the deal to another person.
It happens and you must realise that this is a business and sometimes there is a cost to you. The plan here is to make that money back in the next deal.
Make sure you are in a position to proceed quickly.
If you are not a cash buyer you need the mortgage offer ready , Your solicitor must understand you are needing to move quickly on this too.
Make sure the property fits your strategy and will give you the return you require.
Check you can get the kind of tenants you want and the rent you would like.
So all in all buying a repossession is a quick way to have a property in you ownership and will mean you could be up and renting the property much quicker than a traditional sale.
I hope you find a great deal this way.
Neil