The truth about buying a repossessed property at auction

Written by Posted On Friday, 31 May 2019 06:21
Repossessed property Repossessed property

Lenders who end up taking a repossessed property to auction do so as a last resort they risk losing even more money on a home where they have not received mortgage payments Also know as a foreclosure this happens when a homeowner fails to pay the mortgage. In the USA owners may attempt to sell a property via short sale. I think it’s always good to remember that this is a traumatic event for families and individuals who are losing their home. Foreclosure or house repossessions are a serious matter and decisions to take a property from the mortgage payer has strict guidelines.

In the UK, for example, the government have made strict rules for mortgage lenders to stop house repossession becoming an automatic process.

Guidelines for mortgage lenders state that they must do the following

  • Tell you how much you owe
  • Consider a request from you to change the way you pay your mortgage
  • Respond to any offer of payment you make
  • Give you reasons for turning down your offer of payment within 10 days
  • Give you a reasonable amount of time to consider any proposal they make
  • Give you 15 days’ written warning if they plan to start court action
  • Tell you the date and time of a repossession hearing
  • Let your council know within 5 days of getting notification of the date of the court hearing, in case you need to apply to the council as homeless

Are auctions the place for real bargains?

auction

The truth is that auctions can be a place to find a bargain but it’s not the norm! Seasoned investors along with lenders that need to recoup losses mean that you will not automatically get a great property for peanuts. Urban myths about bargains can be misleading.  Investors will know how much work they can put into a property and can work with smaller margins.=

Don’t be fooled

Auction houses start with low guide prices to get you excited about what you could possible achieve. The guide price means that you will then look at the real market value of a similar property in the same street and jump to a conclusion that you going to make a fortune. The reality is that these starting bids are there to draw a crowd and get the auction interest.

Buying repossessed property the risk

The property is very likely not to have any maintained as the owner had fallen into financial difficulties. Some may have deliberately created expensive work for the new owner by damaging the heating system or wiring. They may have even flooded the home as they left. I have seen examples where roofing tiles and copper pipes were removed and sold. The risk=k is not having taken all this into account as you bid for the bargain property at an auction

Victims come from bidding wars

It’s easy to get carried away in an auction setting and often, houses go for over–inflated prices thanks to a bidding war don’t be a victim and remove the emotion from your bidding

My top tip

Not many are aware of this, some auction houses will sometimes take offers in advance. Better a bird in the hand than one in the bush, auction houses are in business so a genuine offer could be well received!

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nick marr

Nick Marr has been operating real estate websites since 1999 and has written hundreds of articles for numerous publications including Huff Post and The Independent Newspaper. He works with thousands of home sellers and real estate agents from over 40 countries worldwide and provides a unique insight into the international real estate sector. 

www.homesgofast.com

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