At times, homeowners fail to repay their mortgage installments as per agreement with the lender. In such cases, the finance company takes possession of the property after a specific timeframe and tries to sell it quickly to recover the loan amount. Homeowners always have the option to sell house for cash quickly and repay the loan. But, they fail to do so.
Repossessed properties can be the best deal for buyers
Lenders are legally obliged to sell repossessed houses for the best possible price. They are expected to recover their loan amount and pass on the rest to the homeowner. However, at times, banks sell such houses quickly without worrying about the interest of previous owners. They sell it below the current rates. Thus, you may find finance companies selling such properties for 30 percent less than the actual market value to complete the sale quickly.
What are the downsides of such deals?
Mortgage companies often do not spend even a dime on these repossessed houses. Unfortunately, most of these homes require a lot of repair work before someone can start living in them. Occupants often remove electrical and plumbing fixtures or even damage the furniture before handing over keys to the bank. The finance company hands over the house in the same condition to the next buyer. And remember, repair work can cost a fortune.
What’s the difference in buying?
Banks and money lenders appoint several institutions and property dealers to sell such houses for them. There are specialist websites as well. You can find advertisements regarding such places in local newspapers.
From a buyer’s perspective, there’s not much difference between buying usual properties from the open market, and opting for a repossessed house.
The risk factor
Ensure you have an in-principle approval for a mortgage. Check how much you are eligible for and at what percentage. Also, check details for charges and taxes that you will be liable to pay. Let your solicitor review the contract before you sign the same.
To avoid nasty surprises, it is advisable to research yourself or hire a property inspection specialist to inspect the house. Besides the house’s structural survey, the inspection company will also help you find the reason behind the property repossession. Plus, there might be reconnecting costs associated with broadband and telephone lines, gas, and electricity. You may have to pay the pending dues to get them reinstated. If the survey points out significant defects, structural issues, you should simply forget the property. Else, you might not feel like living in such a home and sell house for cash later.
Banks often accept multiple offers and then quickly sell the house to anyone who bids the highest and is willing to quickly close the deal. They may not even wait for your legal work and surveys to get completed.