Updated: February 23, 2022

Buying A Repossessed Property

Thinking of buying a repossessed house from the bank? Find out the pros, cons and exactly how to do it in our in-depth guide..

Get Started
Ask A Quick Question

Ask A Quick Question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different Property Types. Ask us a question and we'll get the best expert to help.

FCA Logo
1 of 3
£
£
£
2 of 3
3 of 3 Send!

No impact on your credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: February 23, 2022

Repossessed properties are reclaimed by lenders after a borrower has defaulted on the mortgage repayments. In order to recoup some of their costs, a lender will place this type of property back on the market with the aim of selling it as soon as possible.

In this guide, you’ll be able to determine if buying a repossessed property is a good fit for you, how to buy one, understand the risks involved and find out where to look for any guidance you may need.

How do you buy a repossessed house?

There are two different avenues to choose from when it comes to buying a repossessed property: via an estate agent or at an auction.  Lenders use both of these methods in order to sell these properties as quickly as possible. So, what’s the difference?

From auction

Just like you’ll have seen on the TV, people at an auction bid for an item they want and sometimes that includes properties. Most auctions are in-person but some can be attended online if you register in advance. If you do decide to attend an auction, here’s what to do:

  • Research the property you want to bid on. It’s typical for properties up for sale to be advertised beforehand. That gives you the opportunity to arrange a viewing and make sure you definitely want to put in a bid.

It’s not advisable to bid without really looking into the place you’re buying. That includes reading through the legal pack and having a structural survey done to ensure there’ll be no unexpected issues likely to cause financial headaches down the line. Remember, unlike with a traditional sale, the owner won’t be there to point out any quirks or possible problems with the property so it’ll be up to you to take a deeper look and find them for yourself.

  • Check your credit report. Before you start bidding, download your credit report to make sure there’s no issues that could slowdown or block your application. If there’s any inaccuracies or outdated information you can arrange for this to be removed.
  • Prepare your finances. You should know the maximum amount you’re willing to bid and either have the funds in the bank or have an agreement in principle (AIP) in place. This is a document from your lender indicating an estimate of the size of loan they could be willing to offer. A mortgage broker would be able to help guide you through the AIP process so you can get confirmation swiftly.
  • Make your bid! If you’re the highest bidder, you must pay 10% of the agreed price straight away on the day of the auction. Once the gavel falls, both the seller and buyer are committed to the sale, which is expected to be finalised within 28 days. The remaining 90% is paid within that window.

Estate agents

A little less high adrenaline but exciting all the same is buying a repossessed property through an estate agent. What to do?

  • Find a broker. The brokers we work with will be able to tell you which estate agents lenders use to offer their repossessed properties.
    • Reach out to local agents. Agents don’t tend to openly market repossessed properties by that description but if you contact them and ask, they’ll be able to share what’s available.
  • Arrange a viewing. If interested, have that structural survey done and do your research on things like noise in the area, any issues with neighbours or planning permission problems you could run into should you want to buy the property.
  • Make an offer. Using your AIP, you’re ready to then make a firm offer on any property you now want to buy.

In both cases, after the offer is accepted you’ll then need to:

  1. Apply for your mortgage. A broker can help you prepare any documentation and all your evidence of earnings etc. and manage your application from start to finish. To help you prepare in advance, take a look at our mortgage application guide.
  2. Contact a solicitor to complete the process. They’ll do a series of checks to make sure there are no issues with purchasing the property.
  3. Complete the sale. This is when firstly, contracts are exchanged and you are legally committed to purchase the property, then leading to legal completion of the transaction and the property becomes yours and you have the keys to move in.

When it comes to which route to go down, a broker with experience in getting mortgages for repossessed properties can advise you on both and help you decide which to opt for.

Speak to a mortgage expert today

Get Started

Pros and cons of buying a repossessed house

There are advantages and disadvantages to buying a home that’s been repossessed and it’s best to consider all of them before deciding on whether you’d like to purchase such a property.

Advantages

The main pull of repossessed properties is the cost. Over half a million such properties are listed each year and they tend to sell for anywhere between 20-30% less than their full market value. That’s because the lender has a responsibility to minimise its losses and sell it quickly. However, properties of this type often also need work done on them to bring them up to ideal standard.

Another advantage is the absence of a chain. You won’t be waiting for someone else’s property to sell to determine when you can have yours, making it a much faster and more secure process.

Summary of the pros:

  • Can be cheaper
  • No property chain
  • Faster completion time

Disadvantages

Given the circumstances in which the previous owners had to leave, it’s unlikely the usual care has gone into presenting the property for sale. That can mean more work for you upon moving in but a visit can help you to decide if that work is something you’re willing to take on.

If the repossessed property was also owned as part of a buy-to-let scheme, there are a few other potential complications. The owner may no longer be on the scene but what about the tenants? Have they vacated and given back the keys?

If not, there’s a risk they could refuse to leave and push for their legal right to stay. This would usually be a problem for the mortgage lender and prior owner to deal with but if they haven’t, it could mean delays for you.

Finally, the likelihood of being gazumped is high. Whether it’s a higher bidder at the auction house or a bigger offer with an agent, it’s not unusual for you to no longer be the top bidder and this can happen at any time in the build-up to exchange of contracts.

Lenders in fact prefer an estate agent to keep a property on the market even once a sale price has been agreed on the off chance a higher BID comes in. It’ll only be taken off once the sale has been completed.

Summary of the cons:

  • Could be in poor condition
  • Need finance in place quicker
  • Gazumping likelihood is high

Other things to consider

If you’re thinking of buying a repossessed house from the bank, here’s a few questions to ask yourself before you proceed:

  1. Are you prepared for a faster turnaround time on the sale?
  2. Are you ready to do those extra checks to make sure the property is as it says it is?
  3. Would you be able to deal with any unexpected costs that could emerge?
  4. Is extra work on a property something you’re open to or are you looking for a turnkey property?
  5. Are you aware and prepared for the possibility of being gazumped?

Buying a property is an emotional rollercoaster at the best of times. Going down the repossessed property route can mean a few extra challenges with slightly higher risk but if you’re aware of these going into the process, it can pay off. And a broker can always help.

How a broker can help you buy a repossessed property

An experienced broker can talk you through the differences in this process compared to a traditional sale, advise on whether an auction house or agent is the best route for you and make sure your mortgage application is prepared for a quicker purchase.

The brokers we work with:

  1. Have experience in repossessed property sales;
  2. Have existing relationships and knowledge of lenders and estate agents offering repossessed properties;
  3. Can offer lending solutions tailored to your specific circumstances.

If buying a repossessed property is something you’d like to explore, a free consultation with one of the brokers we work with can answer any questions you may have. Call 0808 189 0463 or make an enquiry. We’ll then reach out to a broker best suited to your situation.

 

FAQs

Is bridging finance an alternative solution for buying these types of properties?

Yes, it can be. Bridging finance involves a short-term loan you can take out to cover some costs you might have while waiting for longer-term funds to come through. For example, if you want to buy a repossessed home and you’ve got to pay up right away but your mortgage hasn’t yet been finalized, a bridging loan can help. 

The interest rates on these are higher but you’re paying for funds being made available to you quicker. To apply, you’ll need to be able to show that a main line of credit has been approved so the lenders know you’ll be paying it back within the agreed upon timeframe.

Is it harder to get approved for a mortgage on repossession properties?

No, not necessarily. Just like with a mortgage application, a lender’s decision will be based on your income and outgoings rather than the property type. They want to check that you can feasibly repay the mortgage you’re applying for.

What kinds of properties might be repossessed?

Any at all. You can get older flats, houses or bungalows as well as brand new properties previously owned by developers or buy-to-letters.

Ask A Quick Question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different Property Types. Ask us a question and we'll get the best expert to help.

FCA Logo
1 of 3
£
£
£
2 of 3
3 of 3 Send!
Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

Get Started