Tempted to buy a repossessed home? Here are the pros and cons

24th September 2019

couple looking at paperwork with an adviser

If you want to snap up a property going cheaply, buying a repossessed home could be something to consider.

A repossessed home - or repossession - is a property that’s been seized by a lender because the former owner failed to keep up with their mortgage repayments.

Repossession rates have been lower in recent times, as governments have encouraged lenders to work with homeowners who’ve fallen behind with payments to try and find another solution.

However, in the second quarter of 2019 there were 1,270 repossessions - 15% more than the same quarter the year before. The increase has been partly driven by lenders catching up with a backlog of historic cases. (1)

Why repossessed homes tend to be cheaper

Once a lender repossesses a home, their priority is to sell it quickly. So they tend to set the asking price towards the lower end of the market.

This means you could get a repossessed home for up to 30% less than if it were being sold privately.

Some lenders use estate agents who tend not to openly market repossessed homes. So if you’re after one, ask if they have any available.

Repossessions can also be put up for auction. Auction houses generally advertise homes a month in advance and you’re expected to complete the purchase after 20 working days of the auction date.

The risks of buying a repossessed home

Lenders are legally bound to get the highest possible price for a repossessed home, which means properties aren’t taken off the market even after an offer has been accepted.

You could be gazumped after you’ve paid for surveys and legal work. Frustratingly, your sale could fall through if someone else offers even a little bit more.

There’s a higher risk of the home having hidden and serious defects, as there could be something wrong with it that prevented the previous owner from selling.

If the previous owner has been evicted, the home may have been vacant for a while, which also increases the chances of it being in disrepair.

The gas, electricity, and telephone services could have been disconnected, which is something else you’d need to sort out.

Do your homework before buying a repossessed property

If you’re thinking of buying a repossessed home it’s worth speaking to a broker, or a lender, so you have a mortgage lined up.

If you intend to buy at auction, you’ll need to get your mortgage sorted out even more quickly.

Otherwise, you might be faced with more expensive forms of finance, such as a bridging loan, while you wait for your mortgage offer to go through.

Make sure you get a survey done before you buy. It should reveal any major defects or issues, such as asbestos, so you’ll know what you’re letting yourself in for.

Protecting your credit record after buying

If you receive any debt notices after moving into the property, make sure you ring the companies and let them know the previous owners are gone. Otherwise, you could end up with bailiffs at your door.

It’s also worth checking your credit record isn’t associated with the previous owners a couple of months after moving in.

“You could well pick up a bargain by buying a repossessed home, so if you’re interested, ask auction houses and estate agents if they’ve got any available,” said Prakash Patel, a Mortgage Adviser at Trussle.

“However, buying a property that was repossessed is arguably riskier, so you need to do your due diligence by getting a survey done. You should also speak to a mortgage broker to line up finance so you’re ready to make a quick purchase should you decide to buy.”


(1) UK Finance

Share this page on: Twitter Facebook

Get the right mortgage for you

And save up to £344 per month

Individual savings may vary depending on personal circumstances.