Unfortunately, some people are unfortunate enough to find themselves in situations of financial difficulty which in some sad cases can lead to the situation that their home is repossessed by the bank.
Obviously no-one would ever wish for this to happen to anyone. However the bank then has the task of attempting to recover their loss by selling the house and this does offer an attractive opportunity. Some services are around to help homeowners who find themselves in this situation, and is some cases repossession can be stopped.
Typically, repossessed properties offer excellent value for money as the bank is required to recover as much of their costs as quickly as possible. This leads them to instructing agents to recommend an advertised price that will find buyers quickly. This means that repossessions are typically offered to the sales market at a reduced price, sometimes greatly reduced if the condition of the property is not good. This offers property investors the unique opportunity of acquiring a property relatively inexpensively and potentially adding value by refurbishing it and then selling it on to make a healthy profit. This has commonly become known in the property world as ‘flipping’.
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If you are considering purchasing a repossession to ‘flip’ then there are a few key things to remember. The first thing to remember is flipping has become common practice in the property industry and competition between investors for the best deals is fierce. Although a repossession can often start off advertised at 25% or more below the market value, the agent is required by law to post public notice of any accepted offers. Equally, the assess management company in charge of selling the property on behalf of the bank are charged with getting the very best price possible for the property. This means that even after an offer has been accepted and solicitors instructed in the sale, right up until the point of exchange of contracts they are obliged to consider any further offers made for the property. This can lead investors to drive the price of the property up. By the finish, the final price the property achieves may only be 10-15% below market value, decreasing potential profit margins substantially. This is still a good deal, but the investor needs to be confident about the cost of the work the property requires. They must also be certain that the price the property will achieve once the work is complete will be sufficient after all their costs to lead to a profit. Solid research into local house prices, area demand and the average length of time a property is on the market before securing a sale will all help with ensuring you make the best return possible.
Once you have found a repossession, confirmed the cost of the work required and identified the projected profit the property offers you then need to try and secure it. In order to boost your chance of being successful, good organisation is key. Unfortunately, the very nature of a repossession means time is of the essence. The bank will require a quick sale so preference is given to cash buyers due to the length of time lenders take to issue mortgage offers. So if you are a cash buyer you have a great chance of securing the property. However, equally the asset management company are tasked with getting the best price for the property. So if a cash buyer has an offer accepted, even if the sale is a few days or a week from exchange if a substantially higher offer is made by a first time buyer purchasing with a mortgage then the bank may consider accepting it, forcing the negotiation process to start from the beginning again. It is therefore vital that however you plan to purchase the property, from the moment your offer is accepted plan to exchange at the earliest possible opportunity to limit the chance that you will be outbid by another buyer. Make sure that your finances are in place and use a good solicitor. A solicitor experienced with exchanging sales quickly is worth their weight in gold if you are thinking of purchasing a repossessed property and it is worth sourcing one. Even if their fee is above average it can be worth paying since they can make the difference between securing the property or not.
Once you have secured the property make sure that budgets for work as strictly adhered to, don’t be tempted to spend extra since every penny will eat into your profit. Make sure that deadlines for the completion of work are met and when it is ready for marketing inform the agents of your price expectations but make sure they are aware that you need a quick sale since every week the property remains empty any mortgage payments you may have and Council Tax/utility bills will be further reduce your profit.