Repossessed homes are generally the best bargains in the market and it would benefit you to have a look at what the banks have to offer. There are, of course, several things to keep in mind when purchasing a repossessed home, and it is very important to focus on the entire package and all the pros and cons of buying the home rather than just the great price you are likely to get.
What is a repossessed property?
When an individual purchases a home they generally take out a home loan with a financial service provider. The bank will then set an interest rate and decide what the individual has to pay every month for their loan repayments. When an individual cannot make the payments in full or on time, the financial service provider (after warning the individual) will repossess the home.
There is usually a lot of legal involvement at this stage of the process. If a court rules that it can be done, and after a brief holding period to give the individual the opportunity to pay back the money owed, the bank will then put the house up for sale to try to make back their loss. Usually, repossessed houses are sold through auctions. Some financial service providers handle the auction process themselves but many hand the properties over to auctioneering houses and just collect their money.
Most financial service providers will have a list of the properties and other repossessed goods up for auction on their websites, but you could also contact them for a list of what is currently available.
The advantages of buying a repossessed property
Repossessed properties are usually sold at quite low prices because the financial service provider is generally quite keen to get rid of them. Because of the recent global recession, the market value on most houses has dropped anyway, making repossessed houses even more of a bargain. If you buy your repossessed property directly from the financial service provider, you will save thousands on transfer fees.
The disadvantages of buying a repossessed property
Often, repossessed houses are quite run down as they are sold ‘as is’. You will have to take into consideration any improvements, maintenance or repairs that must be done and add them to the total cost.
Buying advice when purchasing a repo property
There are several things to keep in mind when purchasing a repossessed property. Firstly, you should never let yourself be blown away by the cheap price of the property. It may blind you to other factors that could cost you money later on. If the property does need repairs or maintenance, it is a good idea to get a professional in to inspect the house and give you a quotation.
It might, in fact, be a good idea to get two professionals to give you two separate quotations so that you get an idea of what your repairs will cost. You should add this cost to the cost of the house. You should also add the attorney’s fees for registering the property in your name as well as the bond registration fees to the total cost so that you know you are looking at the real figure.
The low cost of the property may also make you overlook the area that the house is in. It is a good idea to take into account what the area is like, what the crime rate is like, whether there are good schools nearby, whether the other houses in the neighbourhood are well looked after or rundown and whether the house itself is suitable for you and your family.
If, however, you are looking to buy a repossessed property as an investment to rent out or fix up and sell on for a profit, you should pay even more careful consideration to the area.