A lot of purchasers ask about repossessed houses. While you may purchase a repossessed house for a good price, you may not be getting as good a deal as you think. You need to be cautious & mindful when buying a repossessed property, the vendor may be exempt from providing the normal guarantees and assurances. The term “buyer beware” can take on a whole new importance.
What is a repossessed property?
A repossessed property is one that has been taken over by the bank. The owner has neglected their mortgage payments for some reason or another, they have fallen so far behind, they can default no further. The lender steps in at that point, evicts the former owners, changes the locks and repossesses the property. Most times this occurs through court proceedings, though it can be accomplished through a voluntary arrangement. The bank can do this because a mortgage is a secured loan; if the borrower fails to pay back the loan, the lender can use the asset as collateral to recoup their losses. The original owner will almost always vacate the property and leave the property empty. Though this is not always the case either. There can be personal items, furniture and rubbish left behind for the purchaser to clean up and discard. Once the former owners are gone the bank selects a real estate agent to handle the transaction and sell the property on their behalf.
Can you really get a good deal on a repossessed house?
The short answer is yes, BUT a ‘bargain’? Maybe not so much! Banks will usually want to dispose of the property vs. incur additional costs. It is the real estate agents duty, however, to achieve the best possible price for the bank. The repossessed house may see several price corrections over the course of time and it’s not unusual at all for empty properties to stay empty for years on end, till a purchase price is agreed upon and accepted. During this time the property sits there with very little or no maintenance at all, this can have adverse effects on its condition and certainly impact the future home owner. Not to mention when the original owner is forced from the house; they can often times be very unhappy about that and in some cases neglect or even cause damage to the property. There could be significant hidden costs that buyers overlook in the equation.
Hidden costs to consider?
Every very situation is different, but it is quite common for repossessed houses to have fallen into a state of disrepair. The former owners could not afford their mortgage payments, remember? In light of this, it can stand to reason they likely could not afford to properly maintain the property either. Certain fixtures may also have been sold to cover their desperate financial situation. It wouldn’t be uncommon to view houses with missing doors, cabinets, vanity’s, light fixtures, no appliances to account for and in some cases- even flooring can be removed! Also, once the property is vacated, the utilities are usually switched off; with the property essentially abandoned, it can fall even further into disrepair. Banks can act slowly, the property may be left to deteriorate over a lengthly period of time. The property may require extensive repairs to even make it liveable again. There’s also all the reconnection fees to think about, when the utilities are switched back on.
I’ve said it twice because it’s important! All property in Ireland is actually sold with the caveat of “buyer beware”. This means that sellers do not have to disclose defects; rather, it is the buyer’s responsibility to act like a detective, along with their team of home inspectors, surveyors and engineers to uncover any potential issues.
In ‘ordinary’ transactions, the home seller does have to reveal details of disputes, such as neighbour disputes. The home seller must also provide assurances the property is compliant with planning/building regulations, and confirm the property boundary. The home buyer is permitted to raise queries, which the vendor must answer truthfully. When a property has been repossessed though, the real estate agent will likely not even have the information available to them, the bank doesn’t know the history of the property and the agent certainly has no access to the evicted former owners to answer queries like these. Thus, the contract will seek to exclude the vendor from these duties.
As a buyer, you will not be given assurances that the repossessed property complies with certain regulations. You will likely not be able to find out the history of the property either, such as whether there are any long-standing disputes to consider. To address these types of issues, it’s necessary to work with an experienced and knowledgable property solicitor. Extensive searches need to be carried out, as well as surveys and due diligence checks.
It is crucial that you take these extra steps, or the property may fall well short of your expectations. Depending on the situation, you may have to spend a great deal of money just to get into the property. It may also affect you down the road if you plan sell the property. A repossessed house has the potential to become a great financial burden that you would have ordinarily avoided in a normal sale and purchase transaction.
Buying a repossessed property can be a good opportunity to save some money, but only with the right approach. Because of the increased risks, you need to proceed with greater caution. If, after reading all of these facts about buying a reposessed house, you still want to move ahead with it, I can help you navigate though the entire process safely and smoothly!