These notes are produced for the information of potential Buyers of re-possessed properties. Whilst re-possessed properties can often be acquired at an attractive price, there are procedural difficulties and risks involved in purchasing property in this way. We think it is worth you being aware of some of these difficulties from the outset.
1. Most Sellers are large financial institutions. Their only interest is getting back as much money as possible, as quickly as possible. Indeed they have a legal duty to do so. They have no interest whatever in the fact that this causes difficulty for Buyers and their advisors
2. When an offer is accepted subject to contract, the lender in possession is duty bound to publicise that offer, usually in the local paper, to demonstrate that they have done the best they can, by giving an opportunity to the public at large to "beat" the figure that has been offered. If a further, higher offer, is obtained by this process, it will usually be accepted.
3. This process causes difficulties. Whilst the Buyer is put under pressure to proceed as quickly as possible, the fact is that the opportunity to purchase can be withdrawn right up to the last minute prior to exchange of contracts. That means that all the money that the Buyer has invested with surveys, mortgage arrangement fees, searches and legal costs can simply be wasted through no fault of the Buyer.
4. Most institutions operate strict time limits. They will often say that exchange of contracts is to take place within 28 days after the date on which the sale is agreed. This puts pressure on the Buyer to get on and spend money, quickly, even though the opportunity to purchase may be lost. It is important to note that if timescales are not adhered to from the Buyer’s point of view, the Lender may simply withdraw, even if it has no reasonable alternative.
5. If this isn’t enough, the property is likely to remain on the market until contracts are actually exchanged.
6. From a risk point of view, Buyers should be aware that the legal owner of the property has probably failed to keep up with their mortgage instalments. This can sometimes mean that the legal owner has simply run out of money. That in itself can be a cause for concern, as a lack of funds can sometimes means that legal owners have allowed the property to fall into disrepair, and in some cases, cause deliberate damage to the property either out of spite, or by removing fixtures and fittings to sell them. This can leave the Buyer with major practical problems.
7. From a legal point of view, standard procedures require the legal owner to provide a good deal of useful information about the property. In re-possession cases, relations between the legal owner and the lender have often broken down and this information is simply not available. Buyers should remember that the Lender has no information whatever about the property, and has almost certainly never even visited it. Therefore this background information is usually unavailable, but even if it is available, it will be given by the legal owner to the Lender and not to the Buyer and, therefore, you may not be able to rely on that information partly because that information is not given specifically to the Buyer, but partly because the legal owner may not be worth chasing if anything they say turns out to be incorrect.
8. Buyers should also be aware that there is a difference between a property which has been legally re-possessed (which means that the original owner is excluded from the property) and cases where the lender sells under a voluntary arrangement (whereby the legal owners have handed back the keys). In the case of voluntary sales, there is always the possibility that the legal owner will re-visit the property after the Buyer has made an inspection and there is the potential for damage being caused, or fixtures and fittings being removed at that stage.
Buyers are, therefore, urged to be aware of some of the procedural difficulties involved with buying a re-possessed property which need to be carefully weighed up against the fact that a sale price is likely to be attractive.