Repossessed Property Conveyancing
A repossession is a property which has been sold by a mortgage lender. They are selling the property because the repayments have not been made by the owner. The conveyance work needed to be carried out to purchase one is virtually the same as a property bought directly from an owner. There are a few differences for this type of transaction which we will go through in this post. When buying repossessions it is advisable to use a conveyance that has experience in this type of transaction.
What Are Mortgage Lenders Looking For When Selling Repossessions?
The reason why repossessions are popular is because they are cheaper than purchasing a normal property. Mortgage lenders are want to sell the property fast so that they can recover as much of the outstanding loan amount as possible. They would rather sell fast then hold onto the property for months on end to get a high price.
Not all repossession property is sold at a reduced price. A lot will depend on where the property is, what state it is in and the demand for such a property. If you are looking to purchase one through an auction or estate agents you should carry out a survey of the building and valuation. This will help determine the state of the building and give you a better idea of the market value.
The Difference in Conveyancing Work for Purchasing Repossessed Property
The main difference between the conveyancing work for a homeowner property and repossession is the amount of information available. The mortgage lender who is selling the repossession will not be able to provide much information on the property. The buyer is expected to carry out their own due diligence on the property.
When buying a homeowner property the conveyance company handling the purchase will be able to liaise with the seller. This means that they will be able to get full information on the property. For instance if there have been any refurbishment, disputes with neighbours, flooding etc. When purchasing property repossessions a lender will not know this.
A purchaser’s conveyancing company will be able to get information from alternative sources. This will not be as detailed as it would have been from the owner of the property. An inspection of the property should be carried out by the buyer prior to making an offer.
You should not rely on details and pictures supplied by the agents selling the property. Repossession property is generally in a worse state of repair than a normal purchase. This is why you need to check out for yourself the state of repair. The previous owners will have been evicted from the house and all their possessions removed. The property will not have been as looked after as it would have if the owners were still there.
If you are buying repossessions through an auction you should instruct a conveyancing company beforehand. By doing this they will be able to check the details are correct and that the property title unencumbered. A survey of the property should be carried out before the auction starts so you know the exact state of repair. The reason these need to be carried out before you start bidding is because you will be legally bound to buy the property if your bid is successful.
The transfer of the property title should not present any problems. The lender will be able to sell the house in their name. They have statutory powers that enable them to transfer the owner’s title to themselves. This means the purchaser will have a title that is free from the lender. The original owner and lender will arrange to have the mortgage cleared and will not affect a sale.
It is common for these types of properties to have additional debts and charges registered against them. There may be bankruptcies notices discovered which are registered under the original owners. All debts which were on the property will be cleared once the sale is completed.
Once the sale is complete and you take ownership of the property you may receive letter or demands for the previous debts of the owner. If this occurs you need to refer them to your solicitor. They will explain to the companies that the debts secured against the property are no longer applicable.
Leasehold Repossession Conveyancing
Buying a leasehold repossession property is more problematic than a freehold. The buyer’s conveyancer will have to find out information about the services charge, management and insurance policy. If using a mortgage this will be part of the terms and conditions that the lender will insist on.
The general practice for selling leasehold properties is that the seller’s solicitor will provide this information on management agents from the freeholder. There will be a charge for this and in some cases they lenders are reluctant to get this. It is important though that you do get these details when purchasing leasehold.
Due to the fact that the previous owner was in financial difficulty the likelihood that the service charges or ground rent have been paid as slim. If this is the case the lender will discharge the amounts owed up to the point of the completion date. The managing agents or freeholder could not accept the transfer of ownership if this is not done. If this happens the new owner will have to pay for the arrears built up.
The service charges are calculated on an annual basis. They are worked out on the estimated costs for the year ahead. If the costs are higher than the estimate the balance can be recovered from the freeholder from the new property owner.
It is not possible to know if there will be any extra funds needed at the time of completion for this. The buyer’s conveyance company will generally retain a small amount of money for this. Once the accounts are done there is more money needed this will be paid from the money retained from the conveyancer. If there is no additional money need the amount held will be sent back to the buyer.
The mortgage lender will not pay the retention for the services charges. If the house conveyancing company discovers that there is usually an additional fee, they should try to negotiate a reduction in price. If this is not carried out then the buyer will need to put money aside to deal with this. The amount owed will be for the period of the year from when the buyer takes possession.
House Conveyancing Comparison Website
When looking to buy repossession property make sure to use our conveyancing comparison website to find the best prices. We will save you money on the cost of the legal work and it will protect you from any problems occurring by instructing a solicitor before you make an offer.