If you're looking for the best possible deal, go to an auction of repossessed properties. You may well end up paying 50% or less of the open 'market' value.

The problem is that you'll almost certainly be buying a property that has been extensively "gutted" by the previous owners, or other unsavoury occupants, since the repossession, and you may not even be able to get a mortgage to buy the place!

Sounds daft I know, but a recent mortgage case of my own experience brings home the point. The applicant was recently divorced and wanted to buy a home of his own. His previous wife had possession of their old home under a "clean break" settlement and no children were involved. He had been with the same employer for most of his working life and was in a very stable job.

The property he had his eye on was a repossessed council house that had been purchased under the "right to buy" provisions by the previous tenants. As has been so very common with these cases, the tenants couldn't keep up the payments when interest rates rose and the building society concerned foreclosed on the mortgage. The property had been vacant for over a year and was boarded up.

The asking price was an absolute snip - 15,000 for a property which under easier conditions would have easily fetched ã40,000. However, a mortgage was almost impossible to obtain. Reasons given were:

1. The property was boarded up so no accurate internal inspection was possible!
   
   
2. There was no kitchen sink or other units (having been torn out by the previous owners when they left) and therefore the property could not technically be occupied.
   
   
3. With no internal inspection the state of the electrical wiring could not be checked and therefore occupation was also deemed impossible.

The net result was that the prospective purchaser had to spend money fitting a kitchen, putting in new windows and having extensive inspections made before he could successfully apply for a mortgage to buy the property!

Sounds mad? Of course it does looking from the purchaser's viewpoint, but just consider it for a moment as the prospective lender. No matter how cheap the price, they could be lending on a "pig in the poke" which, if the borrower defaulted, they could have enormous difficulty selling on.

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mortgage  repo property  repossession