Best price obligations on repossessed houses
It's a common question asked by many buyers – when a repossessed house is put on the market, why is the lender obliged to get the best price? Certainly, this ‘best possible' price will usually be advertised after the sale has been agreed. Usually, if you have put in an offer for a property, and it has been accepted, the house will be taken off the market. However, this is not usually the case with repossessed houses.
Why the best price obligation ?
This may seem like a strange process, but the lender is obliged to get the best possible price i.e. a reasonable and achievable amount for the house. They must therefore consider all offers, even those that are received right up until the point of exchange. For buyers, this can be bad news as they may be gazumped (out-offered) at the last minute. It's unfortunate, but a risk you must be willing to accept if you are placing offers on a repossessed home.
Additionally, the lender may post a notice in a local newspaper or on a property website when an offer is received. This post is called a “public notice” – and generally speaking, contracts cannot be exchanged until one week after the notice has been published. This is an instant requirement and may result in further offers being made on a repossessed house. Occasionally, there may be a delay in displaying the public notice - and in these cases delays can occur. The lender's solicitors or asset manager will need to have possession of the notice before an exchange can take place.
If you are thinking of buying a repossessed home, you will need to prepare yourself for some delays. During the display of the public notice, the house may receive a number of offers from other buyers that are greater than yours – and they will be obliged to accept the highest offer. Lenders need to re-coup losses wherever possible – and this is generally the way in which they do it. However, if you can bide your time, great repossessed houses can be bought at very low prices. Following the credit crunch and subsequent unstable financial climate, the number of houses being repossessed is growing – and massive savings can be made.
It can be difficult to decide on the correct offer to make for a repossessed house, especially as competition is likely to more aggressive than for more expensive properties. To this end, it's wise to visit the house on a number of occasions to establish any works that may be required (i.e. wiring, wall or roof repairs and any costs for redecoration).
You should also factor into your offer any solicitors or estate agent fees. It may mean that you have to perform a little research yourself (i.e. checking the property and talking to the neighbours) – but you will get a better idea of the offer you should make. Also look out for similar properties for sale and note their final sale prices – this is a great indication of the kind of offer that will be accepted.