REPOSSESSIONS RISE IN BRITAIN

The Council of Mortgage Lenders forecasts 65,000 homes will be repossessed in Britain in 2009, a two-thirds increase on 2008 when 40,000 were taken over. These repossessions could provide a rich harvest for investors, because they can be bought relatively cheaply, sometimes at 40 per cent below market value.

A bank or building society will repossess a property if the borrower fails to make mortgage re-payments to them. A home can also be repossessed if its owner fails to repay credit card and other non-mortgage loans secured on the property. Once repossessed, the lender sells the home either through an estate agent or at auction to recoup the money they lent.

The number of homes getting repossessed is rising, because millions of home-owners are struggling to repay their debts. The recession means they are either losing their jobs or having their wages slashed.

Landlords are struggling too, because although they are benefiting from low interest rates, some are struggling to find tenants. According to the Council of Mortgage Lenders (CML) 1,400 buy-to-let homes were repossessed in the second quarter of 2009, about the same as in the previous quarter.

Nick Hopkinson, director of Property Portfolio Rescue, a company which specialises in buying assets from landlords and developers, said the number of homes being repossessed this year would grow.

“We are likely to see a big rush of repossessions later in the year,” he said, “People are losing their jobs, insolvencies are peaking and there is no sign that banks are lending more freely.

Many different types of property get repossessed. Knight Frank is marketing two repossessed country mansions, including GBP.2.75 million Clifton Hall (pictured above) on the outskirts of Nottingham. This Grade I listed mansion boasts 17 bedrooms, eight reception rooms and one hectare of gardens.

Most repossessions are found at the other end of the property spectrum. The bulk are inner city flats or terrace houses offered at low prices. In Bradford, a three bedroom terrace house in need of modernisation is being offered by auctioneer Manning Stainton with a guide price of GBP40,000 to GBP50,000.

Some homes are former investment properties. In London, estate agency and auctioneer, Barnard Marcus, is offering a repossessed terraced house in Fulham which has been divided into four flats. It was unsold at the company's last auction despite receiving an offer of GBP1.35 million. It's guide price is GBP1.5 million.

The company is also offering a flat in Hampstead at a guide price of GBP200,000 at its next auction in September.

In addition to approaching estate agents and auctioneers for repossessions, buyers can find websites dedicated to these types of property. Three thousand repossessed British homes are advertised on http://www.repossessedhousesforsale.co.uk/.

An auction can be the cheapest place to buy a repossession. According to Steve Forshaw, managing director of website www.repossessedhousesforsale.co.uk, properties can be bought for 40 per cent below their market value at auction.

“The vendor wants a quick sale and a quick sale equates to lower price,” he said, “It is not politically correct to say a property is repossessed, but the fact that the property is being sold by a bank is enough to tell you it is.”

However, auction buyers sometimes bid too high Robert Hadfield, managing director of London investment property management company, Pineflat, said.

“Auction rooms can encourage irrational exuberance, so, while there are some bargains to be had, this is not automatically the case,” he warned.

Repossessed properties can be problematic he added.

“It's quite a long time since we've bought a repo, but the last one needed half the kitchen cupboards replacing and also lots of messing about with heating controls, keys and missing bits of pieces,” he said, “And of course sometimes repo properties are trashed deliberately.”

Repossessed homes are sometimes blighted by planning disputes or are in areas with high crime rates or widespread mortgage fraud he warned.

“Check for liabilities like unpaid service charges, title irregularities and the sales history of neighbouring properties,” he advised, “If there are several repossessions in the local area there is probably something amiss.”

Mr Forshaw said investors ought to base their purchases on a property's potential yield. “We are looking to buy property in this office,” he said, “We are interested in nothing less than 10 per cent returns.”

Tim Hyatt, head of lettings at estate agency, Knight Frank, said buyers in London ought to choose properties that were close to transport links to major financial centres, like Canary Wharf. Properties in poor condition needed improving he added.

“The standard of rental accommodation is now really quite high, much higher than three years ago,” he said, “it needs neutral décor and style, and to be high spec.”

Mr Hopkinson advised overseas investors against buying blind.

“You either need to work with a specialist advisor or see the property yourself,” he said, “You need to do spreadsheets, not just look at pretty pictures. You need to go on the Internet and check the prices and rents in the area.”

(All The World's a Home : Global Property News)