It has been revealed that purchasing repossessed homes is no longer the cheapest option, with savvy buyers turning to short-leases and part exchange deals instead.
With fluctuating debt and arrears in mortgage repayments, most expect repossessed homes to be a viable investment opportunity.
According to the BBC 9,100 homes were repossessed in the first three months of 2011. Lenders have claimed that this figure is up 15 per cent on the previous quarter. The vast increase has been driven by rising living costs, stunted wages, higher taxes, and an increase in unemployment.
Although some still see these repossessed homes as an investment opportunity,they are no longer the ‘bargain’ purchases they once were, as despite the increase in the number up for resale, the nineties’ price cuts of 25 per cent are a thing of the past. According to the Council of Mortgage Lenders (CML) these distressed properties are now sold between market value and 5 per cent below.
Martyn Alderton of LSL Property Services told The Times: “The diligence and transparency that is required in the sale and marketing of repossessed property now means it is much harder to secure a big discount on the market price.”
Repossessed properties are fetching higher prices at auction than in the nineties due to increasing pressure upon the lenders to attain a better price on behalf of the indebted. The Times has reported that ‘properties are often marketed with a “public notice” after a bid has been received, to encourage counter-bids and raise the price’.
As a result, bargain hunters are looking elsewhere, to part exchanged homes, properties with short leases, and those sold under probate, which can be purchased for around 25 per cent less than market price.
Robin King of Move With Us told The Times: “The attraction of part-exchanged properties is they are usually in great condition because they were lived in by people who sold only so they could trade up.”
Investors are being advised to look passed repossession for bargain investments, with alternative ‘distressed’ properties standing out as a better opportunity.