Everything You Need to Know About Buying a Repossessed Property at Auction

Properties are sold at auction for a wide range of reasons, including for sellers to achieve a quick sale. One such type of property is that which has been repossessed, as the seller is usually a lender that has seized a property due to a breakdown in the financial agreement. For example, when a mortgage agreement breaks down, they often look at ways to recover losses efficiently. As a result, it's not uncommon to see repossessed homes listed in an auction catalogue.  
 
An enticing property type for a range of buyers, repossessed properties present the chance to purchase a home for a lot less than the market value, with lower reserve prices, varying property conditions, and urgency from the seller all contributing to a potential steal for some lucky buyers. Of course, there are still some considerations you’ll need to keep in mind if you want to be one of them. In this guide, we’ll talk you through exactly what it means to buy a repossessed property. 

What Exactly is a Repossessed Property?  

A repossessed property is one that has been seized by the mortgage lender or other financial body because the owner could not keep up with the mortgage payments. This can be for a range of reasons as, of course, anyone can struggle with payments due to unforeseen circumstances. Reasons that a property might be repossessed include:  
 

• Loss of income 
• High debt levels
• Interest rate increases
• Divorce or relationship breakdown
• Unexpected expenses
• Failure to pay other loans that the house is secured against 
• Fraud. 
   

This means that, due to these different circumstances, repossessed properties can come in all shapes and sizes from well-kept family homes to houses in poor condition where the owners may have struggled to keep up with running costs and maintenance. 

What Happens to Repossessed Houses? 

Typically, repossessed homes are sold via auction because the lender would like to recoup the money lost from missed payments as fast as possible. Auctions, then, naturally represent the most attractive method to do this, as sales often reliably complete within 30 days of the winning bid being placed. 
 
If lenders kept the property in their ownership for long periods, this means they would need to pay for ongoing basic running costs, so they’re often willing to sell at below market value to prevent this costly inconvenience. These expenses add up quickly, and because lenders generally have no interest in managing a property long-term, these properties are sold by auction for a quick sale. This is one of the key reasons auctions can be particularly attractive to buyers - motivated sellers, minimal negotiation, and a stronger likelihood of securing a competitively priced property. 

How Do You Buy a House That Has Been Repossessed? 

If you’ve seen a repossessed property lot in our listings, this will follow the same format as any other auction property. So, if you’re completely new to auctions, we’d recommend that you familiarise yourself with the process by reading our buying property at auction guide, in which we break down everything from how to bid, the differences between conditional and unconditional auctions, and what happens when you’re the winning bidder. 
 
After you’ve read these guides and have a sound understanding of how an auction works, you’ll need to consider the factors that may influence your decision to make an offer on a repossessed property in particular. Below, we’ve detailed everything you need to plan for before you decide to make an offer:  

Financing and Budgeting  

The first and most important point is ensuring you have the funds available to buy the property. Many buyers at auction pay with cash, but it is possible to get a mortgage to buy an auction property as long as the property meets the criteria of the lender and you can secure an offer in time.  
 
The reason why we emphasise the importance of planning your finances thoroughly before the auction is because if you win the bid but the sale cannot be completed before the deadline because of financing issues, you’ll still have to pay the relevant fees, will lose your deposit, and could be at risk of legal repercussions.  
 
Financing the sale is not the only thing you’ll need to think about. You’ll also need to consider your budget for potential remedial works, renovations and redecorating, as this can influence what you’re prepared to pay at auction. The best way to do this as accurately as possible is to get a survey done before making an offer. You can read more about arranging a survey and gaining access to view the property on our FAQ page, but you or your surveyor will need to contact us beforehand to arrange access. By doing this, you’ll have a list of issues to remedy, and can find average quotes for each thing on your list, so you know exactly the kind of costs you’re facing and what to prioritise first when it comes to getting the house up to standard. 
 
The other reason why you should consider your budget for these works when thinking about financing the sale, is because second homes and empty properties can incur costs if left for too long. This is dependent on the local council of the property you’re buying, but you should bear in mind that if you can’t complete the renovation works and have the home occupied within a year, you may be liable to pay a premium on top of your costs. This will need to be factored into your initial financing and budgeting plans. 
 

Competition 

Repossessed properties often attract a lot of competition, particularly at auction, where investors and cash buyers are ready to move quickly. If you’re not confident you’ll outbid everyone else, one strategy is to make an offer to the seller, typically around 10% or more above the guide price, before the auction takes place. This can sometimes allow you to secure the property early and avoid the uncertainty and pressure of bidding. 
 
This approach can be especially appealing to the seller, which in the case of repossessed homes is usually a bank or lender. Their main priority is to recover their money as quickly and efficiently as possible. A strong, early offer that’s clearly above the asking price signals that you’re serious, prepared, and able to move quickly, all of which are things that appeal to a lender looking for a fast, secure sale. You can place an offer by contacting the auction team, who can then pass along the information to the seller. However, these pre-auction offers can only be accepted where an unconditional contract is exchanged or a reservation fee is paid before the auction. 

Post-Sale Issues 

It’s easy to get caught up in the momentum, but it’s important not to forget the realities of owning a repossessed property. There are some potential challenges that are different to purchasing a regular vacant home. Here’s how to make sure you’re prepared for the most common post-sale issues if they arise:  
 
Utilities not in place 
 
Previous owners may have disconnected or left behind unpaid utility accounts. This can result in no water, electricity, or gas when you move in. Check with utility providers before completion or as one of the first things you do after, and ensure new accounts are set up in your name. You should also ensure that if there are any outstanding bills to be paid, the utility company knows that you are not responsible for this bill as the new owner, to avoid repeat correspondence intended for the previous owner. It can be helpful to provide a meter reading as soon as you gain access to the property to give your new supplier an accurate starting point for your usage. 
 
Debt collection letters and bailiffs 
 
Sometimes, letters or even visits from debt collectors or bailiffs can continue to arrive at the property, intended for the former owners. These can be alarming, but they do not apply to you once the property is legally yours. Keep proof of ownership handy, such as the title deed, completion documents, and contact details for your solicitor, so you can quickly demonstrate that you are the new owner should you need to do so. 
 
Legal and administrative checks 
 
Make sure all necessary searches and paperwork are completed, including checking for outstanding charges or restrictions on the property. Your solicitor should flag any issues and guide you through the rectification process to ensure the title is clear and there are no surprises once you take ownership. 

Is it a Good Idea to Buy a Repossessed House?  

There’s no straightforward answer to this question as it entirely depends on your situation and goals. However, it can’t be ignored that there are definitely advantages to buying a repossessed property, the first and foremost being the price. You may be able to secure a property that would normally be out of your price range, or secure a property for less that can turn a substantial profit when let out or sold. 
 
Of course, on the other hand, with a low price you’ll often be facing uncertainty regarding the condition of the property and may have to take remedial measures. This can be true of any type of property sale, so this seems like a small disadvantage when considering the quick sale and often attractive price point.  

Find a Suitable Repossessed Property with BTG Eddisons Property Auctions 

If the allure of finding a property at a great price is something that appeals to you, a property auction may be the best option for your next investment, whether that be a buy-to-let project or a new home.  
 
To find a property that suits your needs, you can start by browsing our repossessed properties that are available to bid on in our upcoming auctions. If you find one that interests you, we’d recommend organising a viewing, allocating a budget, and figuring out your finances in advance of placing a bid.