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What Happens When A Property Is Repossessed

What Happens When A Property Is Repossessed

WHAT HAPPENS WHEN A PROPERTY IS REPOSSESSED

For some reason, people believe that ” What happens when a property is Repossessed” the mortgage company auctions it off for a rock bottom price. This simply isn’t true, in reality, the mortgage lender has a legal obligation to the borrower to sell the repossessed property for the best price possible.

WHAT’S THE FIRST STEP WHEN A HOUSE IS REPOSSESSED

Once a repossession order has been granted the mortgage lender will appoint a bailiff to take possession of the house. He will change the locks, shut off all of the utilities and make sure the taps and cisterns aren’t going to leak. The bailiff’s duty is to physically repossess the property and to make sure it is locked and secure. They aren’t supposed to damage the property but some jobs take physical force to repossess a property, so they won’t win any award for home improvements. Potential buyers can usually tell when a property has been repossessed, they will usually come in with cheeky low offers.

Borrowers find it frustrating that there is a delay with the property being repossessed to being sold. This is infuriating for the borrower who was denied the time to sell their property themselves before being repossessed. There can be many different reasons why a mortgage lender may take a while to sell a property, they might have many houses to sell at that particular time or they might be waiting for house prices to rise in that particular area.

 

REPOSSESSION PROCEEDINGS WHEN A PROPERTY IS TENANTED

When a mortgaged property is tenanted by way of an assured tenancy agreement when the property is repossessed the lender will have to appoint a receiver to administer the property. During this period the tenants will be allowed to remain in the home under the original terms of their tenancy contract, the rent will have to be paid to the receiver rather than sending the money to the landlord.

If the lender needs to evict the tenant as soon as possible they will have to start a separate repossession case against the tenant so the property can be sold vacant possession. The mortgage company will need to obtain a court order before this can happen which will delay the sale process.

HOW DO LENDERS MAKE SURE THEY GET THE BEST PRICE FOR A REPOSSESSED PROPERTY

The lender has to satisfy their duty of care to the borrower to achieve the best possible price for the property. They should place the property on the open market while it may be sold at auction most are sold the traditional way through an estate agent. If a satisfactory offer has been made the estate agent must advertise the offer to invite a higher offer before exchange takes place. A lender also has a duty not to incur unnecessary costs while they are selling the property.

CLAIMING IF A LENDER UNDERSELLS A REPOSSESSED PROPERTY

If as a borrower you feel that your repossessed property has been sold at an undervalue and the lender has failed in its duty to get you the best price, you can bring a case against the lender for damages. The damages are usually the difference between what the property sold for and what the actual market price has been determined to be. The borrower can also bring an action if they believe the costs involved in selling their repossessed property are too high. A borrower also has the ability to bring an action up to six years after the mortgage lenders failure. However always be wary about taking legal action as the costs can spiral and if the breach is not substantial, a case might not be worth pursuing.

WHAT HAPPENS TO THE SALE PROCEEDS

Once a repossessed property is sold the proceeds of that sale first of all covers the existing mortgage on the property. The mortgage company will use the remaining proceeds to clear any other debt against the property. Once the title is clear of any debt, the mortgage company will use the remaining monies to clear any costs or fees incurred during the repossession process. The fees and costs incurred can easily add thousands of pounds to any debt against the property, which can take a substantial amount out of what’s left over. Once all debts have been cleared and costs have been paid the balance of the sale proceeds will be sent to the borrower.

NEGATIVE EQUITY REPOSSESSED PROPERTIES

Properties in negative equity can be sold at a price which doesn’t cover the mortgage debt and all costs incurred. The borrow will be held liable for any shortfall from the sale price and whatever the mortgage amount and fees are. The lender has up to 12 years to bring an action against the borrower to recover their debt, in some cases, the lender can wait even longer to take the matter back to court to claim back what is owed to them. This only usually applies if the borrower admits liability for the shortfall made on the property after it has been repossessed.

If you are facing repossession proceedings and would like some advice there are a list of government websites that can help you in this difficult time:

STEP CHANGE: They are an independent body which gives advice on debt scenarios.

SHELTER ENGLAND: Are a charity which deals with all kinds of housing issues within the UK.

 



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