Buying a repossessed property can make sense for a buy-to-let investor if the price leaves room for repairs, fees and the wait for rent. A low asking price alone says little about the return.
This article covers buying to let in England and Wales. Here is what to check about the building, the sale terms, the full cost and the funds you need.
What is a repossessed property?
A repossessed property is one a mortgage lender has taken control of after a problem with the previous owner's loan. The lender may then sell it to recover the debt, usually through an estate agent or auction house.
The lender must take reasonable care to get the best price it reasonably can, as Insolvency Service guidance explains. There is no standard discount you can assume will apply.
The lender may know little about the house's past. Ask about missing records and past repairs, and check the state of the services before you rely on a budget.
Where can you find repossessed properties for sale?
Look through estate agents, property portals and auction lists. Some listings look much like any other house for sale, so ask who is selling and what terms apply.
Ask the agent or auctioneer for:
These details help your solicitor check the seller's right to sell and the contract.
If the house is listed for auction, the auction buying process helps you plan the checks needed before bidding. The terms for that lot set out when you are bound to buy and when payment is due.
Is a repossessed house a good buy-to-let investment?
It can be, if the rent and value support the full cost of buying it and getting it ready to let. Compare the price with recent sold prices for similar local houses, allowing for their state of repair and whether they are freehold or leasehold.
Ask a local letting agent about demand and a rent you could expect to achieve. A cheap-looking house may need work that delays the first tenant. In the meantime, you may still have loan costs, insurance and other bills to pay.
Get the work costed before you decide what to offer. A damaged roof, unsafe electrics or missing kitchen could change both your repair budget and your choice of lender.
Run the figures again with a longer wait for rent or a lower rent. If the deal only works when all goes to plan, look again at the price and the cash you need to keep aside.
How does buying through an estate agent differ from an auction?
The sale route sets how long you have to check those figures before you are legally bound to buy.
In an ordinary estate-agent sale in England and Wales, an accepted offer is not binding until exchange. At a traditional unconditional auction, the winning bid usually binds you to buy.
| Check | Estate-agent sale | Traditional auction |
|---|---|---|
| When you are bound | Usually at exchange | Usually on winning bid |
| Checks and survey | Before exchange | Before the binding bid |
| Money needed first | As agreed in the contract | Deposit and any buyer fees |
| Balance due | Agreed completion date | Deadline in the lot terms |
| Higher offers | Possible before exchange | Check the auction conditions |
Before you bid, have your solicitor review the legal pack, any special terms and later changes. Leave time to act on the survey and the lender's checks.
Some auctions reserve the house first, with exchange due later. You may still have fees and duties at that stage, so check the auction terms for your sale. Not all online auctions work in the same way.
What should you check before making an offer or bid?
Whichever route you take, check what you are buying, what work it needs and whether you can let it as planned. A viewing will help, while your solicitor and surveyor can check things you may not spot yourself.
Check the title and legal restrictions
Ask your solicitor who can sell, what rights come with the house and what limits or charges affect it. For a leasehold, they also need to read the lease and check service charges and any planned major works.
HM Land Registry's title records are a starting point. Your solicitor needs to read them with the contract. Ask what will be cleared when you buy and what will remain.
Find out whether anyone occupies the property
Find out whether the sale promises an empty house or whether someone has a right to stay. Do not assume repossession has settled every question about an occupier.
Ask your solicitor how that affects access, the sale and your plans to let. Government guidance on tenanted property explains how a tenancy can affect a lender taking possession. England and Wales have different tenancy rules.
Assess the property's condition
Choose a survey suited to the building and ask what it leaves out. A lender's valuation does not replace a condition survey.
Work through these checks with the surveyor and relevant trades:
Serious defects can also affect whether the house is suitable mortgage security.
Check whether the property is suitable for letting
Check the energy performance certificate, safety checks and work needed before a tenant can move in. Landlord responsibilities in England include keeping the house safe. Wales has its own rules.
Ask a local letting agent which licences and rules apply at that address. Allow for the cost and time needed to meet them.
Review the sale documents
Read the contract, searches, special terms and any records the seller supplies. A lender may not be able to answer questions that an owner who lived there could answer.
If a record is missing, ask your solicitor what can be checked before the deadline. Find out what would remain unknown and how that might affect your choice to buy.
What will the property really cost before you can rent it out?
Use the legal checks and survey findings to build a budget through to the first rent payment. Keep the cash needed to buy, the cost of the loan and the bills while the house is empty distinct.
| Cost type | Allow for | Check with |
|---|---|---|
| Purchase price | Deposit plus balance | Solicitor and lender |
| Upfront buying costs | Tax, legal fees and survey | Conveyancer and surveyor |
| Borrowing costs | Interest and all lender fees | Lender or broker |
| Repairs and letting setup | Works, safety checks and licences | Surveyor and letting agent |
| Empty-period costs | Insurance, bills and upkeep | Agent and service providers |
| Cash reserve | Delays and unexpected repairs | Your own budget |
Your deposit is part of the price. Do not count it twice in the total cost. You still need that cash ready when the contract says it is due.
Work out the buying tax too. In England, higher residential SDLT rates may apply, based on the buyer and the deal. There can also be a non-resident surcharge.
In Wales, Land Transaction Tax applies instead. Ask your conveyancer or tax adviser to work out the bill for your purchase and how you will own it. The fact that it was repossessed does not settle the tax bill.
If you borrow, check the cash you will receive against what you must pay on the day. Get a quote showing the loan, any sums taken from it and other fees.
Keep cash aside for repairs and delays if the work takes longer or the first tenant moves in later than planned.
Can you get a mortgage or bridging loan on a repossessed property?
Funding depends on both the house and the time available to buy it. Check whether a buy-to-let mortgage can meet the sale terms, then assess any need for short-term finance and its added cost.
When can a buy-to-let mortgage work?
You may be able to get a buy-to-let mortgage if you and the house meet the lender's rules. The last owner's repossession alone does not stop a new buyer getting a mortgage.
Ask the broker or lender to check:
- Property condition: Whether the house is acceptable security in its current state, particularly if it needs major repairs.
- Rental income: Whether the expected rent meets the lender's affordability requirements.
- Legal position: Whether the title, lease and any existing occupants meet the lender's criteria.
- Borrower eligibility: Whether your income, residency status and financial circumstances meet the lender's requirements.
- Completion deadline: Whether the valuation, legal checks and mortgage approval can be completed before the seller's deadline.
If the mortgage fits, you may have no need for a bridge.
When might bridging finance help?
A bridge may help with a suitable purchase if a mortgage cannot be ready in time. It adds interest and fees, so put those in the budget. The types of bridging charges help you check what a quote includes.
You also need a plan for repaying the loan that you can back up with evidence. A sale or future mortgage may form that plan, but neither is guaranteed. Check what happens if it takes longer to pay the loan back.
The lender still needs to accept you, the house and its legal position. A tight deadline alone does not mean a damaged, occupied or repossessed house will qualify for a loan.
What if the seller needs you to complete quickly, or another buyer offers more?
Check the lender's timetable against the dates in the contract. Get exchange and payment dates in writing, including what happens if you miss either one. There is no single deadline for every repossessed sale.
In an estate-agent sale, the seller may consider another offer before exchange. Ask if the house will stay on the market and how you will hear about other offers. You may have paid for a survey or legal work by then.
Being ready to buy can help. An agreement in principle is only an early view from a lender. It does not mean the money is cleared to pay the seller.
If there is no time for the checks or finance you need, ask if the dates can change. You may have to pass on the house if the seller will not agree.
Frequently asked questions
1. Does the previous owner's credit record affect yours?
Their credit history does not transfer to you because you buy the property. Credit records relate to individuals rather than properties.
2. Can you renegotiate after a survey?
In an ordinary sale before exchange, you can propose a lower price. The seller can refuse. A binding auction contract works differently.
3. Can you view the property more than once?
Ask the agent or auctioneer. Further access may help you check a survey finding, but it depends on the seller and sale timetable.
4. Does sold as seen replace the legal checks?
No. Your solicitor still needs to examine the title and contract, including any limits on what the seller says about the property.
5. Can you arrange a survey after winning at auction?
At an unconditional auction, you are normally already bound to buy. Arrange checks before bidding so you can act on their findings.
Is a repossessed property worth buying?
Buying a repossessed property can work if the numbers still add up after repairs, buying costs and time without rent. Check the property's condition and whether your funding can meet the seller's completion deadline.
If you plan to bid at auction, our guide to auction finance explains how short-term funding works, what it costs and how to plan for repayment.
