A survey from HML estimates that roughly 83% of the repossessed properties sold in the UK are disposed of with a shortfall. That equates to approximately 188,000 properties. The problem is the worst in Northern Ireland, where 97% of the repossession sales come up short. However, even in the south-east of England, the shortfall rate is about 75%.
The shortfall reality means different things to different people. To former homeowners, it means that even the repossession and sale of their homes does not absolve them off all of their debt obligations. Most will still have to pay something toward satisfying their original loans. Whether that money is paid to the bank or a debt collector is irrelevant.
To the property investor, the reality of the shortfall is good evidence that it is possible to purchase repossessed property at very good prices. The fact that banks are letting the properties go for less than the mortgage value demonstrates their willingness to sell just to get the properties off their books. This means excellent opportunities exists for investors throughout the UK.
What is the rationale for banks and building societies accepting a shortfall? There are couple of things to consider. First, the repossession and foreclosure process is very complicated and time-consuming. It could take a year or more for the process to finally reach the point of sale. By that time, the lender has invested more time and effort into the process than it cared to. There comes a point when the lender just wants to be done with it.
The other consideration is the possibility that the lender has already made a tidy profit on interest. It may be that the combination of interest payments and the eventual sale price still enables the lender to make a little money in the long run. Any additional monies realised from the sale of the debt would be considered profit. Under such circumstances, a lender would be happy to let a property go at a lower price, as long as it allowed them to break even before selling the remainder of the debt to a collection agency.
Again, this suggests the possibility of very good prices for investors. That is one of the reasons that Fruitful Property considers repossessed property for sale when recommending client purchases. Our experience has taught us that off-market properties, like repossessions, can provide our clients with investment opportunities unavailable on the retail market.
Are you interested in learning more about repossessed property for sale? If so, contact us here at Fruitful Property. Since 2006, we have been using a time-tested strategy to help our clients earn tens of millions of pounds on rental properties. You can begin building your portfolio today with an investment in a single property, using a buy-to-let mortgage from a bank or building society. Moreover, once you own one successful property, it becomes easier to purchase additional properties.
Rental property is a much better investment than savings and pensions. We believe it is also better than equity investments. Fruitful Property has been making it work for years; we can help you make it work as well. There is plenty of repossessed property for sale that you can use to start building your portfolio today.