Buying repossessed houses used to be the "holy grail" for a property investor. I don't actually believe this any more and I'll tell you why later. That said, there are definitely some bargains to be had and we'll tell you exactly how and where to find repossessed homes for sale.
Risk factor 2/5
Fairly low-risk, as long as you've done your due diligence.
Cash flow 4/5
Some repossessed property can be very high yielding, if this is what you've set your sights on.
Capital rating 3/5
If you keep your eye on the market, big discounts are possible. Release them by refinancing or trading.
Time intensiveness 3/5
Time required to monitor the market and do your research. It also depends how much work is required after you buy a repossessed house.
Fairly location independent although you'll find more repossessions in urban areas.
A property is repossessed when the owner can no longer keep up payments on it. They can be owner-occupied homes or new-built or let properties owned by developers or landlords who have fallen on hard times.
Once the lender regains possession, it will use one of a variety of means to dispose of it so that they can recover their debt.
Lenders have a responsibility to get the highest price possible for the properties they repossess. However, because they also need to get their capital back as soon as possible, the properties often end up selling for well below market value.
Discounts of 10-30% are not uncommon.
If you buy a repossessed house, it will usually require some refurbishment. At the very least, central heating and plumbing systems will usually have been drained down and the utilities disconnected.
It is not uncommon for disgruntled owners to strip the property of fixtures, fittings and even central heating systems. Some even cause intentional damage!
So be prepared to budget for some repairs.
These are the most common places to find repossessed homes for sale:
As I said before, I am not convinced that repos are worth chasing. At the end of the day they are on the open market and you'll be up against other buyers also looking for a bargain. This can push the price up until what originally looked like a bargain, no longer is.
For that reason, instead of buying repossessed houses, I still favour having below market value deals come to me, rather than having to compete with other bargain-hunters.
If you're interested in the American market, you can find some great info on finding foreclosures and short sales here.