Anyone know about home repossessions?

[22s]

Morning all,

I'm working on a new project and was wondering if anyone has a good understanding of how the sale of bank-repossessed residential properties works?

My understanding - laced with assumptions which could be/are very likely wrong - is that:

- Borrower takes out loan for resi property
- Lender packages up this loan with a bunch of others and sells them on to mortgage servicers
- Mortgage servicers receive and process the monthly payment from the borrower
- The borrower defaults
- The lender repossesses the property
- The mortgage servicer is responsible for selling the property and recovering the debt, and does so by marketing the property through its network of agency/auction house partners

Is that right? I believe that mortgage servicers are not always involved in the loan administration - and that the lender and mortgage servicer may be the same company - but I'm finding it difficult to get a clear answer. I'll be speaking to some mortgage servicers and lenders, but was hoping to get some basic understanding first!

If relevant, my new project would come in at the end of this process to sell the repo properties for the lender/mortgage servicer.

Thanks in advance!

[mcflurry]

What would you do betterer that the existing Estate agents / Auctioneers aren't?

[22s]

mcflurry said:

What would you do betterer that the existing Estate agents / Auctioneers aren't?

Offer a guaranteed sale price at near market value. Enable the company selling the repo to draw down money immediately for a fee.

[Countdown]

22s said:

Offer a guaranteed sale price at near market value. Enable the company selling the repo to draw down money immediately for a fee.

So you would be like the Estate Agent but guaranteeing the Lender gets something like 95% of market value immediately ?

If I understand correctly you would be bearing the cost of the short term financing, plus the risk of the property not selling... If you're only going to get 5% profit (the difference between MV and what you pay the Lender) it hardly seems worth it ??

Bear in mind that the MV of a repo will be a lot less than the MV of a "normal" house, usually because it's left in a poor state by the previous occupiers.

I think you'd be better off buying the Repo, doing it up, and then selling it on.

[surveyor]

I believe that the lenders are under a duty to obtain Market Value for repossessed property.

They use use a variety of tactics to achieve this - including the adverts that they have accepted a particular offer and will be exchanging unless a better offer is received. At the end of the list is the auction.

I don't think they would be able to agree a sale which is expressly below Market Value even if it makes their life easy. MV tends to be depressed due to the condition of the properties.

[Christmassss]

Mortgage providers are under an obligation to get the best possible price for all repossessed houses as generally there is a shortfall once the property is sold and then they chase for the remainder of the debt.

A building society that rhymes with Borkshire hire asset managers...for example countrywide, connells etc. The houses are then evaluated and sold through the network of estate agents.

It is very rare that they would go to auction unless they are only suitable for cash buyers

Also, as someone has alluded to above...the format of selling like they do means that they have to advertise accepted offers...for example:

http://www.dixonsestateagents.co.uk/buy/property/2...

This generally encouraged more offers which is what has happened in the example above. So your offer of giving 'market value' wouldn't really be of interest. Also, generally they aren't in a rush to sell the houses so being able to access money sooner isnt really a priority. Its all about getting the maximum price.

Edited by Christmassss on Monday 24th July 14:05

Edited by Christmassss on Monday 24th July 14:08

[KevinCamaroSS]

surveyor said:

I believe that the lenders are under a duty to obtain Market Value for repossessed property.

They use use a variety of tactics to achieve this - including the adverts that they have accepted a particular offer and will be exchanging unless a better offer is received. At the end of the list is the auction.

I don't think they would be able to agree a sale which is expressly below Market Value even if it makes their life easy. MV tends to be depressed due to the condition of the properties.

I think actually the duty is to obtain best price rather than market value.

In the past I have made offers for repossessions. In every case the agency has re-listed it as you have said.

[98elise]

22s said:

mcflurry said:

What would you do betterer that the existing Estate agents / Auctioneers aren't?

Offer a guaranteed sale price at near market value. Enable the company selling the repo to draw down money immediately for a fee.

MV is dictated by what someone will pay for it. The EA will advertise the house on right move and when an offer has been made and accepted, they will advertise that as well.

The mortgage co are obligated to get the best price, so how are you going to offer more money?

[22s]

98elise said:

MV is dictated by what someone will pay for it. The EA will advertise the house on right move and when an offer has been made and accepted, they will advertise that as well.

The mortgage co are obligated to get the best price, so how are you going to offer more money?

Would market the property as a normal estate agent, but with a guarantee it would be sold for X amount within 90 days.

If it does not sell, then we would advance the cash.

The value would be in the certainty (and speed, if they want to draw down on the guarantee early) - but don't know if this is valuable to those selling repos or not.

Lots of valid points from everyone - maybe it won't work - thanks for the input!

[KevinCamaroSS]

22s said:

Would market the property as a normal estate agent, but with a guarantee it would be sold for X amount within 90 days.

If it does not sell, then we would advance the cash.

If a property has not sold in 90 days there is always the same reason - Too expensive.

[Robertj21a]

22s said:

Would market the property as a normal estate agent, but with a guarantee it would be sold for X amount within 90 days.

If it does not sell, then we would advance the cash.

The value would be in the certainty (and speed, if they want to draw down on the guarantee early) - but don't know if this is valuable to those selling repos or not.

Lots of valid points from everyone - maybe it won't work - thanks for the input!

I doubt that you will get much interest just because there's a 90-day 'guarantee'. Most of the businesses with significant house repossessions will be the big banks, building societies etc - they have slick systems to churn through standard processes for any such issues.

[MrJuice]

Who dictates MV? Oh, that will be the agents. My friend gave an agent 6k in a repo setting and bagged himself a 50k discount. Ie he bought for 500k and the agent did not forward the offers they were getting for 550k. Exchange and completion on the same day.

Obviously illegal. But quite common I'd guess. Lender doesn't care cos they just want the loan amount covered. Are they really going to expend their own resources to thoroughly check if any brown envelopes have been passed around? No they are not

The one losing out is the one who was repossessed. 50k down in the case of my friend.

For the record, this really was a friend and not me. Thank you.

[98elise]

MrJuice said:

Who dictates MV? Oh, that will be the agents. My friend gave an agent 6k in a repo setting and bagged himself a 50k discount. Ie he bought for 500k and the agent did not forward the offers they were getting for 550k. Exchange and completion on the same day.

Obviously illegal. But quite common I'd guess. Lender doesn't care cos they just want the loan amount covered. Are they really going to expend their own resources to thoroughly check if any brown envelopes have been passed around? No they are not

The one losing out is the one who was repossessed. 50k down in the case of my friend.

For the record, this really was a friend and not me. Thank you.

That's not MV, thats selling it under MV for a bribe, which as you've said is illegal. The MV would appear to be around 550k.

Any repo I've ever offered on I've later checked to see what it sold for. If if went for less than I offered I would be asking some difficult questions. The Mortgage company will not be happy that their agent is acting illegally as its their responsibility to get the best price. I've never yet seen one sell at less than I've offered.

Repo's are not as common as you think, and completion to make money a refurb's is pretty stiff. Typically when I've been to a viewing its been open house and 4 or 5 people there at once. It will be pretty obvious if its sold for less than someone else has offered, as the information is freely available.

[MrJuice]

I understand your point. But not all offers are equal. Eg 500k today vs 550k in 1 week is not the same. So things are not as clear cut as you suggest. To add, agents will murky the waters by making up lies. So even if you offered 550k today, they will make up some bullst and sell for 500k as long as they get their back hander.

I'm sure bent agents have an answer to say someone like you if you asked them why a given property sold for 500k rather than 550k.

[surveyor]

My experience as a chartered Surveyor is that the lenders are also wary of they legal duty. Most have some form of independent valuation to try and spot the worst of the scams

[MEC]

Would it make more sense to try and acquire the property from the owner just before repossession? A "We Buy Any House" kind of deal?

[Christmassss]

MrJuice said:

Who dictates MV? Oh, that will be the agents. My friend gave an agent 6k in a repo setting and bagged himself a 50k discount. Ie he bought for 500k and the agent did not forward the offers they were getting for 550k. Exchange and completion on the same day.

Obviously illegal. But quite common I'd guess. Lender doesn't care cos they just want the loan amount covered. Are they really going to expend their own resources to thoroughly check if any brown envelopes have been passed around? No they are not

The one losing out is the one who was repossessed. 50k down in the case of my friend.

For the record, this really was a friend and not me. Thank you.

I would question the validity of this story.

Mainly because legally the estate agent has to provide evidence that the property has been marketed for 30 days with the accepted offer advertised. If offers were not being put forward and accepted then the people making the offers would, could and do contact the mortgage provider themselves.

There is also the fact that the mortgage lender will tell the ex owner what the sale price was, what outstanding balance is owed and ask how they are going to repay the outstanding balance. Or if there wasn't an outstanding balance then where they would like the surplus funds transferred. If it was sold for 50k less than MV then there is no way in a million years they would let that go.

Also 3 separate estate agents are required to provide a valuation as well as desktop valuations being done by surveyors.

Also...and finally, you state that 'Lender doesn't care cos they just want the loan amount covered'. This is also incorrect, The legalities of repossessed houses is very strict and i was paid a lot of money to ensure that who i worked for got the maximum amount in property sales and to ensure fraud like that doesn't happen.

[Christmassss]

MEC said:

Would it make more sense to try and acquire the property from the owner just before repossession? A "We Buy Any House" kind of deal?

This makes more sense, there are a number of companies who offer around 85% of market value and a 30 day exchange etc.

The problem is, getting through to these people. Alot of people who lose their homes are the people who bury their head in the sand. We used to give people between 6-12 months before taking their homes.

If they made token payments and maintained contact, generally they would get to keep their homes. But they tended to ignore us!

So to make it work, you would need a list from mortgage companies of people in arrears, close to repo BUT have enough equity to make a lower than MV offer work for them and the mortgage provider...but no mortgage provider would ever give that info....

[MrJuice]

Christmassss said:

I would question the validity of this story.

Mainly because legally the estate agent has to provide evidence that the property has been marketed for 30 days with the accepted offer advertised. If offers were not being put forward and accepted then the people making the offers would, could and do contact the mortgage provider themselves.

There is also the fact that the mortgage lender will tell the ex owner what the sale price was, what outstanding balance is owed and ask how they are going to repay the outstanding balance. Or if there wasn't an outstanding balance then where they would like the surplus funds transferred. If it was sold for 50k less than MV then there is no way in a million years they would let that go.

Also 3 separate estate agents are required to provide a valuation as well as desktop valuations being done by surveyors.

Also...and finally, you state that 'Lender doesn't care cos they just want the loan amount covered'. This is also incorrect, The legalities of repossessed houses is very strict and i was paid a lot of money to ensure that who i worked for got the maximum amount in property sales and to ensure fraud like that doesn't happen.

Obviously I was not present at exchange, completion or handing over of the cash.

However, I was told that the property was marketed at offers above 500k. Mate offers 500k + 6k bribe. Agent then ignores/doesn't forward any other offer. Agent claims he was getting offers at 550k. Maybe agent played a blinder and took 6k and 500k was genuinely the best offer. I don't think so though. It was a good buy at 550k. And cheap at 500k. It is a detached 3 bedder in walking distance of a zone 5 central line station and a few hundred yards from an outstanding primary and within 2 mins of A406.

This house was in east London, bought about 2012 I think and would have risen in value during the ownership of previous owner. Again, I don't know the details but pretty safe to assume the bank was well covered and there would have been a surplus that was returned to the dude who was repossessed.

[Christmassss]

MrJuice said:

Agent claims he was getting offers at 550k. Maybe agent played a blinder and took 6k and 500k was genuinely the best offer.

That is a fair shout! Lol!