A repossessed property is a favourable option for many house hunters as it offers good value in an affordable price range. These are homes on which the owner could no longer afford to make bond repayments. When the owner fails to secure buyers for the property (known as a distressed sale), the bank takes matters into its own hands to recoup its losses, selling the property at a public auction. To boost interest in the sale, the bank will often offer no transfer duty fees as well as lower home loan interest rates, bond registration and legal fees.
Despite the bad rap, repossessed houses for sale are not necessarily poor-quality buildings. While some homes may require extensive repairs, other homes are in perfect shape, sometimes giving budget-minded buyers an opportunity to live in an area they could not have afforded otherwise.
Discovering a real gem of a repossessed house doesn’t happen by chance. You've got to know what to look out for and how to detect red flags. Here are five essential tips, presented in collaboration with Private Property, to help get you the best deal.
Consider the cost of repairs
A repossessed house may seem like a bargain, but sometimes only so because the property is in poor condition as the previous owners didn’t get around to fixing things or couldn’t afford to carry out maintenance. In many cases, the property only needs a lick of paint or a facelift, but if repair costs are more than half the price of the home, it’s not worth it.
Beware foreclosure stripping
It’s not uncommon for former owners to remove vital fittings and fixtures prior to the auction to recover some of their investments made in the home and to significantly decrease its value so that it’s impossible to sell. You’d want to avoid a nasty surprise, so conduct a thorough inspection of valuable components such as geysers and electrical fittings.
Choose an estate agent who has experience selling repossessed homes
Real estate agents are trusted advisors, especially those who have a background in buying and selling repossessed homes. Be sure to check in with your local realtor; not only will they be able to lay bare the complexities of the foreclosure process but can also identify the problems which resulted in the property being repossessed by the bank, so you’ll know exactly what you’re buying.
Determine the resale value of the property
Assess a repossessed home on its resale value. Consider the location – is it in a good area with a low crime rate? Does it have easy access to quality educational institutions, healthcare services, and recreational facilities? These suburb features will be a great advantage whether you intend to buy to sell, or stay there.
Consider the rights of tenants
If the property is being rented out, you will be responsible to remove the tenants. There’s always the option to let them stay as tenants if you want to rent the property out yourself, however, if it will be your primary residence, you’ll need to give them notice or go through the formal eviction process.
A home is the most valuable asset you’ll own, so it’s important to get it right. While anyone shopping for a home on a tight budget welcomes the opportunity to save a little cash, buyers still need to be smart in their choices.