Repos? Best to forget them...

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QWe are saving to buy our first home. We’ve been told that repossessed properties can be a lot cheaper. Is this true?

A Firstly, it’s something of a myth that repossessed properties (or ‘repos’) are necessarily very much cheaper than similar homes being sold in the normal way – particularly now, with supply lagging so far behind demand. After all, just like anyone else, lenders disposing of properties in this way are keen to get the best price they can. But in any case, remember that any saving will normally only reflect the amount of work that needs doing to bring such properties up to scratch. It’s an unpleasant fact that people who are about to have their home repossessed often take it out on the property itself.

As for finding repos, that’s not easy. For one thing, there is no obligation on the part of anyone to explicitly identify them as such. Indeed, many lenders actually stipulate that repo status should not be revealed, precisely because they are not interested in low offers! Besides, the simple fact is that there aren’t actually very many repos around at the moment – last year, for example, numbers were at their lowest since 2006.

This partly reflects a new willingness amongst lenders to be rather more accommodating than used to be the case in the bad old days pre-crisis – not to mention the fact that interest rates have been at an all-time low for several years. Of course, this may all start to change when interest rates start going up again, as they inevitably will at some point. Indeed, there have been a number of dire predictions about the number of over-extended borrowers who might struggle to deal with any significant increase in their mortgage payments. Still, right now, repos are pretty rare.

There is another issue here, aside from availability. The fact is that repos are traditionally sold at auction – and as first time buyers, the auction route is probably not your best bet, since successful bidders are required to exchange there and then, and complete within 28 days. This basically means you’ve either got to be a cash buyer, or you’ve got to have a mortgage already agreed. So…all in all, if I were you, I wouldn’t pay too much attention to repos!