What is home repossession?
Home repossession is the formal process through which your mortgage lender starts the legal steps necessary to take over ownership of your home because you have missed payments. The terms of repossession and how it works will be detailed in your mortgage agreement, so be sure you fully understand them before you sign this legally binding document.
It’s believed that roughly 100,000 homeowners face the potential for losing ownership of their homes through repossession every year, although many of these could be prevented through a series of steps if people were aware of all the options open to them. This guide covers some of the steps you could consider, however it is important to take professional advice too if the need arises.
Steps to consider when you’re facing the threat of home repossession
Thankfully home repossessions can sometimes be avoided, although not always. If you are facing the risk of losing your home ownership, consider some of the options open to you.
Get in touch with your mortgage lender
Hire a solicitor to discuss your options
Although you may have limited financial resources, you should consider hiring a solicitor to discuss your options for avoiding home repossession. If you can afford one, they can talk you through possible steps including ways to fight the repossession in court. And even if you can’t afford a solicitor, the UK government’s website has details on how you might qualify for free legal aid to discuss your problem.
See whether you are eligible for financial benefits
If you are having severe financial problems that have led to the missed payments resulting in the threat of repossession, consult with benefits agencies to see whether you qualify for any funding assistance. Although the amount of money that you could be eligible for might not cover the cost of the missing mortgage payments, it may still offer some much-needed help as you put together a plan to retain your home.
You might be able to win a court fight over the repossession
Before a mortgage lender can take possession of your home, they need to get approval from a court. Tell the court about your specific plan for catching up with the missed payments and how you intend to get back into good standing.
Consider selling your home as a way to clear your debts
While you are still the owner of your home, you usually have the option to try selling it. The total proceeds that you might make from the sale could cover the rest of the mortgage, the missing payments as well as any fees that you’ve incurred with your lender, and still leave you with money left over. It’s not a perfect option but it can be a quick and simple way to get back on a solid financial track. And even if you property is one that currently has tenants, you still have options for selling it to help clear your debts.
As you weigh the pros and cons of selling your property in order to pay off your debts and prevent going through the process of repossession, consider as a factor the amount of stress and anxiety that could be involved if you end up having your home repossessed.
The negative emotional impact of going through repossession is one that can seriously harm your mental health, as the website Repossession Help notes. And for many people this situation is exacerbated by feelings of social stigma and other self-denigrating feelings they could have after their home is taken away.
That’s why selling a flat or house, whilst not the preferred outcome for many owners, can nevertheless give them the chance of a fresh start with less impact to their mental health.
Will you be able to own a home again if you sell it to clear your debts?
If you are worried that selling your flat or house to clear your outstanding debts means that you will never again be able to own a property in the UK, then this concern isn’t one to worry about.
Even if your credit score has been reduced as a result of the money that you owe, these scores can always be improved through sensible financial planning, paying down debt and avoiding returning to the same situation in the future. Speak with free financial advice agencies to see whether there are additional tips that they can recommend to help you save in the future.
For example, Citizens Advice says that you might find it hard to get approved for a private rental immediately after selling your home to clear your debts, and therefore you could ask family members or friends if you can stay with them for some time. This would be one way to save your funds during the time you are trying to save money.
Eventually, you will hopefully be in a much better position in the coming months or years where you finances are stronger and you have rebuilt your credit. At that point, you could then start to think about potentially searching for a home to buy within a reasonable, affordable budget.
Your options for how to sell a property to resolve your debts
If you have assessed your various options for attempting to tackle your debts and have determined that selling the house or flat is the best possible solution, you will then have to decide on which of four available options you would like to use for finding a buyer.
Generally, you can choose from selling your home at an auction, selling with an estate agent, selling to a quick home buyer or selling without any assistance. There are benefits and drawbacks associated with all four methods, for example it might take more than a year to sell your home via an estate agent but only a handful of weeks if you speak to a quick buyer.
One useful step to take can be writing down you main aims with the sale of the home, such as how fast you want to sell, your preferred sale price, and whether you are open to paying any commission. Then compare all of these goals against the specific information about all four options below, and this should show you which of the strategies best matches your needs.
Selling at an auction
You could try your luck with an auction, where people will be able to place bids on your home starting at the reserve price – this is the lowest price at which you are comfortable selling the property. Further bids will increase in price value until the auctioneer says that the auction is over, at which point the highest value bid is the winner and person buying your home.
It’s important to choose a reserve price that will generate a profit from the sale, particularly as you’ll be using the proceeds to help clear your debts. Be sure to account for the auctioneer’s fees when calculating a reserve price, so that you select one that avoids selling break even compared to what you paid for the property, or that even risks selling the home at a loss.
Auctioneers often charge commission at 2.5 percent of a property’s sale price, and this fee is subtracted immediately from the sale proceeds. You might find that other auctioneers charge even more than 2.5 percent, whilst some could be open to charging less than this rate, or to have the winning bidder pay a share of your costs, which will reduce your expenses.
The auctioneer charges this fee for the work that they do in selling a home, starting with creating a listing that features photographs of the property and describes its main features. They will advertise this listing, host the auction, and oversee the completion of a successful sale.
Selling through an auction is not the fastest option, which is something to consider as you weigh the pros and cons of the various strategies. There will be a long wait of many weeks or months between the day that you decide to sell this way and that day on which the auction takes place. And then even if your home does sell, the buyer will have an average of 28 days to sign all of their required legal documents and complete their other tasks to finalise the sale.
Some auctioneers might be willing to reduce the deadline that they will set for the buyer to finish these steps, which can help speed up a sale, so consider asking about this option. Just note that other auctioneers might give the buyer even more time than 28 days.
Selling with an estate agent
When you sell a home through an estate agent, they will be responsible for putting together a listing, advertising this in local newspapers, in their office, and online, and then scheduling viewings where people interested in your flat or house will have the chance to tour it. Finally, estate agents will hear offers from buyers and try to get one to the exchange of contracts.
For doing all of these tasks, the typical estate agent will charge a seller commission within a range of 1.15 percent to 1.40 percent of a home’s final sale price. This fee will increase your expenses because it will be taken out of the eventual selling proceeds, so this might not be the best option when selling to clear debts because it will reduce the amount that you receive.
It can also take quite a long time to sell a property through an estate agent, possibly many months or even more than an entire year. If you want to sell fast to clear your debts quickly, you might therefore have to consider other options – for example selling to a quick buyer such as LDN Properties, because that process should only take a few weeks to complete.
Note also that if you sell through an estate agent, someone can make an honest offer to buy your property but then later decide against it and cancel the offer, which they can do without any penalty if you have not yet exchanged contracts. This would add much more time to your selling schedule because the sale would collapse and you’d have to start over with seeking a buyer.
Selling to a quick home buyer
A quick home buyer is a company like LDN Properties that has the funds on hand to purchase your flat or house immediately. They do not need to wait weeks or months to get approved for a mortgage to afford the purchase, and this cuts the timeline for buying your home down to just a handful of weeks, and this covers the exchange of contracts any paying you the proceeds.
You will likely want to keep costs down if you are selling your property to prevent repossession, and this is another reason why a quick buyer can be a wise option because the honest companies will never charge you any commission when buying your home, which reduces your expenses. That compares favourably to selling through an auctioneer or with an estate agent, because those two methods charge fees that will be taken out of the final sale proceeds.
Quick buyers are also a good choice for buying any home, including those with structural damage, legal disputes or any other issues that might make others view them as “problem” properties. These companies make competitive and speedy offers to purchase leasehold and freehold homes no matter their age, condition, location, shape, size, type and other factors.
LDN Properties, for example, has a long and varied list of homes that is has bought and made offers for since launching in 2003, including flats with a freeholder dispute, properties on a roundabout, houses with a low Energy Performance Certificate rating, homes located near to railways, flats with a leak, properties that do not have a Heating Equipment and Testing Approval Scheme certificate, smoker’s homes, flats with cladding, properties with dry rot, and many other situations.
For your extra peace of mind, ask specific quick buyers if they belong to The Property Ombudsman (TPO), which is an independent organisation that writes rules and regulations for the industry that all member companies – like LDN Properties – must follow. If a quick buyer can’t prove they belong to TPO, don’t sell to them because it might be a scam.
It’s simple, free and fast to check a company’s registration status, just visit TPO’s website, click on the “Find a Member” tab on the left side of the welcome page and then when prompted type in the name of the business. If they are truly a TPO member then you will be shown their membership details, whereas you will get no results if they do not belong to TPO.
Selling without any assistance
Selling your home on your own will put the burden on you to handle every step needed to find a buyer, starting with putting together and then advertising a listing, followed by scheduling viewings, hearing offers and hopefully getting one through to the exchange of contracts.
If you are already dealing with the likely large stress of trying to clear your debts and prevent the repossession of your home, you might not want to add to this with the burden of selling on your own. Therefore, you should only think about this option if you have quickly sold a home before, or if you have a qualified friend or family member that can help with the sale at zero charge.
This can also be an unpredictable way to sell your home, and it might take many months or even more than a year to find a buyer – which likely is far too long for the deadlines that you are facing to clear your debts. Therefore, you may want to think about using other options, such as selling to a quick home buyer, as that process should only take a few short weeks to complete.
Remember also that someone could make an offer but then cancel it, causing the sale to fall apart, and they can do this without any penalty if you have not yet exchanged contracts. You’d then have to start over seeking a buyer, delaying an eventual sale much further.
The only obvious advantage of selling on your own is that you will not have to pay an auctioneer or an estate agent any commission when you find a buyer, which lowers your expenses. But this saving may be wiped out by the funds you’ll spend on advertising your home and other steps.
Top seven questions about repossession of your home
As we speak to many homeowners on a regular basis, we’re frequently asked many questions about home repossession. Here are the three that we are often asked:
Yes. In fact, many mortgage lenders prefer to reach a repayment agreement rather than have to go through the lengthy process of repossession. If you have fallen behind with payments, call your lender as soon as possible and tell them about your situation. Talk with them about making a repayment plan and restructuring the mortgage.
Yes. Often if your mortgage lender has started the initial stages of repossession, you might still be able to sell it and use the sale proceeds to not only pay off the mortgage but any late fees you might have occurred.
Not necessarily. A court will have to sign off on the final repossession before the mortgage lender can officially take control of your home. If you fight the repossession in court then you can present a plan for paying the arrears that a court might approve, which would prevent the lender from taking over your property.
If you’re selling to clear your debts, you likely will want to sell as fast as possible, so timing should be one of the factors that you consider when you decide among the various options available to seek a buyer for the property. Typically, your choices are selling at an auction, selling with an estate agent, selling to a quick home buyer, or selling on your own.
Selling a property via an auctioneer or using the services of an estate agent are two approaches that will charge you commission if they find a buyer for your home, and this fee will be subtracted from the eventual sale proceeds. But if you choose to sell to a no-commission quick buyer like LDN Properties, or if you sell without any assistance, then you’ll pay zero fees.
If you choose to sell your home to a quick buyer such as LDN Properties then you can anticipate that the typical schedule should be just a few short weeks, and that includes the final steps of exchanging contracts and paying you the proceeds. By contrast, selling at an auction, selling with an estate agent or selling without any help can all take several months at least.
Yes, you should still be able to own a property in the future but you should be prepared to have to wait several years whilst you rebuild your finances and improve your credit score, as both will likely have suffered as a result of the outstanding debts. But if you take some steps toward saving money and repairing your credit, you could consider buying a home again.
