Contrary to public perception, repossessed properties are never simply sold at significantly below market prices. Doing so could result in legal action by borrowers since the proceeds from the auction must be used to offset any remaining loan amount. In addition, any extra amount must be returned to the borrower (though this happens very rarely).
After a house repossession has been legally completed, court bailiffs will inspect the house to ensure that there are no squatters living inside. Thereafter, they will conduct an inspection of the house to ensure all the taps, cisterns and tanks are not leaking. A cursory review of windows and other doors will also be made to prevent people from entering the house. Once this is concluded, bailiffs will change the locks of the house. Lenders will follow this up by terminating all utility services such as gas, electricity, water and phone.
After all internal processing and documentation have been concluded, lenders will then assign the house to a property agent from their panel to handle the sales. The agent, in consultation with the bank, will then use their discretion on whether to list the property for sale immediately or wait until the market becomes more bullish. If the property is of high value, a surveyor may be engaged to conduct a professional valuation. Lenders are always mindful of placing too high a valuation on properties as it could also lead to legal action from the original owners.
Property agents will usually inspect the houses themselves to identify houses which can be sold directly in the open market. These houses are typically newer and better maintained ones located in good neighbourhoods. Once a minimum selling price has been agreed upon with the lender, the property is then marketed using the usual sales channels, which include, but are not limited to, online property portals and exhibitions. It bears reminding that lenders will not perform any renovations or refurbishments on properties as they have to account for any expenditure to the court (and borrower).
For less attractive properties, property agents will usually place them on public auctions. All expenses, such as auction costs, fees and commissions will be deducted from future proceeds. Buyers of such properties are usually professional flippers who will resell the houses after doing a comprehensive beautification process.
Once the house has been sold, the proceeds will be used to pay off the remaining mortgage amount, agent fees, legal fees and any other court sanctioned costs. Any remaining amount will then be handed back to the borrower.
In the event the proceeds are insufficient to cover the mortgage and costs, the borrower will remain liable for the amount. Lenders have up to 12 years to file a new legal claim for the remaining balance.
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