According to a recent article by the Financial Times, many buyers putting in offers on repossessed houses which have been accepted are finding themselves being gazumped by banks and estate agents. The FT makes a bit of a fuss about it but to be honest I don’t think this practice is anything new or something to be overly concerned about.
Bank owned properties marketed by estate agents or auction houses have to, by law, publish offer notices in a local or national newspaper. This gives other potential buyers the option to put in a higher bid (which the bank can accept or not, but why wouldn’t they?) and for the bank to recoup more of the debt owed to them. For the banks and the person who has had their home repossessed, getting the highest possible sale value that they can is a good move. This is especially true for repossessions where there is negative equity in the property.
Imagine how you would feel if your home was repossessed and you knew that the bank had taken a low offer, despite having higher offers on the table, leaving you with more of a debt to the bank than was necessary? Even if there is positive equity in the property the previous owner has the right to expect the highest price it can achieve. Most repossessed homes sell for a good 20 – 30% less than the market value anyway, so having to pay a few thousand pounds more is not going to damage your profit margin too badly.
So while we can all agree that the practice of gazumping on repossessed houses and flats may be inconvenient to the potential buyer (who is in many cases a property investor looking for the cheapest houses s/he can find), it’s par for the course and not something we should be griping about. It’s just a case of pulling our socks up and either putting in a higher offer (which is still probably much less than the market value anyway), or cutting our losses and walking away.