15th October 2015

Points to consider when purchasing a reposessed property

With the recent economic problems suffered by some countries, there have been opportunities to purchase properties in those countries at very cheap prices, either because the current owners wish to sell quickly, or because a bank that originally lent to the original owner has had to repossess the property due to non-repayment of a debt.

On first sight a repossessed property may be a good opportunity, but the following points should be considered before proceeding further:-

• Why has the property been repossessed? Is it because the original owner had personal cash-flow problems, or is it that the property is situated in a poor location and therefore could not attract the potential renters?

• Could the rental yield that you originally expected be obtained in that area and will it still be achievable, even with the reduced repossessed purchase price?

• Were the amenities that were promised as part of the original sales package with the property delivered? For example swimming pool, local restaurants/bars, shops, hotel, water park, casino etc and if not, when will they be finished?

• In what condition is the property that is being sold? Is it habitable, has it been damaged by the previous owners and what are the additional costs of repair?

• If it is part of a block of apartments, or a villa that is part of a complex, when will the others be finished?

• Are the other apartments/villas occupied and if not, when will they be expected to be fully occupied?

• Did the apartment/villa originally have planning permission to be built and are all those permissions still in place?

• Are all the licences in place, such as building and habitable licences, and if not, when will they be available?

• Are all the utilities available, such as gas, water and electricity, and if not, when will they be available?

• Is this actually a repossession or is the bank simply selling on behalf of the owner? Who technically is the seller?

• Even though this property may be being sold by a bank, still instruct your own independent lawyer to act for you throughout the process.

• Lastly, get an independent valuation carried out to check on:-
  • Current condition and valuation
  • Potential future valuation after any necessary remedial work has been carried out and other nearby properties and amenities have been finished
  • Potential rental yields to be achieved, if required

Simon Conn (www.simonconn.com) is an official partner of FEIFA – Federation of European IFAs. FEIFA (www.feifa.eu) is a non-profit trade body that represents and assists English-speaking advisers that are either based in mainland Europe or have clients there. The Federation also actively assists UK-based advisers to obtain the relevant knowledge - or to work in conjunction with appropriately regulated European advisers – in order to continue advising clients that emigrate or have assets overseas.

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