Property Repossession - Common Myths
meeting people at various events, eventually talk turns towards
the increasing number of repossessions, which have been
increasing as interest rates started to rise at the beginning
of 2006. This is bad news as it is for people going through
hell, some people seem to believe that the enormity of this
problem can be avoided by doing things that simply can not be
done - at least not in UK.
Some one recently mentioned, “the best way to avoid trouble
is”, he said, “just hand over the keys to the bank manager -
that way they get to keep the house, I save my credit
Nice idea Jack, just that it does not work like this… not in
UK any way!
Some one else recently wanted to help those going through
the property fast by finding ‘foreclosures’. So he was
trying to figure out how ‘find’ people who are in trouble.
Further proving showed that he had been reading far too many
property books meant purely for American audience. Foreclosure
is a term used in the US. Law works differently in UK, and it
refers to repossessions.
Same thing? Hardly!
Lets us talk about foreclosures versus repossessions first,
and then some other common myths.
Myth 1: Just hand the keys over to the
Many people believe that if they are struggling to keep up
with paying the mortgage then handing over the keys to their
bank manager will clear them of any further obligations of
making payments - because they do not own the house, right?
Sadly this is far from the truth.
Mortgage company lends you the money (cash) and requires you
to pay back the whole amount and interest in cash. If the
company has to sell the house on your behalf then you are still
liable for any interests incurred till all the dues are
Myth 2: Property repossession allows you to make a
Only as long as all debts are cleared from the proceeds of
If the proceeds from your property only pay back a part of
the loan to your mortgage company then you are still liable to
pay back the outstanding amount. These situations can happen if
the property prices have crashed below the borrowing
Myth 3: UK Repossessions are not the same as
In UK, companies are not allowed to seize the house as is
the case in US. Courts allow them only to repossess the house
to be sold at the fair market value, pay the owed amount (and
expenses) from the proceeds and send the balance to the
The Building Societies Act 1997 directs companies to “take
reasonable precautions to obtain the true market value of the
The true value of any property is often subjective - and
depends on the opinion of a purchaser. So how can a mortgage
company determine its true market value?
Auction is a route that many companies take.
However the mortgage company does not has to sell the
property via auction to obtain the true market value. Courts
generally accept this method as a determinant of fair value,
but as long as a company can demonstrate, if questioned, that
other methods were used, it is allowed.
Some companies sell the property via local estate agents
without disclosing that he property is repossessed. By the way
of like for like comparison, they can demonstrate that fair
value was achieved.
However US housing lenders are allowed to apply to the court
(and granted permission) to seize the house back, sell it and
keep the whole proceeds. Normally court allows repossession but
increasingly they are allowing foreclosures. This means that
investors can buy the house from the company cheap and make a
profit on by reselling it at full market price.
So, if you are facing
repossession threat then it is best to speak to some one
competent about your situation. One advice is: do not ignore
correspondence from your mortgage company. Second, get neutral
advice as soon as you can. You do not always have to pay for
the advice. Many free advice
resources are listed on this link.
Remember,if property is sold via your lender (after
repossession) then you not only become liable for further
charges (e.g. bailiff etc), this also gets recorded against
your credit score for future reference.
Many people prefer to sell
the property to an investor who can buy the property fast.
These investors can be located via doing a search on Internet,
searching your local papers or speaking to those in the
This article and similar others can be read at the following
website. These pages are updated regularly.
Repossession Help Blog
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