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My home was repossessed before lockdown – can I stop my bank selling at a knock down price?

A friend of mine had their house repossessed in late February, just before the lockdown began.

With the assistance that is currently being offered such as mortgage holidays and protection from repossession until the end of October, is there any protection for those currently being repossessed? 

Can their lender sell the house at a reduced price because of the effects of the pandemic on the housing market?

House prices, according to the latest Nationwide data, have had the biggest fall in 11 years and I wondered whether my friend could request that his lender refrains from selling his property into this current depressed and distorted housing market?

The Government hasn’t set any guidance for lenders on what repossessed homes should sell for while the lockdown remains in place

Will Kirkman of This is Money replies: The Government’s ban on repossessions came into place on the 20 March and was extended to 31 October this week. 

As you mention, your friend unfortunately saw their home repossessed just before the ban came into place. 

You say your friend has had to leave his home and that it’s now being advertised on an online portal, having been valued by three different agents from £825,000 to a high of £875,000.

The next stage will be for the lender to sell the home, and your friend may have to pick up any shortfall if the selling price doesn’t match what he owes. 

Unfortunately for your friend, the Government hasn’t set any guidance for lenders on what repossessed homes should sell for while the lockdown remains in place. 

As the home was repossessed before lockdown, it’s unlikely your friend’s financial hardships were a result of the economic impact of the virus, which is what the Government’s measures are intended to dampen.

And while it’s in your lender’s best interest to sell at the highest price possible, they will also want it to dispose of the property as soon as possible. 

We’ve asked Russell Conway, a senior partner at solicitors Oliver Fisher specialising in housing, for his advice on what to do next. 

Russell Conway, senior partner at Oliver Fisher solicitors replies: This is a very unfortunate situation to find yourself in.

Oliver Fisher senior partner Russell Conway

Oliver Fisher senior partner Russell Conway 

Sadly lending organisations and building societies generally choose to sell a repossessed property as quickly as possible. 

There are generally good reasons for this. 

Not least of which being that the property owner remains liable for interest on his loan until such time as the property has been sold and the loan paid off in full.

The lender has a legal duty to sell quickly and they also have a legal duty to obtain the best possible price for the property.

Repossessed properties can be sold on the open market using an estate agent or possibly at auction.

However, it should be stressed that valuation is not a science. 

It is possible 10 valuers looking at a property may well come up with 10 different valuations and accordingly while you may disagree with the price obtained for the property unless it is very wide of the mark there may be nothing you are able to do about it. 

Asking the court to hold off on selling until the market picks up is unlikely to be successful

 Asking the court to hold off on selling until the market picks up is unlikely to be successful

Obviously if a £500,000 property were sold for £200,000 that is something you would wish to question and possibly litigate over but if a £500,000 property were sold for £450,000 that may be very difficult to challenge.

Repossessed properties are often valued lower than normal house sales. This is because they may not have been left in great condition. 

There may also be a problem locally which made it difficult for the house owner to sell before the property was repossessed. 

There is also the fact that anyone purchasing a repossessed property may have a black mark on their credit rating as the previous occupant will have almost certainly have had a bad credit rating.

I am not sure if the property has now been sold or if it is awaiting sale. 

Sadly, however, to make an application to the court to defer sale until the property market picks up is unlikely to be successful as this is a huge unknown. 

While prices have dropped in certain parts of the country that is not the case everywhere and if the Covid-19 emergency slows down it may be the case that prices pick up again very quickly.

Courts do not like to dip their toes into the unknown, and accordingly I would advise against any application to the court.

If you genuinely believe the property has been sold at an under value – and you can back this up with an expert valuation report from a valuer – then and, only then, you might be able to think about challenging the sale.

I do wish you luck.

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