There is a common misconception that mortgage lenders auction off repossessed properties at rock-bottom prices. In reality, mortgage lenders have a legal duty to the borrower to sell repossessed properties for the best price they can get.
What Happens When a Property is Repossessed
When a property is repossessed by bailiffs they will change the locks, shut off utility supplies and ensure that taps and cisterns are not going to leak. The bailiffs’ responsibility is to physically repossess the property and ensure that it is secure. Whilst it would be contrary to their duties to damage a property, bailiffs’ activities would not win them any home-improvement prizes. It is usually obvious when a property has been repossessed and it is likely to attract lower offers as a result.
Many borrowers find it frustrating that there may be a delay between a property being repossessed and subsequently sold. This can be particularly galling if a borrower was denied the time to sell the property themselves. There are many reasons why a mortgage lender may take time to sell a property – they may have many other properties to sell or be waiting until property prices rise.
Repossessed Properties Occupied by Tenants
If a mortgaged property is occupied by authorised tenants when it is repossessed receivers will be appointed by the lender to administer the property. After repossession, the tenants may be allowed to remain in the property under the terms of their original tenancy agreement but should pay the rent to the receivers rather than to the landlord.
The mortgage lender will usually start a repossession case against the tenants so that the property can be sold with vacant possession. The mortgage lender will have to obtain a court order before the tenants can be evicted resulting in an inevitable delay in the sale process.
How Mortgage Lenders Obtain the Best Price for Repossessed Properties
To satisfy their duty to get the best price they reasonably can, a mortgage lender should place a property on the open market. Whilst a repossessed property may be sold at auction many are marketed in the usual way through estate agents. Once an appropriate offer has been received on a repossessed property advertisements may be placed by the agents inviting higher offers before exchange takes place. Mortgage lenders also have a duty not to incur unnecessary costs when they sell a repossessed property.
Claims for the Underselling of Repossessed Properties
If a borrower believes that a mortgage lender has failed in their duty to get the best price they can for a repossessed property they may bring their own case against the lender for damages. These damages would probably be the difference between what the property should have been sold for and what it was actually sold for. A similar case could also be brought if a borrower believes that the costs of the sale were too high. A borrower has six years from the date of the mortgage lender’s failure in which to start a court case. However, as with any court case there will almost certainly be potential costs implications so caution should be exercised before rushing to court – especially if the breach is not substantial.
What Happens to the Sale Proceeds from Repossessed Properties
When a mortgage lender sells a repossessed property the sale proceeds must first be used to redeem any prior mortgages on the property. The lender will then use any of the sale proceeds remaining to clear their own debt. However, the lender will also use the sale proceeds to discharge any costs or fees which they have incurred during the repossession or sale process. These can easily add thousands of pounds to the mortgage debt – taking a substantial bite out of anything left over. When the mortgage lender has cleared the mortgage debt and their costs the balance of the sale proceeds will be passed to the borrower.
Properties in Negative Equity
Repossessed properties may be sold at a price which does not cover the mortgage debt and all of the lender’s costs. The borrower will remain liable to pay any shortfall between the sale price and the mortgage debt and costs. A mortgage lender can usually wait up to 12 years before starting a new court case to recover this debt. In some circumstances a mortgage lender may be able to wait even longer before taking the matter back to court. This could apply if a borrower admitted that there was a shortfall, or made payments towards it, after the property was repossessed.
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My ex husband kept the marital home after we divorced, he Agreed to pay me A sum which we agreed at the time but this never happened , my name is still on the deeds and mortgage and over the years he’s missed lots of payments and the bank have been relentlessly chasing me even though I told them it’s not my problem . The house got repossessed eventually and my ex disappeared. The debt to the bank is now paid but there is surplus left over . The solicitors working for the bank said they can pay the funds to us but we have to sign an agreement of split of funds , because they can’t find my ex they said they can’t pay me and will have to send the money to court where I can try and claim my share .... will I ever get my money .
Sarah - 29-Sep-20 @ 9:34 PM
My house was repossessed and when I got a breakdown of the charges they were extortionate can I complain to someone and try to get them reduced
Deb - 13-Jul-20 @ 4:01 PM
Hi my house was volentry repossessed in 2019 and was valued at 225k . I was never informed by the bank that it went for auction for 175k well under value . Is there anything I can do as it was sold for 175k (just covers mortgage) so I wont receive any profit from it. I think this was there plan . As long as the mortgage was covered . But I voluntary gave it to them to sell as they persuaded me that it would be better for me as they will pay all fees incurred by the sale.
Arlene kundak - 29-Jun-20 @ 1:46 AM
My house was repossessed in 2006 and during that time I had Cancer. In 2019. I contact Halifax for my PPI and was told not entitled and requested for all my Data. On getting this information I realised from the figure that my house was sold for £205,000 on the Lands registry data and the bank declared it was sold for £156,000.
Although the transaction clearly showed the
Payment of £206,000 was paid into the account.
Do I have any chance of taking this fraudulent act to court as Ombudsman replied it’s over 6 years. My cut is someone needs to look into this
Simi - 20-Apr-20 @ 10:49 AM
My house is valued at aprox £90,000 I owe £21,000 what would happen if house got repossed ?would I expect any money after the sale,?
Dodsy - 22-Dec-19 @ 12:17 PM
Hi when a repossed house is sold and they only things owed are second mortgage and main mortgage plus estate.agent fees ECT how long should you wait for the surpless how long is lender allowed to keep your money
Momma - 29-Jun-19 @ 10:38 PM
I have been contacted by a firm Fraser and Fraser regarding a property that was repossessed in 2011. They have advised that there is £35000 which is what was left over after the sale of the property and all debts cleared. They are offering to help us claim this money at a cost of 25 % of whatever we are awarded, I’d like to know if I’m better chasing this up myself as I feel 25% is very expensive?! Any advice would be gratefully received. Suzanne
Suzanne Harkins - 27-Jun-19 @ 11:16 AM
My ex is about to be repossessed, after missing mortgage payments, my name had been removed from the deeds, that took 3 years and thousands pounds.But they won't remove my name from mortgage,even though it was given to ex in divorce settlement,my credit limit is trashed ,even though l have a concent order stamped by court.Can building society take my mortgage free house shared with my now husband who is on deeds with me?.
Fudge - 19-Jun-19 @ 11:16 AM
My name is stuck on mortgage of ex husband, l have a concent order stamped by a court ,exonerating me from any debt on his property and mortgage,but the building society won't release my name, they have taken my name off the deeds ,that took me 3 years.Now they are about to repossessed him with negative equaty.My credit limit had been trashed, what can l do to protect myself ,l have a property of my own,can they take my mortgage free property? I'm really ill with worry.
Fudge - 19-Jun-19 @ 11:03 AM
In 2006 our home was repossessed it was then sold by nationwide b.s. The proceeds of the sale paid of the mortgage abd they also used the proceeds to pay off an overdraft we had with them was this allowed? We didn't request they do this or authorise it, so should they of just done it? Many thanks
Chelle - 12-Jun-19 @ 6:33 PM
I had my house repossessed in 2001 it was auctioned in 2002 and sold for 11000 more than the mortgage am I entitled to any money back?
Dickyboy - 8-May-19 @ 1:21 PM
My house withnorthern rockwas repossessed in 2006 i just walked away and left it never told bank or anybodyand it sold for nealy double the price the mortgage was for i also have a couple of loans with it but years later my wages was arrested and i paid back about 20k to loans what im wondering how do i check if im due anything back from northern rock now they no longer exist?
Jack - 27-Feb-19 @ 8:36 AM
I had my house repossessed in March 2011 It was sold around 6mths later never heard from the mortgage provider Purchase price £45000 from the details I have found it sold for £85000. A loan was taken on the property of £20000 which leaves a balance of £20000 less cost
George Palmer - 25-Nov-18 @ 1:07 PM
Gail Duncan - Your Question:
Hi I owned a house in Scotland bought for 195,000 we put down 35,000 and took out a mortgage for 160,000. My partner and I split I walked out and he more or less did the same. The house was repossessed and sold 5mths later for 188,000. We were there 4yrs and paid a repayment mortgage at 1,050 A month this was 9yrs ago I'm now curious to what happened to the difference after mortgage paid and fees paid would my x be entitled to all that was left withought me being informed the payments came out a joint bank account x
Our Response:
Contact the mortgage company, if the home was in joint names, they will be able to tell you if there was any thing left after the mortgage and all fees were paid. These proceeds should have been split between the two of you.
HousingRepossessions - 4-Apr-18 @ 11:50 AM
Hi I owned a house in Scotland bought for 195,000 we put down 35,000 and took out a mortgage for 160,000. My partner and I split i walked out and he more or less did the same. The house was repossessed and sold 5mths later for 188,000. We were there 4yrs and paid a repayment mortgage at 1,050 A month this was 9yrs ago I'm now curious to what happened to the difference after mortgage paid and fees paid would my x be entitled to all that was left withought me being informed the payments came out a joint bank account x
Gail Duncan - 1-Apr-18 @ 5:43 PM
My £240,000 home was sold off by the Bank Christmas 2012 for half its value. Sadly the shortfall didnt cover the bank business loan for the fish & chip shop, mortgage and associated debt so i became a social hermit. Its probably too late too claim. Ironically my little daughter drew Baby Jesus comfortably in a crib that Christmas.
Chris - 30-Jan-18 @ 2:35 PM
I co own a property in dunstable thats worth aproxametly 280,000 - 300,000 I owe 115,000 I've split up with my ex who is still living in the property I was awardedcustody of our two girls as they suffered neglect in their mothers care. My ex refuses to move out or let me sell the property, and as I've spent £1000,s taking her to court to get custody of my girls I have nothing left to take her to court to have her removed/ sell the house. I'm paying £1300 a month for a house me and my children don't live in and can't afford it anymore. I was considering letting the house be repossessed as my credit history is terrible anyway and was wondering how long and what costs would incur? Could anyone shed some light on my situation?
Kibo - 19-Sep-17 @ 9:16 PM
Hi
My daughter has rented a property for 5 years, that was originally a repossession. She has asked the third party that deal with renting property if there was an option to buy it as we were originally told by the estate agentthat it was advertised with.She has been told that she would have to vacate it until it went on to the open market then make an offer, seems daft to have to move out first?? Is there anyway that the company will pass our details to receievers and or bank so we can ask them direct if we could buy it?
Thanks
Polly - 24-Jul-17 @ 3:31 PM
Hi I had a mortgage on a house in 1999 for 20000 I had it for couple of years and had a loan of 18000 aswell it was with rbs I went through depression and ended up giving the keys bk to the bank and they sold the house for 75000. Then a couple of years later the rbs put a charge on a house I was selling for the 18000 and took the money. I thought when they sold the house I had the mortgage on with them the price they got for it would of covered the 18000 loan never got a penny back and tried speaking to them and just get passed to different people all the time. Do you think all there costs came over 75000 the mortgage was for only 20000.
Lee53 - 19-Jul-17 @ 10:38 AM
Wee - Your Question:
I lost my house to a mortgage company, (described by a judge), as not having a good name within the industry, I defended repossession 6 times, they were not interested in the fact that I had been involved in a serious road accident, (not my fault, someone reshaped my stationary car). Even when I sent a letter from a reputable national law firm with details of compensation, they judge asked why they had done this. Anyway, after almost 3 years I get a letter saying I owe just over £25k.The original price was in 2006 was £130k minus right to buy discount making the purchase £101k. Now look at the price the mortgage company sold it for, and the sudden increase the buyers sold it for. The area around the house cannot be built upon and no extension added, so how would the selling price be Almost £100k above what the mortgage company sold it for?£245,000 Semi-Detached, Freehold 20 May 2016 3 bedrooms£147,000 Semi-Detached, Freehold 25 Oct 2013 £101,000 Semi-Detached, Freehold 02 Oct 2006 Take into account I bought the house valued at £130k, in 6 years it increased according to mortgage company sale by £17k, and sells 30 months later for £98k profitany thoughts
Our Response:
Unfortunately if you lose your house you don't benefit from any profit that was made in subsequent sales. You should however receive the amount it was sold for minus what you owed (plus any court/admin fees incurred by the company)
HousingRepossessions - 7-Jul-17 @ 2:37 PM
I lost my house to a mortgage company, (described by a judge), as not having a good name within the industry, I defended repossession 6 times, they were not interested in the fact that I had been involved in a serious road accident, (not my fault, someone reshaped my stationary car).Even when I sent a letter from a reputable national law firm with details of compensation, they judge asked why they had done this. Anyway, after almost 3 years I get a letter saying I owe just over £25k.The original price was in 2006 was £130k minus right to buy discount making the purchase £101k.Now look at the price the mortgage company sold it for, and the sudden increase the buyers sold it for. The area around the house cannot be built upon and no extension added, so how would the selling price be Almost £100k above what the mortgage company sold it for?
£245,000 Semi-Detached, Freehold 20 May 2016 3 bedrooms
£147,000 Semi-Detached, Freehold 25 Oct 2013
£101,000 Semi-Detached, Freehold 02 Oct 2006
Take into account I bought the house valued at £130k, in 6 years it increased according to mortgage company sale by £17k, and sells 30 months later for £98k profit
any thoughts
Wee - 6-Jul-17 @ 8:43 PM
JJ - Your Question:
I have had my flat repossessed about 10 years ago but just recently I am getting credit companies contacting me for the money I owe because the flat was sold less then my mortgage at the time what shall I do
Our Response:
Find out why this debt is being chased now - seek help from a debt adviser (Citizens' Advice is a good place to start). If you are indeed responsible for the debt, you should be able to come to an arrangement to pay off the debt by instalments.
HousingRepossessions - 28-Jun-17 @ 12:32 PM
I have had my flat repossessed about 10 years ago but just recently I am getting credit companies contacting me for the money I owe because the flat was sold less then my mortgage at the time what shall I do
JJ - 27-Jun-17 @ 1:19 AM
My property was repossessed and sold by the mortgage lender in April. They have now passed on surplus funds of 170K to the housing association that jointly owned 50% percent and is entitled to 150k. However the housing association is taking a long time in giving me surplus of 20k saying they need to search if I had bankruptcy/ IVAs in the past and this takes time. Q1) how much time it takes for these kind of searches? Q2) do they need to make these searches as I thought there responsibility is limited to loans secured on the property?
Don - 15-Jun-17 @ 9:09 PM
Loyden1- Your Question:
My rented flat may be getting repossessed would I be able to negotiate with the lenders about buying off them before being evicted ?
Our Response:
You could trybut it's not always that straightforward, you would be better to speak to a legal professional for advice.
HousingRepossessions - 15-Jun-17 @ 2:13 PM
My rented flat may be getting repossessedwould I be able to negotiatewith the lenders about buyingoff them before being evicted ?
Loyden1 - 12-Jun-17 @ 10:44 PM
I had a shop with 3 secured family homesbut last week I phoned the lenders they told me they've sold the shop property as it was repossessed3 years ago but they let us stay in the houses.but there is a shortfall can they come to an arrangement or can they sell the houses
Zam - 22-May-17 @ 9:01 AM
house - Your Question:
After repossession of my previous home an the lender has now sold the property.I have been contacted by my old neighbour who said the new owner has spoken to them as they opened a letter with a listof charges an stated there may be money owed? I believed that there may be a shortfall an am reluctant an scared to contact the lender. Can you tell me hoe the lender goes about trying to trace you if there is a surplus or shortfall? As I find it strange that a letter would be sent by the lender addressed to myself an ex partner at the address that has been sold?Can you please advise how they go about this.Thanks
Our Response:
Any debts relating to the mortgage are removed from the title when a mortgage lender sells after repossession. Letters from other organisations demanding payment in relation to other debts might still be sent to this addres though. The new owners should refer these back to their conveyancing solicitor to explain that the house is sold etc.
HousingRepossessions - 26-Apr-17 @ 2:47 PM
After repossession of my previous home an the lender has now sold the property.
I have been contacted by my old neighbour who said the new owner has spoken to them as they opened a letter with a listof charges an stated there may be money owed? I believed that there may be a shortfall an am reluctant an scared to contact the lender.
Can you tell me hoe the lender goes about trying to trace you if there is a surplus or shortfall?
As I find it strange that a letter would be sent by the lender addressed to myself an ex partner at the address that has been sold?
Can you please advise how they go about this.
Thanks
house - 25-Apr-17 @ 8:08 PM
Tine - Your Question:
Thanks for response , yes there was surplus money after house sale and my name on mortgage , I can not be contacted /found how can I find out where money is not knowing who the lender was.
Our Response:
How do you not know who the lender is if your name is on the mortgage? Your old bank statements might help?