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Some Facing Repossession Still Think Their Homes Are Worth More

Sometimes it’s best to sell up and walk away or lenders may chase you for 12 years

Today I got a call from a frantic seller who is facing repossession – I’ll call him Mr. B. He owns a house in North London, but in a not so great area where prices have been steadily depressed for some time.

He told me that he has a ‘repossession order’ for next week. The first thing I try to do when someone calls in a panic to tell me about a court possession order on their home is to try an find out exactly which stage the reposession / possession is at. Many people confuse a Court Order for Possession with a Bailiffs Warrant for Possession. The two things are very different.

If you just got the first one, you have some time to sort out your finances and a very good chance to avoid repossession.

However, if you just received the Bailiffs Warrant, then look out. That’s the nasty one, and much harder to deal with simply because time is no longer on your side.

Mr B. told me that his was a bailiffs warrant for early next week. That in itself is not impossible to deal with by any means, but sometimes seller’s own expectations are simply too high.

Mr B. has a house worth £300,000 – his valuation of course, and as a homeowner like all of us, this will be the top valuation. He owes £200,000 to his mortgage lender, sub-prime specialist GMac.

He told me that he would like to sell to avoid the bailiffs coming next week. That’s a pretty tall order, to find someone who is willing to put down cash in today’s climate to buy a house in a couple of days. That would mean exchanging contracts at least and then submitting a form n244 to the court to get the bailiffs warrant suspended.

Unfortunately Mr B. also has arrears of a substantial sum of £22,000. This means that he would have to sell for a minimum of £222,000. Except that he also has a second charge loan with Black Horse Lloyds for £13,000. Once fees and penalties and costs are added to this Mr B. is looking at a minimum of £240,000 just to clear his debts.

Mr B told me that he understood that he time was against him and so he is willing to sell at a discount – but absolutely no less than £280,000.

This represents a discount against the value of the house (his valuation, mind) of approx 6.5%.

Now house prices are falling at a pretty fast rate. Lenders are telling surveyors to downvalue properties, but Mr B. not only wants someone to pay 93.5% of his price, but also wants to buyer to pay cash (no choice if they are going to exchange before the bailiffs arrive) which would almost certainly have to include the arrears of £22,000 as deposit if GMac are going to accept a conditional exchange.

I suggested to Mr B that any cash buyer will be looking at a serious discount in return for doing this in such a short time frame and any buyer is going have difficulty in remortgaging above £250k because of the stamp duty threshold.

There had already been a buyer and Mr B had used this to get the court to suspend the possesion order. Courts usually give a second chance, and the Judge did, but then the buyer pulled out.

Real Cash buyers are few and far between right now and they have the pick of hundreds of properties at fire sale prices. Even an estate agent trying to sell a home to an normal owner occupier will admit that 10-20% is the minimum discount from asking price if you really need to sell right now (and that sale would take at least 8 weeks via the normal process). If Mr B. thinks that he will find one of these normal homebuyers, with cash in hand and who doesn’t know there are bargains to be had, then he really is kidding himself.

When prices were rising, a rise in the valuation of a property of 10-20% over a 2 to 3 year period was considered by many to be a god given right. Now that values are slipping in the reverse direction many owners are clinging to the notion of ‘equity’ in their homes as their ‘money’ but that equity simply no longer exists.

I tried to get Mr B to be realistic and outlined the alternatives to him as I see them.

Reality No 1 : Find the money to pay off the arrears in a reasonable time frame and use an N244 form to apply to the Court for more time to pay GMac. Not definite but in the current climate a strong chance the Court would insist that GMac accept terms and the Court would suspend the bailiff’s warrant.

Reality No 2 : Sell the house to a cash buyer for what he owes and simply walk away from the problem with NO DEBT. Sure, he loses his home, but he keeps control of his future and his future income. With no equity in his house and huge arrears of £22,000 and mounting, what exactly is there to lose?

Reality No 3 : He waits until the last possible moment to decide on one of the options above and instead the bailiffs arrive, take control of his house and sell it at auction. GMac will sell it right now for whatever they can get (local comparisons on Auction sales sites show similar properties worth £285,000 selling at auction in the last 6 weeks for £152,000!). Mr B. may well think that is the end of the affair, but GMac won’t forget. Nor will Black Horse Loans.

Black Horse actually are quite good at turning secured charges into unsecured loans if they think they will get nothing at auction, but GMac were jsut involved in demanding repayment from Woolworth’s so they are unlikely to care about Mr B’s feelings when they use their legal right to pursue him for up to 12 years for the difference between what he owes them today and what they get for the house at auction.

Which option do you think Mr B will go for?

It’s a shame but my experience tells me it will be No 3. Instead of being honest to himself about his situation I feel he will remain in denial. After all, the whole repossession process actually takes months to get the position that he is now in. Really Mr B. is lucky. Tens of thousand’s of people are now in negative equity and don’t even have the luxury to be able to sell to anyone for enough to cover their debts and walk away debt free.

The moral of the story?

Act Now to stop your repossession!

Like any difficult situation it also helps to deal with it earlier than later. Stay in control of your own future, by either finding the funds to pay the arrears and settle with your lender in Court, or sell your home and pay off your debts. The alternative is too scary to think about.

Welcome to Stop Repossessions Org UK Official Blog

We at Stop Repossessions Org UK have decided to start this blog in order to document some of the hundreds of home repossession cases we are involved in over any given period of time.

Obviously, those we help need to remain anonymous but all the situations are real and current. Every UK Repossession is unique, everyone’s circumstances with mortgage arrears and possession orders is different.

However, by understanding the processes involved in repossession of your home by your lender, you should be able to fight back and stop reposession of your home.