If you are being repossessed, it is usually a long process during which there is ample opportunity to try and prevent the repossession. Selling your home before it is repossessed could put you back in control and help you save money in the long run.
What Is Repossession?
Repossession occurs when an individual does not repay debt, such as a mortgage loan. Consequently, lenders then repossess assets such as houses, in order to make amends of missed repayments. Repossession only occurs when people do not repay debt, and it can happen quickly and suddenly so it is important to repay loans on time, and in the agreed manner with the direct lender.
How Does Repossession Work?
There are many different steps in the repossession process and many stages at which you could try and stop the proceedings:
- You will go into arrears
- If you continue to be in arrears, your lender could take court action
- Court action will lead to a court hearing – this is a chance for both you and the lender to present reasoning and evidence
- Not showing up to the hearing will usually result in the lender’s right to repossession, by default
- Court decision – the judge could decide to rule in your favour (new repayment plan) or in favour of the lender (repossession order)
- Bailiffs can be sent to your home if you violate your suspended order
- Repossession will occur and the lender will sell your home
The entire process can take up to 12 months and can be a time-consuming and expensive journey. Repossession will always be a last resort for lenders and there are many steps for you to try and prevent the situation before it escalates to repossession.
At What Stage Should I Think About Selling My House?
Selling your home if you are at risk of repossession can be a good preventative measure that can help you pay off your mortgage and any arrears that you owe. It puts you back in control and helps you to plan for the future.
Choosing to sell your home before it is repossessed means that it is more likely to sell for its market value; if the home is repossessed and sold by the lender, it will usually sell for far less.
If you are able to sell your home at its market value, it is possible that you are able to pay off all of your debts and still have some money left over. Think carefully about what your plan is if you sell – for example, will you need to purchase another property and pay off a smaller mortgage? Will you need to cover rent?
There is plenty of time between going into arrears and the actual repossession of your home so many steps at which you could try to intervene. Lenders will need to let you know how much you owe, request for you to make alternative repayment plans, give you time to consider various proposals and give you written warning if they plan to take you to court. If the situation escalates to court action, there will be a warning given before the court hearing and time after the court hearing to vacate the property.
Why Might It Be Beneficial To Sell Before Repossession?
What Factors Should I Consider When Selling My House Before Repossession?
If you choose to sell your home before it is repossessed, you will need to take certain factors into consideration including:
- how much will it cost you to sell?
- what is the current condition of the property?
- what debts could you incur if the home sells for less than you expect?
- how long will it take to sell given the current housing market?
One of the most important actions to take before selling your home is getting a realistic price valuation. You may be keen to get a quick sale, however, make sure that you are getting the best price possible for your home as you will still need to pay to live somewhere.
What Risks Are There If You Sell A House That Is Being Repossessed?
If you choose to sell your house before it is repossessed, you might be at risk of not receiving support from the council when it comes to finding you somewhere to live. It is possible that they will view your decision as choosing to be intentionally homeless. Selling your house to avoid repossession is a drastic solution – trying to resolve your mortgage problems or challenging court action by your lender could be sensible first steps before choosing to sell your home. Selling a property at risk of repossession could also negatively affect your benefit entitlement – you might not be able to claim benefits if you receive more than £16,000 from the sale after paying back your mortgage.
If you are in negative equity (i.e. the value of your home is less than the value of your mortgage), you will usually need your lender’s permission in order to sell the property or go to the court to allow you to sell. It also means that you could still be in debt after the sale as the earnings may not cover what you owe.