Mortgage Fraud Danger in Below Market Value (BMV) says LettingFocus

Is making money in property as easy as some people say?
Well, it’s not hard, that’s for sure, providing you know what you are doing.
On a scale of 1 to 10, where 10 is very hard (e.g. running a kids football team as I do and having to deal with some of the parents) and 1 is very easy, I would rate buy to let as a 4.
To keep it simple, it is really just about doing a few things right.
First, you find a property in an area where there is currently strong and ongoing future strong tenant demand for that property.
Second, you buy the property at a good lowish price and third, you find good tenants who will look after it and pay the rent on time.
Sounds simple – and yet so many people try to overcomplicate it.
Usually the companies who overcomplicate it are trying to sell property that is supposedly dirt cheap and which does not require you to put any or much money in.

Too Good to Be True
If you see a deal that looks too good to be true, it usually is.
Very often you will see such companies trying to promote “no money down deals.”
But please keep in mind these important facts……
Mortgage lenders will ALWAYS want to see that you have put some money into the property you are buying. They want to see that you have a stake in it.
And this cannot be funny money – it has to be YOUR money – not money you have borrowed from someone else or from another company.
It has to be YOUR money and you have to tell the mortgage company where it has come from – i.e. the source of the funds.
If you don’t tell the truth about where the money comes from, you have committed mortgage fraud and if you don’t tell the mortgage company the true price you are paying for the property – with all the kickbacks made clear – then you are again liable to be done for mortgage fraud.

Use Your Own Solicitors
Lots of companies specialising in marketing no money down deals will require you to use that company’s own finance arm and legal advisers.
This is because they will make some money from the legal team and finance co. Nothing wrong with that, of course.
But you should check out the cost first as it is often not cheap – and always make sure you have the deal and the property checked by your own solicitors and valuers.
Finally, if you are paying someone to source leads you ought to check out their track record very carefully indeed. Look at the Internet and ask for references.
There are some good firms sourcing below market value property -and we can help with that too - but there are some whose leads have proved to be not so much “below value” as “very poor value.”

Final Thought
It is important to have a mix of investments.
I always laugh when I see how people who manage equity and bond funds are very keen that investors avoid direct property investments like buy to let.
And many who promote buy to let often gloss over the risks and hard work involved to make it work.

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Realted article: BMV or Below Market Value

Copyright of Blog: David Lawrenson 2009. This blog is updated roughly once a week usually on a Monday or Tuesday.

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Auction & Repossession Property Lists – A Guide for Landlords by Letting Focus

Many people think that the only way to buy a repossessed property is via an auction.
But the fact is that the vast majority of repossessed properties go through an estate agent first. Indeed, they only go on to auction if they fail to sell via an agent.
In my opinion, especially for those who need mortgage financing to buy one, it is a lot less risky for a buyer to find which estate agents handle repossessions (they don’t all do so) and then go and do some viewings and put a cheeky offer in with the agent.
The problem with buying repossessions at auctions is that at an auction you can get outbid so easily, and if you are, you can kiss goodbye to the cash you spent on your survey valuation fee and the legal costs you have already incurred.

Estate Agents and Repossessed Properties
Dealing with an estate agent, is in many ways so much better because the agent is bound to pass the offer on to the mortgage co who is repossessing and often the lender will accept low offers.
And whilst lenders usually insist that estate agents keep on marketing a repossession up until exchange, in practice I know that most stop effective marketing once they have found a good buyer (especially given the fact they don’t earn much from mortgage cos for marketing these repossessed properties)
In my opinion, auctions are great for residential property providing, 1) you are happy to buy a wreck or something that needs a bit of work doing on it and / or 2) you don’t need a mortgage.
They can be good for more standard properties when the property market is down on its proverbial bottom but the wider market has not cottoned on yet - as during the period from September 2008 to February 2009.
For all other periods of time and type of situations, you need to get out there and play hard ball with estate agents or source motivated buyers using your own efforts.

Repossession Lists
Oh, and still on the subject of auctions, now and again I hear some supposed expert claiming that for a few pounds you can get access to Repossession Lists from mortgage lenders before anyone else does.
Using this mythical list you can, of course, get in first and get these “below market value properties” for a song.
You may a s well send £30 to Prince Whatever who emailed you today from some dodgy state somewhere in return for which he will supposedly send you a load of money from his currently frozen account in Switzerland.
The fact is that Special Repossession Lists are as rare as a straight man who likes “Sex and The City” – which is to say, they are actually non existent.
Mortgage companies repossessing properties are legally bound to get the best price for the property they are repossessing.
As such they have to be squeaky clean about how they do it – and this means they have to do widespread marketing - which usually means marketing through estate agents first.
There are no secret lists – only people after your money.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the buy to let experts and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
I have been a landlord and property investor myself for over 25 years.
At LettingFocus we offer independent unbiased advice for landlords and property investors on a one to one mentoring and coaching basis as well as occasional group seminars.
Property clubs are property advice is still mainly unregulated.
As I am not linked to a property company, developer, estate agency or bridging loan provider I am able to give unbiased independent advice on where to buy (which areas), what type of property to buy, when to buy and how to buy property at a low price. I can also explain how to reduce the risk of getting a bad tenant.
In a nutshell, we help you make money in property by showing you the ways that work and which are of minimal risk to you.

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Why I like houses more than flats by Lawrenson of LettingFocus.com

Ah, us British and Irish we just love those lovely Victorian and early Edwardian houses don’t we.
We love them so much so that we are happy to chop them up into “conversions” and make little flats out of them.
Our love affair for the converted flat can be seen in the fact that many people are prepared to pay as much if not more for a two bed converted Victorian flat than they would for an equivalent two bedroom ex local authority freehold house with a garden on a nice estate in a similar area.
As a property investing landlord who has owned both types of property, I’m not convinced by these Victorian conversions.
In the long run, properties that are freehold and have gardens will always keep their price – just as long as they are in decent areas.
If I had to choose between a converted Victoriana flat with no garden and a freehold two bed modern house with a garden I would always tend to go for the house.
Why?

CONVERSIONS CAN BE A PAIN IN THE NECK
Well, it’s more than just money, it’s time too.
You see, if you have a problem with a flat, you may also get problems with neighbours too. Think leaks and how leaks tend to damage anywhere below where the leak occurs and you’ll know here I am coming from.
Often, conversions also seem to have poor plumbing and heating systems – another consequence of the fact that they were not built to be separate dwellings.
Think about noise and inconsiderate neighbours. In converted flats, noise is always a real problem because the properties were never built to be soundproofed in the first place.
And too many converted flats have problem leases too which make it really hard to get a freeholder to do anything, like fix the building.
Recently I looked after a property for some friends who had gone overseas.
What a nightmare! I constantly had noise issues, leaks, endless plumbing issues and antisocial neghbours to deal with.
A good pal of mine in the trade, who I can’t name, has a business where he helps people extend leases and buy freeholds. He knows how hard it is to enforce your rights as a leaseholder or get agreement on a shared freehold and he says he would never buy a flat. He should know!
If I really had to buy a converted leasehold flat, I would only buy where there was just one other leaseholder in the block – and even then I would want to see a rental yield at least 2% higher than on an equivalent freehold to make up for all the extra work involved.

BELOW MARKET VALUE SHOW GOES ON
At our recent networking event Simon Taylor, the founder of GetAnOffer.co.uk told us that serious buyers with cash or access to lending are still using the downturn to their advantage to buy below market value properties.
Simon has accepted that with legislation imminent, the party is over as far as Sale and Rent Back is concerned but is still confident that on his site where sellers pay to advertise their properties below market value deals can still be had.
His site has some interesting features and is worth checking out.

INFLATION NOT DOWN MUCH – SHOCK HORROR
I see that the commentators were a bit surprised that the latest inflation numbers were not as low as expected. Goodness gracious, where did they study economics.
I would have thought it pretty obvious that with the pound so low, the impact of “imported inflation” for anything made abroad (which these days is pretty well most things) was always going to be pretty significant.
The scribes were also surpised that yesterday’s mortgage numbers were the highest since way back in the autumn.
More proof that the doomsayers who forecast further huge falls in the price of property will be proved wrong.

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ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the property letting experts. Read Articles for Landlords.
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I’m an expert property writer and property speaker - and I run the well known landlords blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice and consulting to anyone looking to buy property for themselves or to let out. I can help private individuals with any aspect of buying property or buy to let.
What’s unique about lettingfocus.com is that we are independent property investment advisors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from these sources.
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Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
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Buying Below Market Value Property with No Money Down - Does it Work asks Lawrenson of Letting Focus?

The answer is yes, of course it can.
But to buy with “No Money Down” you have to find someone desparate and willing to sell you their property for at least 20% below its true market value so you can make the financing work. And that’s the hard bit, of course!
The fact is it’s really hard to find a seller willing to sell you property at 15% below market value (or BMV as it’s called in the trade!) let alone more that that.
OK, the credit crunch has meant it has got a bit easier but its still very hard work to find these deals.
Sure, professional investors can find ‘em at 25% BMV if they spend many hours a week and lots of marketing costs ……and if property investing is their full time job too… but even for them, their own time has to be factored into the equation.
For some property investors it IS definitely worth it and I personally know of a few property millionaires who do this type of investing for a living & many of them read this column. Some have been to my seminars. Many are friends.
But for every one of these, there are many other people who buy with no money down, because they are stretched financially and they think that buy to let is somehow going to be their financial salvation and route to fast riches.
Many of these people have no other siginificant assets and they don’t understand what being a landlord is all about - the hassles, the costs, the laws.
For these people, I’d really question whether they should be in property anyway, because for many new investors who don’t have spare accessible capital, I’d argue the risks of property investment with no money down are just too high.
The fact is that professional BMV investors I know have lots of equity in existing properties or in shares, just ready to pounce in the credit freeze – they don’t have to go No Money Down.
OK, they sometimes do No Money Down deals to buy property when cash flow is tight but the fact is they can access cash, if things get hard and stuff goes wrong – the roof falls in, tenants default -that kind of thing.
For the newbie investor I would say unless you have got £20,000 stashed away for a rainy day or a very kind Uncle who can help you out if things get tough, I would be wary of buying No Money Down.
If you do, you could end up with a house on a very high loan relative to value and if your “Sale and rent back tenant” defaults on the rent you or the boiler needs replacing, you are really going to have hard times indeed।
We are away for a week’s holidays -see you in 2 weeks!
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of landlord experts lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 2 years has been the UK’s top selling property title - buy the UK's top selling property investment book.
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value.
I’m an expert property journalist , property speaker and a well known buy to let blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I can provide landlords advice
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property mentor programme at my website.What’s unique about lettingfocus.com is that we offer you help as an independent property coach because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week.
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NO MONEY DOWN DEALS AND BELOW MARKET VALUE, BMV THREATENED says LAWRENSON OF LETTINGFOCUS.COM

Another casualty of the credit crunch is the “NO Money Down BELOW MARKET VALUE Deals.
I have written about how this works before but in essence how it works is that you buy a property at say 20% below market value from a motivated or distressed seller using a bridging loan and get a remortgage next day for the full market value.
That way you can buy the property with No Money Down.
The problem is that the only mortgage lender prepared to do these types of deals, the Mortgage Express, has I hear, pulled out of doing this business.
No doubt they have been spooked by the credit crunch and the fact that such deals look ever more risky as long as property prices remain shaky.
Also, lenders must have got increasingly nervous about the rental income potential from “sellers turned tenants” on the sale and rent back version of these deals (as that person will by definition probably have some history of not paying their financial obligations)
In the light of the banks new found timidity to lend, Mortgage Express would recently have also become scared of the fact that so many novices (and hence inexperienced landlord investors) were so keen to get in on this kind of deal. This is not surprising as these routes to wealth are heavily promoted at trade shows.
But I understand from one experienced Below Market Value Operator that the doors are also now closed to experienced BMV players too.
According to my contact, this now means the only way to proceed is to hold the property for 6 months on a bridging loan and then re-mortgage. And that ain’t cheap!
It is a shame because Buying Below Market Value or BMV using a bridging loan has it merits.
I will be interested to see what the promoters of seminars on BMV at the Property Investor Show in Manchester next week make of all this and how they will proceed.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson a property expert from lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title buy the UK's top selling buy to let book
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value. I’m an expert public speaker on property and a well known property investment blogger and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press and I can provide advice for landlords
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property investors networking programme at my website.What’s unique about lettingfocus.com is that we offer independent property coaching because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week. Permission must be sought before using the material in the blog.

Buying Below Market Value from Distressed Sellers and Sale and Rent Back by Lawrenson of LettingFocus.com

RISK OF BIG PROPERTY CRASH IS LOW
Last week I was speaking at the Birmingham leg of the Property Investors show at the NEC.
It was pretty quiet there and much less active than last year reflecting, I guess, all the negative news about the property market.
As you’ll know if you have read previous blogs, I don’t believe all the doom and gloom and whilst I think that property prices could fall up this year by up to 10%, I think that falls will be limited for properties and areas that are not oversupplied already or where serious local social and / or unemployment problems exist.
And since rents are rising strongly and unemployment has so far stubbornly refused to go up, there are indeed still many green shoots for the investor or brave property buyer.
In other words, this is a year when you can buy property cheaply, just as long as you have access to credit and can put in at least 20% of a property’s value as equity.

DANGERS IN BUYING BELOW MARKET VALUE
Whilst at the show I heard a few scare stories about Below Market Value (BMV). It seems some investors have got themselves in a bit of a mess with below market value purchases from distressed sellers - and here is how they did it.
I’ll just explain for those who don’t know that buying BMV can sometimes involve buying from indebted (and hence motivated) sellers who are about to be repossessed by the mortgage company.
BMV buyers will seek out and then buy from these kinds of “motivated distressed sellers” at a discount, sometimes using bridging loans to buy with “No money down” and then they rent back the property to the seller who becomes their tenant.
So far so good!
But one of the big dangers is that the kind of property seller who is prepared to do this type of deal - and sell their home at below its true price- will by definition have what we could call “a bad credit history”
In other words, they have defaulted on their mortgage already, so the chances are arguably higher that they will default on their new tenancy too than a normal tenant would.
Most BMV investors would say that if they do, well it is bad for them but by doing so, it will allow the investor to evict if the arrears are bad enough.
And that is true, though some will have ethical issues with all this – but let’s leave that aside for now

TROUBLE IS.....EVICTION IS NOT FAST
The only trouble with eviction because of arrears is that it typically takes about 5 months to go through if you have to ultimately enforce the eviction notice with a bailiff.
First, you need there to be 2 months before you can even start a possession action and it takes another 3 months for the court processes to slowly grind through.
Oh and don’t expect an evicted tenant to leave the property spotless – chances are very high that they wont. And we won’t even mention the stress that comes with having to evict someone
Property Investor News in one of their articles in their current edition, anecdotally report the cases of some BMV operators who are in difficulties because the investor is struggling with a many of these types of properties where he is receiving nil rent.
Some of the less reputable operators in the market sell BMV deals on the basis of “becoming a property millionaire overnight” with “nil (of your own money) down” using bridging loans and as by definition many of the investors who do this have a very high loan to value, the affect of tenant default can be crippling.
And that’s why we hear stories of BMV investors being repossessed themselves - leaving their tenants homeless.
This, of course, does nothing for the reputation of the Below Market Value business which is already being looked at by the regulatory bodies who would like to see codes of practice drawn up.
So, my message is, if you buy Below Market Value be aware of the risks, especially in sale and rent back type deals and don’t borrow too much.
Sure, you can do it using a closed bridge loan and hence with No Money Down but only do this only you have a stack of cash elsewhere to pay the mortgage - just in case your tenants default.
Pretty much all the more realistic advisors on BMV at the property shows do, to their credit, advise their investors of the risks and they caution having a pot of money aside for a rainy day.
However, there are some who don’t. You have been warned.

BEING A GOOD LANDLORD
I was quoted in the Mail on Friday and the Telegraph on Saturday. Here is the link to the Telegraph story which is all about how to be a good landlord: http://propertyclub.telegraph.co.uk/Page/View/222

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson from property consultants lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title buy the book
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying below market value. I’m an expert on buying property below market value and a well known property investment blogger and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press and I run a landlords help service.
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property investors networking programme at my website.What’s unique about lettingfocus.com is that we offer independent property mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week. Permission must be sought before using the material in the blog.

Below market value property, BMV - One good tip from LettingFocus.com

What is the best way to get a good deal when buying property?
Well there are many ways to get good deals.
However, in today’s blog, I just thought I’d highlight one particular technique that always works well when you are viewing a property and the vendor is showing you around.
As you go around, the key thing of course is not to give much away, whilst also trying to find out in a non pushy way as much as you can about the vendor’s circumstances in order to gauge if they will accept a hard offer. (It is also worth finding out what you can about the seller’s circumstances are in advance from the agent too.)
Then just as you are about to leave, you whip out the estate agents blurb on the property, pause for a few seconds and then just slowly say the price as if you were contemplating the meaning of life. Then allow the silence to hold for a few seconds. If the seller really wants to sell for less, they won’t be able to resist filling the gap by indicating what price they will accept.
It’s a great technique and it works most times. Try it.

FLOOD RISK
Now, a quick word about flood risk.
The property I am in the process of buying is close to a flood risk area.
To find out the extent of flood risk, all you need to do is look at the environment agency maps (at their website) and put in the postcode of the property.
This will bring up a general map of the area showing the extent of the flood risk – but this can actually vary a lot depending exactly where in the road the property is.
To find out the risk for a specific house you then have to click on the spot on the map at exactly where the property is. This will then bring up another more detailed statement which will state if the flood risk is “significant”, “moderate” or “low”. It is this which is the thing you really need.
Also, use Norwich Union too. They have among the most sophisticated flood maps in the UK which use other data which are laid on top of the environment agency maps – so if you are buying in an area that could be at flood risk, always call them for an insurance quote.
If they won’t cover you or charge a very high premium then you need to think about buying that property very carefully.

MORTGAGES
Out in the mortgage market mortgages are being withdrawn almost as soon as they show up and lending by the building societies continues to be restricted to certain areas and types of property. I continue to enjoy your stories about how hopeless the banks and building societies are at mortgage lending.
My friend Andy in Lancashire told me that “Despite being approved for a further £500,000 from the Woolwich in March for refinancing/new purchases, it seems I am not solvent enough for a 4,000k limit on a new capital one Cash Back credit card.”
I have had similar experiences too and I am also finding that the processing of mortgage applications by the lenders is still painfully slow. In my case, after having been approved for a mortgage from a subsidiary of one of our biggest banks I am still waiting after 4 working days to receive the application form. So, no change there then!
The same correspondent also says he accepts tenants on benefits and has noted that the rates for the new Local Housing Allowance were published yesterday by his local council for his area and they are pretty much 15-20% extra to tenants here when compared to the current HB system. The only downside is of course, that the money is usually going to be paid direct to tenants, so we lose the guarantee that we had when it was paid direct. So, we will have to see how this all works out.
If you need more advice on investment property or buy to let investments in general please ask me.
I’m David Lawrenson from property investment mentors http://www.lettingfocus.com/
I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
Buy the new edition here: http://www.amazon.co.uk/Successful-Property-Letting-Right-Plus/dp/0716030195/ref=sr_1_1?ie=UTF8&s=books&qid=1203933977&sr=1-1
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying below market value. I’m an expert on the UK property market and a well known property investment blogger and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press and run a landlords advice service.
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services.You can read more of my property investment blog and details of my networking, advice, buy to let networking programme at my website http://www.lettingfocus.com/My next London property investors networking meeting is coming soon. Click here for details: Property Investment Advice
I am also speaking at the Property Investor show in Birmingham in April http://www.propertyinvestor.co.uk/birmingham/
What’s unique about lettingfocus.com is that we offer independent property mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.Copyright: David Lawrenson 2008. This blog is updated once a week. Permission must be sought before using the material in the blog.

Sale and rent back operators question need for regulation says Lawrenson at LettingFocus.com

Following on from yesterday’s lettingfocus.com blog calling for the need for more regulation of sale and leaseback, I thought I should just balance out the debate by putting the view of one landlord who contacted me.
So here goes. And thanks to Mr. P for this one.
“Buy and rent back regulation. Hmm are people that daft that they need protection from their own stupidity. I would agree that some of the promises are ludicrous, but if there was not a market for this kind of deal then it would not happen
This week I agreed with two other landlords to do exactly this, the first adverts go in the paper this weekend, with the idea of putting portfolios of 5-10 properties and then selling the portfolio on. We have contacts who supposedly want to buy them, but time will tell
The scenario is the same as those put to us through mortgage advisors/estate agents when someone is facing repossession. If someone has spent more than they can afford they need someone to dig them out of the mess of their on making.
They can always turn down our offer, but I suspect they need the money quickly to stave off repossession/bankruptcy proceedings.
I had one last week, he is in debt to the tune of 120K, all secured against a property worth max 90K (if perfect, which it wasn’t), and was 7 days away from repossession and bankruptcy court hearing. However he and his family went on a nice cruise recently - so I guess it is obvious where his priorities lay.
However he turned down our offer (of 10%ish below true price), but I suspect now has nowhere to live and will be phoning our rental adverts, but with his record of not paying his interest only mortgage of £500, what makes us think he will pay rent of the same amount.
Or am I being too hard nosed on poor unfortunate people who obviously are not responsible for their own lives &r the mess they make of them.”
At lettingfocus.com, I have some sympathy with that position.

Our View at LettingFocus
Looking at it this way, by selling to a landlord and becoming a tenant, the vendor turned tenant cuts out some costs - he saves on estate agency fees and also HIPs (because as the property is not marketed it should not need one) and he gets to stay in his own home too (at least for a time) Maybe at the bottom line, what’s really needed is for the government to provide some sound financial education for people as part of the core curriculum at school, so they would not make a mess of things in such ways.
If you need more advice on buying property below market value or buy to let investment in general please ask me. I’m David Lawrenson from property investment advisors http://www.lettingfocus.com/
I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
I’m an expert on property investing for profit and a well known property freelance writer and I contribute to newspapers and a host of property websites, write a property investment blog and run a landlords advice service.
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my property investment blog and details of my networking, advice, property networking programme at my website http://www.lettingfocus.com/My next London landlords networking meeting is coming soon.
Click here for details: Property Investment Advice
What’s unique about lettingfocus.com is that we offer independent property mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.

Good deal on repossessed property at auction by Lawrenson of LettingFocus

Years ago, buying property at auctions was the preserve of a few professional investors and builders. However, more and more people (and financial institutions) are now both buying and selling property at auction, so that today the volumes sold are approximately three and half times what they were 10 years ago.
Around one eighth of all residential property sold at auction is now a repossession and about one eighth of all repossessed property eventually finds its way to the auction house.
But can you bag a bargain at an auction and what do you need to know?
Well, the first thing to remember is that the auctioneer’s client is the vendor, not you. In this much he is just like an estate agent whose duty is to get the best (read highest price) for the client.
However, whereas some estate agents will often let slip information on what price the vendor will accept, you are not likely to get any such tips from an auctioneer.
Remember too, that you will be in a room competing with other buyers and the auctioneer will be doing all he can to squeeze out an extra five hundred pound from the bidders.

Repossesions Are On the Up
All auctions are seeing a big rise in repossessed flats which were bought off plan by would be investors.
Many of these investors bought the flats with rental guarantees from builders or via property clubs, often on 2 or 3 years fixed rate mortgages taken out in 2004 or 2005.
With the rental guarantee ended these landlords were left competing with hundreds of others for a limited tenant pool. They were also facing having to remortgage at higher borrowing costs.
As an example, at a recent auction, a two bedroom flat in SE London, which had sold at £250,000 in 2005 was put on at a reserve price of £175,000 but still failed to sell.

Check with Estate Agents First
Most repossessions will be marketed at estate agents first and only then come to auctions, so it’s always worth keeping in with the agents who handle repos (not all do) to see what’s coming up there first.
So, there are always good deals on offer especially on these oversupplied me too city centre flat. However, with the dearth of tenant demand, you have to ask if they will ever be a good investment.
At auction, you and your conveyancer will have had to study the legal pack, do your viewings and survey, arrange the finance and insurance in principle before the fall of the gavel.
You’ll also have to pay 10% of the purchase price right there at auction and you must also normally complete within 28 days though a seller may allow you longer. You will also have to pay the auctioneer’s fees - usually 2.5% plus the stamp duty.

Ten Tips for Success at Auction
Go to a few auctions first before you bid. Understand how it works and feel comfortable.
Ask for the package compiled by the auctioneer at least 4 weeks before the auction. Get your conveyancer to study it carefully. Look at the contract, the title documentation, the searches, whether there is any outstanding planning or environment issues etc and replies to general enquiries.
On the day of the auction, arrive early; check the “addendum” and the legal pack in case anything like special conditions have been added.
Keep cool and stick to your maximum price.
If you go with a partner, sit together as it’s been known for partners sitting in different corners to bid against each other! B
The auctioneer, vendor or their agent can bid up to the reserve price without identifying themselves. It’s called “off the wall” or “imaginary” bidding.
If the sales details quote “unless previously sold” you should be able to approach the auction house and make a bid in advance of the auction. If it’s accepted, you’ll still need to move fast and ensure finance is ready and conveyancing can be done quickly.
If the property hasn’t met its reserve, the auctioneer will normally tell you what the reserve is and advise if he has the vendor’s authority to sell at the reserve price for up to 24 hours after the auction. This can be a good way of snaffling bargains.
Forthcoming auctions are advertised in local newspapers, as well as on the Internet or in the Estates Gazzette magazine.
Get real! Don’t come expecting to buy a £300,000 place for £150,000. However, you may well bag one for £270000 or even a shade less.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the property investment experts.
I’m, David Lawrenson, the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book.
What’s unique about LettingFocus is that I offer independent unbiasedproperty networking seminars covering property investment and letting because unlike most people in the buy to let and property “advice” business I am not linked to a property company, developer, agent or bridging loan financier.
I can tell you where to buy (which areas), what type of property to buy, when to buy, how to buy property at a low price, how to make sure you get tenants who are going to pay the rent and how to manage a rental property to make money.
I can also comment on “No Money Down” Schemes and “Buying Below Market Value” methods too.I can answer all your questions on letting property because I have been a landlord and property investor for over 25 years.

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Below Market Value Properties and Sale and Rent Back

There is a huge growth in people selling their homes at well below market value to landlords and then renting them back and an industry has grown up where investors buy properties directly from “distressed sellers” in this way.
This is a real human interest story because where someone sells their own property and then rents back under a standard assured shorthold tenancy; the “seller turned renter” usually has no security of tenure.
Also, the seller will usually have sold their property at a low price to give themselves cash and resolve their debt problems.
This explains why there is so much interest from investors, not least because they can acquire a property with “no money down” using what’s called a “closed bridging loan”
I expect the number of people offloading their homes in this way to grow in the coming months as home owners come off fixed rate deals taken out 18 -24 months ago and face remortgaging at higher interest rates.
The investors find the dis

How Below Market Value Investors Find "Motivated Sellers"
These investors find distressed sellers in a number of ways.
One way is by leafleting. The message of these leaflets will be simple and along the lines of: “Do You Own Your Own Home? Do you need to Sell Quickly? Contact 0800 XXX XXX. Another way is by advertising on the internet - many of the 1.9 million sites that are returned when you key in “below market value property” are targeted at people who may be motivated sellers.
In recent years, many companies have been set up which use automated systems featuring call centres to field enquiries and filter out the genuine distressed sellers. They may then charge investors for each “lead” or an affiliate could “buy” the rights to all the leads that come onto his patch.
These leads cost the investor money but it means the person who is not a full time property investor - who has another job – can be “in the game” too.
It will usually be the investor’s job to negotiate with the seller and try to secure a deal to buy the property at a big discount from its market value. Once the deal is agreed the investor sets up a bridging loan for the discounted price and a mortgage for 100% (i.e. for the true value on the same day) – hence generating “instant equity”

Sale and Rent Back (SARB)
The seller now becomes a tenant of the landlord, can stay in his own home and his neighbours are none the wiser as to his change of status. However, he will usually have no security of tenure beyond the initial 6 months term under the standard tenancy agreement.
Clearly there are a few moral issues with the whole process - a process which has been pretty much ignored by the national press.
Many investors I know who do this, say they turn down some deals if they believe the seller could do better by doing something else – say remortgaging, talking to their lender, getting citizens advice help or by selling the property.
However, the question is how many others are as altruistic.
I forecast that in a few years the press and finally the Government will legislate against some of the worst practices in this rather murky business.

To find out more about buying property below market value and the truth about no money down deals ask me.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the landlords’ expert and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
I have been a landlord and property investor myself for over 25 years.
At LettingFocus we offer independent unbiased advice for landlords and property investors on a one to one mentoring and coaching basis as well as occasional group seminars.
Unlike many in the still largely unregulated buy to let and property “advice” business I am not linked to a property company, developer, estate agency or bridging loan provider.
So I can give unbiased independent advice on where to buy (which areas), what type of property to buy, when to buy and how to buy property at a low price. I can also explain how to reduce the risk of getting a bad tenant.
We help you make money in property by showing you the ways that work and which are of minimal risk to you.

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