Banks gazump buyers of repossessions

Housebuyers are being ”gazumped” at the last minute by state-supported banks, which are continuing to aggressively market their repossessed properties, even after they have accepted offers on them.

Mortgage Express, a division of the now state-owned Bradford & Bingley (B&B) mortgages, has been accused of actively seeking higher offers right up until it exchanges contracts with an initial buyer.

Liz Peace, chief executive of the British Property Federation, said her son recently had a stressful experience purchasing a repossessed property from Mortgage Express, when the bank continued to market the property even when the exchange of contracts had to be delayed by its own failure to produce the correct title deeds.

“We felt they should have taken it off the market at that time as it was positively their fault, not ours. I don’t think it’s a moral way to do business,” Peace said.

Dominic Toller of Property Earth, a property portal for chain-free properties, has reported an increase in gazumping in the sale of repossessed properties by all major banks – particularly in London.

Buyers have hit out at banks and their appointed estate agents for failing to point out the greater risk of being gazumped when purchasing a repossessed property – and potentially losing any costs already incurred.

The process of buying a repossessed property is distinctly different from a private sale. In a normal sale, a property will be taken off the market once an offer is accepted. However, with a repossession, the bank is under a duty to get the best possible price for the property. This onus is even greater for taxpayer-supported banks.

Banks are therefore continuing to market properties after a buyer’s offer is accepted. They will even place a “public notice” in the local press or on the estate agent’s website inviting higher offers – and typically refuse to exchange contracts until a week after the notice is published.

Peace said she understands that the banks need to get the highest price for repossessed property but feels they should not accept an offer unless they think it is a good one.

Toller said it was “completely right” that banks seek the best possible price. “In this situation, one has to look out first and foremost for the borrowers that have lost their house.”

A spokesman for B&B said: “We would always try and get the best possible deal for the taxpayer as we are in government ownership. We have to realise as much value as possible.”

However, Toller said agents need to make sure they inform potential buyers that repossessed properties will be marketed right up until exchange of contract. In addition, there will often be complex title issues with repossessed properties, which could cause delays.

The majority of repossessions are sold by the large agency chains: Countrywide, LSL Property Services, Connells and Spicer Haart.