I was speaking at an event in London last week and at the end I was approached by a gentleman who for privacy we shall call Mark. Mark asked me if I could help because his mother’s property was due to be repossessed this week!

He asked me to come and look at the property to see if I could help them. It is a large four bed property in North London in need of some work but a fantastic location. Mark explained that his mother lives in the property but that he, his sister and his mother were all on the mortgage.

The loan was with a subprime lender who was charging them 10.5% per annum and they were finding it very hard to keep up the payments and so had decided to sell. Another brother and sister had been helping to pay this mortgage but had decided enough was enough and they had to sell

So the house was put on the market and as a sale had been agreed the lawyer representing Mark’s sister (let’s call them “Bungle & Scarper”) had suggested that the family members stop paying the mortgage and the arrears that build up could be paid off when the revenue comes in from the sale.

This is a risky strategy in the event that the sale could fall through, which surprise, surprise it did. We all know what happens if you do not pay your mortgage (or maybe we don’t all know) …eventually you will get repossessed. Mark had already been to court with his mother and the Judge advised that the property had to be sold.

Mark was a very motivated seller. He and his mother agreed that they would rather sell the house at a discount, to clear all the debt and walk out with £100k rather than get repossessed, have their credit records trashed and potentially not get much money after all the associated legal costs. Mark had an investor lined up ready to buy the property who also went to court with them to present the solution.

Unfortunately, Mark’s sister and the other brother and sister had a different view. On the advice of their lawyers, Bungle & Scarper, they thought the best solution would be good to get repossessed and then do a deal with the lenders solicitors to sell the property on the open market get the best possible price and then hopefully they would get more money from the sale, not to mention the trashed credit rating or maybe they are unaware of the full implications.

Incredibly the judge thought that the investors offer was too low (even though it would clear all the debt and give the family £100k plus), and agreed to give possession to the lenders solicitors. How can being reposed be the best solution for the property owners? Maybe the judge was thinking that they will get more money by selling the property on the open market. Well, whilst I agree they may receive a higher offer I wonder if the Judge has conserved all the associated costs. For a start an estate agent in London would want 2.5% of the sales price. I am sure the lenders lawyers and Bungle & Scarper will also have very high costs associated with their time involved in the sale, not to mention all the interest and penalties building up whilst the property is marketed and sold.

This cannot be right! Maybe I have a simplistic view of this. Maybe I have had a bias account of the facts from Mark but this does not seem right to me. Is this fair? What do you think?

I wonder if Bungle & Scarper were more concerned about the fees they can earn from the prolonged case rather than the best interests of their clients. It looks to me as if this lawyer has been giving financial advice to their clients. Interesting as I don’t think they can do that. I wonder what the law society would have to say about this?

The lessons I would like you to draw from this are as follows:
1. Most sellers do not understand the implication of getting repossessed. Often the bury their head in the sand and think everything will be better once the property is repossessed
2. You need to be aware the advice that sellers are given may not be the best course of action for them.
3. When you are dealing with sellers always put their interests first ahead of your own and try to come up with an ethical win win solution.
4. When there is a disagreement between family members the judge can decide the course of action he sees fit.

Feel free to post what you think about this case study.

Kind regards,

Simon Zutshi
Founder, property investors network

Kind regards,

Simon Zutshi

Probably the only people who are buying right now, are the sophisticated investors who know what to buy and how to buy at the right price.

There are so many motivated sellers out there right now, that as an investor you can afford to be very fussy about what you buy. You should only be buying property in a great location with good rental demand, and significantly below market value. Not all property will fit into this category so you need to educate the estate agents as to exactly what you are looking for.

Often estate agents struggle with the belief that a vendor would sell a property significantly below the market value because most of their experience will be of vendors who want to achieve the highest possible price for the property. This is one of the reasons they don’t like submitting low offers to vendors.

However the fact is that the property market is still going down. Some vendors need to sell and so will accept lower offers. If you are not embarrassed by your low offer then it is not low enough.

You need to convince the estate agents that you are a serious investor and you plan to buy lots of property in your area this year. This means that the estate agent should be delighted to deal with you as you can help them keep their job which is a serious issue at the moment.

A tip for you is that if you get estate agents contacting you about properties where the vendors are prepared to drop the price, ask the agents to contact you BEFORE the price is actually dropped. You need to be quick and let the agent know if the deal is right for you but if the price is still marked up at the higher value on the agents website then this means that it will be easier to get a decent valuation on the property even if the surveyor down valuing it from the advertised price.

I would also recommend that you go back to enquiry about any properties you viewed or offered on 3 months ago as the properties may still be on the market and the sellers may be more motivated to sell now.

After my presentation three guys came up to me and asked me what I would do when MX do pull their product. They said that there were mortgage brokers and it turned out that they had purchased 40 BMV properties between them so they were fairly confident that they knew what they were doing. I explained to them a more advanced strategy that we teach on my Property Mastermind Programme but they seemed to think it was not possible. I know this certain strategy works as I have done it before and I am doing it again next week. Although they know a lot about the market, these mortgage brokers did not know as much as the brokers I use. There were actually quite argumentative, insisting that what I was saying would not work. I suggested they come and speak to one of my mortgage brokers who is on my Property Mastermind Programme and happened to be on my stand at the exhibition. After about 20 minutes talking to one of my mortgage brokers they left, all smiles and happy as they now knew of 2 more lenders who would do same day re-mortgages for them. Just goes to show, no matter how much you know, you can always learn more if only you are open to it.

Please make sure the people that you use as your Power Team actually know what they are doing so they can best represent you and give you what you need.

Will mortgage express always provide this type of same day re-mortgage? Who knows but currently they have a massive share of the market and I can’t really see them wanting to give that up. I believe that they may change their criteria. They may only allow experienced investors who already have several buy to let mortgages to use this facility which will block out the amateur investors.

Anyway to cut a long story short, with the help of one of the solicitors in my power team, we managed to stop her getting evicted by
making a payment to her mortgage company and securing a promissory note from her to ensure I get the money back (or taken off the purchase price). The house is worth between £120k and 125k depending on how the surveyor will be feeling on the day. She has agreed to sell it to me for £92k with a rent back of £550 per month. Another great deal that will cash out. There are plenty of deals out there. There is some risk in this but sometimes you need to take calculated risks to get the better returns.

This has reminded me of a few points that i thought may be useful to you:

1) Be persistent! If you don’t get hold of someone at first, keep trying. Don’t give up.
2) Any lead that you do not get a deal out of, it is always worth following them up two weeks later. If they still do not have a solution to their problem then they may be even more motivated than before.
3) Always leave an offer on the table and the door open for the seller to come back to you.
4) You need to reassure clients that we MAY be able help but be careful not to give them false hope
5) Be ready to move really quickly
6) Know what you are doing so that you can act with confidence. Avoid Paralysis through analysis. You just don’t have time.
If you want to find out more about how to get these kind of deals you need to get onto the Pre announcement list for my next “Property Mastermind Programme”. You can find out all about it here: www.property-mastermind.com
Kind regards

Simon Zutshi

The coverage has on national TV has been varied. “The Money Programme” which featured Glen Armstrong of Repossession Angels, showed the positive side of the business where people are saved from repossession, allowed to rent back at a fair market rent and even have an option to buy back in the future.

In contrast, “Tonight” with Trevor McDonald had a more negative spin about people who sell their homes to BMV companies with the impression that the will be able to rent back, only to be kicked out of the property 12 months later. This is of course totally unethical. I have no doubt that there are some unscrupulous companies out there who are deliberately taking advantage of people.

There are also an increasing number of amateurs investors out there who are attracted to the concept of being able to buy property with no money down but who have no clue about what they are doing and how to handle motivated sellers. The danger being that they don’t know what they are doing and may make promises that they just can’t keep.

So what does this mean for you? Should you be looking to adopt this strategy? My advice is only if you do it ethically. Anyone who has seen me speak about buying property below market value will know that I always talk about ethics and how you can make it a WIN WIN deal for all involved.

There is no doubt that if someone is about to get repossessed and experience all that is associated with it, then it has to be better to sell their home to an investor who will pay off their debts and give them a fresh start and an opportunity to minimise the disruption to their life by renting the house back.

It must be in your interest to keep the motivated seller as a long term tenant. Yes it may be possible for you to get more rent but it if you increase the rent and kick out the vendor of the property you may well have a void period whilst you find a new tenant. This may cost you more in lost rent than you gain from the rental increase.

The other benefit of allowing the tenant to stay long term is that often they will treat the house as their own home and continue to make improvements to your investment. That has to be a goof thing. So by being ethical both the seller and purchaser get a good deal.

To learn how to buy property below market value ethically you may want to consider my property mastermind programme. The next one is full but we are taking names on the waiting list. For full details and to express your interest click here.