Wednesday, Jul 25, 2007
Humanitarian benefactors to rescue UK house market
Tgraph: The flash way to avoid repossession
"When financial difficulties strike, the last thing on anyone's mind would be selling the family home at a discount. For some, though, there is no option. Faced with repossession and the corresponding costly black mark on their credit rating, growing numbers of homeowners are turning to a new group of so-called "flash sale" property companies"
Posted by confused76 @ 01:10 PM (203 views) Add Comment
14 Comments
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1. confused76 said...
According to the CML these flash sale company are a real force of good: yadayadayadayada... go with repossessions!!
"Economists and housing market observers believe the sector, which has taken off in the past year with the likes of a-quick-sale.co.uk and approvahomebuyers.co.uk, is poised for rapid expansion as the five interest rate rises of the past year kick in.
They estimate that 750,000 borrowers will reach the end of two-year fixed-rate loans in the next six months, after which their mortgagee payments will increase by up to a third.
Given that personal insolvencies between January and March rose above 30,000 a quarter for the first time and that the nation is saving the lowest proportion of its income in 47 years, the debt crisis may be about to spill over into the property market.
According to Sue Anderson, head of member and external relations at the Council of Mortgage Lenders, flash sale companies "have the potential to be a good thing" but there is a great deal of "nervousness" about the market at the moment.
"We're worried that there's no regulation and the lack of a code of practice," she said. "But it does have the potential to be a useful product for people wanting to keep a clean credit record."
2. Doomwatch said...
The giant Ponzi scheme now reals it's true colours.
3. uncle chris said...
That's fine, these companies are generally offering 15-20% below the market value, so if they move to dominate the market they will drag down the average 'sale prices' that appear in the land registry figures. This in turn should bring down the valuations and the cycle continues - get the picture. However, I suspect pride will get the better of some vendors who are determined their house is worth what the EA told them a year ago come hell or high-water, so there will still be a sizeable market for repossessions.
4. bidin'matime said...
All the while people have some equity in their house, they are not going to 'give this away' to the flash companies - they will simply re-mortgage (all the while they can) to pay their debts. Then, by the time they have negative equity, they will be chasing the market downwards, as the 20% discount demanded by the flash companies will make it all seem far worse and they will cling to the belief that, if they can just hold on, it will all come right in a year or two…
5. paul said...
These companies are a transitory phenomena.
As property values continue south it will no longer make sense to buy the property at 15% less or sell the property to these sharks.
6. royston said...
Wait till one of these guys gets overstretched and has loans called in ( - bound to happen, given all the 'unmissable bargain' buying opportunities coming their way). Who is he going to sell to? Another flash sale merchant? I don't think so!
Even more than BTL, this business model only works when the market goes up.
7. p. doff said...
Bidin. --- 'All the while people have some equity in their house, they are not going to 'give this away' to the flash companies'
Not true. If they have no equity they cannot sell for less than real market value as they would be unable to redeem the outstanding mortgage.
You would be amazed just how many people are prepared to give away shedloads of money by selling at 20 or 30% below market value. It beggars belief I know, but these overstretched people really do have a different attitude to finances.They have probably already fallen victim to subprime lending at a silly interest rate, effectively digging themselves deeper into the sh1t and delaying the inevitable.
Looked at one yesterday - terraced house worth about £115K where owner had accepted £90K. As is frequently the case with some of these deals, the instructions stated a purchase price of £125K, with a required advance of £100K. It is apparent that some of these outfits are pulling perceived equity out from day one. You can see why there are so many at it.
On a previous case, the vendor was aware that he was selling cheap but said he didn't care as he'd made loads on the right to buy purchase. There was no thought as to financing a possible next purchase, but I guess the guy was going back into rented. Not my place to judge or provide advice though.
8. captain sensible said...
Can't see how these companies expect to profit. In my area a 300k property typically rents for 900-1000 pm. Even after the discount the return on investment is only 4 to 5% (less after voids, expenses etc). As with BTL landlords they must be hoping for capital appreciation, yet unlike a typical new BTL investor, they are helping to push the market down. Most likely scenario - this will help to stall the market for a little longer at the top of its cycle but these companies will just add to the bail out effect when the rest of the BTL market panics and tries to escape massive falls.
9. Ticktock said...
Or more likely they will be bundled into a REIT portfolio (which if structured correctly can make money in falling as well as rising markets)
10. Happy? said...
Why am I reminded of Lionel Barrymore in It's a Wonderful Life? - Potters Field instead of Potters Bar
11. dobber said...
Predatory sharks.
They prey on the desperate and think they can bag a quick buck, as royston said 'this business model only works when the market goes up'
Big mistake, this market is going down a long way and these guys will be flushed down the toilet on the way, 15% off when the price falls 50% is not smart business. Capital gains are many, many years away and they will not have the stomach for it.
12. lvmreader said...
During the DotCom crash, there was a website called "www.f*ckedCompany.com".
I think we need one called "www.f*ckedCountry.com"
13. Van Hoogstraten said...
Where are these clowns going to get the credit from to buy houses at a discount - bonds based on property values are poison. Who in their right mins would lend money to company whose inventory is a stock of properties of which the value gets a little bit lower each day. Looks like the next Pets.com
14. Environmentalspoilerand Taxdodgerneedingfloodgates. . . . said...
Why am I depressed by this? For the housing 'market' generally this is great news because as is quite obvious the prices will fall dramatically...But this was probably going to happen anyway, so the business should have been regulated far more stringently...I don't understand what they do as any householder can get a valuation on what their house is 'worth' (I love that terminology!) and market it themselves.