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"flas" Sales - The Flash Way To Avoid Repossion - Telegraph

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newbie here - great forum - searched on this but no mentions yet(?) - great story from Daily Telegaph business on 10/7/07. Selling quickly at 20% off list price! Also check http://www.approvahomebuyers.co.uk/


As interest rate rises begin to bite, a new group of companies is offering homeowners a fast way out of trouble, reports Philip Aldrick

If all else fails...

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.

Companies offering 'flash sales' allow struggling homeowners to clear their debts without moving

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 that buy homes for about 20pc less than the market price in return for delivering the cash within four weeks.

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."

The scheme works by companies typically buying homes for 20pc less than the independently assessed market price, clearing the mortgage and leaving the vendor with funds to pay down the rest of their debts. The vendor then rents the property back from the buyer.

Robert Watters, founder of a-quick-sale.co.uk, estimates the true discount is 15pc because - unlike in a normal sale - there are no fees.

Ms Anderson said the companies provide the useful service of allowing struggling homeowners to clear their debts without moving. However, most of the tenancy agreements are six monthly - raising the possibility of the vendor having to move out as soon as the company wants to cash in its asset.

She says the market should be treated as a last resort. "The first thing to do is have a conversation with your lender, who may allow you to defer payment, switch to an interest-only mortgage or extend the term of the loan.

"The next step would be to seek independent advice from a debt-counselling operation such as National Debtline. Only then would you turn to selling the home."

In cases of extreme emergency, she added, lenders may allow the vendor a period of time to sell the home and clear the mortgage.

If all else fails and an estate agent sale is a too lengthy and uncertain process, options include refinancing, renting out the home or selling at auction - but she said flash sale companies may, in fact, be the best deal.

The banks themselves have even investigated a move into the market but are believed to have balked at the potentially lethal publicity from cashing in on their customers' misfortunes.

In private, though, they support it. Royal Bank of Scotland, for example, provides 100pc mortgages for a-quick-sale.co.uk on properties bought at a 20pc discount to the market price.

Rapidly expanding though it is, the flash sale market may be a short-lived phenomenon. It is underpinned by rising interest rates and soaring house prices. One person involved said: "This is a product of the economic times we're in. When prices fall, a-quick-sale.co.uk will struggle to help anyone as, after the discount, the payout may not clear the mortgage."

In other words, there's still no escape from the negative equity trap.

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