Saturday, December 6, 2008

Crime of the century – selling cheap homes

Northern Rock accused of selling repossessed properties at bargain prices

Northern Rock has been accused of selling off job lots of repossessed homes at knockdown prices. The shocking findings of a Mail on Sunday investigation show Northern Rock was offering the homes at discounts of nearly 50 per cent because its overriding aim was to get its mortgage money back - not to get the best price for the previous owner. Today’s disclosures reinforce claims that some banks are willing to sell the homes at way below their market value because their only concern is to recover the value of the mortgage. They also raise fresh questions about the conduct of Northern Rock, which was rescued by the government after it collapsed in February.

Posted by little professor @ 11:24 PM (1364 views)
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11 thoughts on “Crime of the century – selling cheap homes

  • I like the bombshell shocker the story finishes on:

    “The house is on the Northern Rock repo list at £145,000, the same amount Phil paid for it in 2001.”

    And?

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  • Frankly I can’t see anything that Northern Rock repossesses having 50% equity in it. They are therefore loosing money to sell at 50% off.

    If an owner has that much equity and have hit difficulties then they have had the option to sell it themselves and rent haven’t they ?

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  • OK I’ve read the article now and it appears any shortfall will be still owed by the ex mortgagee.

    Investors snapping things up at 2000 prices and no doubt getting new lower rate mortgages to fund their new purchases.

    It’s a dog eat dog world out there.

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  • gardeniadotnet says:

    2. str 2007 said… If an owner has that much equity and have hit difficulties then they have had the option to sell it themselves and rent haven’t they ?

    In normal times, yes; in the current stand-off, no.

    The housing market ( and the money market in general) is broken, hence the panic measures being introduced on an almost daily basis.

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  • inflation is eating my savings says:

    This sort of stuff happened an awful lot in the early 90s. Flat bought for 30k sold by bank for 6k.
    So- does one buy yen, single malt or a house. Survivalists need not respond.

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  • Ah, so they are saying that the real crime is that the bank sells it quickly, then claims the excess back from the ex-owner.

    Life sucks when you buy something you can’t afford, huh.

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  • Ajay Ahuja, the guy at the centre of this, wrote ‘The Buy to Let Bible’ in 2002 (I have a copy because I had to reasearch when my other half was trying to persuade me to invest in BTL). From a business point of view, what he wrote made sense especially because his cut off for a good deal was around 12% yield.

    What I find interesting is that the Daily Mail article does not mention Mr Ahuja buying the properties himself, but rather ‘finding’ them for other ‘investors’, presumably making use of his reputation. Presumably then, these properties might still be a bit over priced on that basis.

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  • Isn`t NR selling it`s repossessed properties at close to market value, not 50% below ? OK, the odd property is currently selling for much more, but most of the property on the open market at the moment would probably need to be 30% “below market value” to sell.

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  • No, Northern Rock sells the properties for their real current market value. Or are those auctions kept in secret??? For sure not … And owners have had anough time to sell them personally anyway …

    Maybe in 10 years we will have again 2007 prices, but not now. The current market value is 2002 prices. Next year 1999 prices. Simple like that. Daily Mail and their readers just need to accept the reality of the capitalism …

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  • Tenyearstogetmymoneyback says:

    phdinbubbles @1

    Things aren’t as bad as the nineties then

    Duncan

    Bought 1989 £65500 Sold 1999 £70500

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  • @Dfach – quite right!
    If a house is sold “50% below market value”, then that IS the market value.
    The market value is the price achieved.
    Let’s say I see a property about to go under the hammer at 50% of its FORMER market value, and I think it’s cheap.
    I then bid 60% of the FORMER value.
    My bid is then the new market price.
    Investors don’t just generously let things go through “cheap” out of benevolence.
    The fact that properties are changing hands at these prices merely tells us that the market has dropped by 50% or whatever.
    Otherwise there would be higher bids. Any other idea of “market value” is the other side of the very same delusional fantasy that caused the bubble in the first place!
    QED.

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