Tuesday, Oct 20, 2009

Sharp fall in repossessions going to auction

Guardian: Housebuyers bid for market recovery as auctions lead the way

This part of the article says that the number of repossessions going to auction is barely a quarter of the same period last year. " The latest figures from auction specialists the Essential Information Group (EIG) showed that 72% of lots were sold at all residential auctions in July to September this year, up from 62% in the same period a year earlier. David Sandeman, managing director of the EIG, said: "The vendor is being more realistic and the purchaser is more willing to buy." However, analysts believe the lack of repossessions going to auction is artificially holding up the market. EIG said just 306 repossessed lots were up for sale in the third quarter of 2009, compared with a whopping 1,351 in the same period a year earlier. "

Posted by wanderinman @ 12:10 AM (967 views)
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6 Comments

1. jack c said...

magnaman - thanks for your input.

Tuesday, October 20, 2009 08:48AM Report Comment
 

2. magnaman said...

Perhaps I can help - I have worked in property (investments both residential and commercial) for about 20 years now. I run an acquisitions service for individuals and corporate clients. You can imagine that most have had the savvy to hold back and business has been slow however, I was recently approached by an organisation who work closely with lenders "distressed asset" departments. They have been told by the FSA that the use of auctions to dispose of properties should be a last resort and they must look for alternative methods of disposal. Within the next few months, less and less properties will appear at auction

This organisation has set up a website, for subscribers only, which will be fed with details of repossessions by the lenders themselves. The site is being Beta tested at the moment but will be going live in the next few weeks. According to my source, the FSA have told the lenders that disposing of property at auction is expensive and if there is a short fall in the amount the borrower owes, they cannot justify adding on up to 10% in disposal fees to any outstanding balance and expect the borrower to pay. Lenders can of course, pursue a bad debt for up to 12 years and the only realistic way for the borrower to rid themselves of the debt is, in most cases, to declare themselves bankrupt. However, lenders are possibly leaving themselves open to litigation if they cannot demonstrate that they have used all reasonable and cost effective methods of disposal.

Furthermore, lenders are shooting themselves in the foot if one of their repossessions is sold low at auction and they have other security in close proximity. Once sold, the sale price is available within a few weeks to all and sundry which will be viewed as comparable evidence by a surveyor valuing similar property nearby.

Tuesday, October 20, 2009 08:48AM Report Comment
 

3. jack c said...

Looks like the timings are out again

Tuesday, October 20, 2009 08:49AM Report Comment
 

4. 51ck-6-51x said...

The second point made by magnaman is the fire sale conundrum with respect to recovery - it is well known that the default rate and the recovery rate are inversely correlated in any debt market; the proximity ( not only geographical, but also in terms of market sectors ) of an institution's other assets will make such a correlation that much stronger, but the same goes for other institutions selling off their assets, and therefore one should expect a critical mass phenomena to display itself - once one institution starts selling off their assets, then others should race to sell theirs, thus casing a market wide fire sale -- a crash. If this is expected to occur then it will occur quicker. However, it appears not to have happened; maybe this is due to the threat of further reduced recoveries due to the legal aspects mentioned, and maybe once the banks lawyers have navigated the minefield we will see such a phenomena through a different sale channel -- in which case, if hegets it right, magnaman stands to profit and profit big.

Magnaman - what is your organisation, and what will the domain name be for your new site? I'd be happy to do a touch of user acceptance testing for you.

Tuesday, October 20, 2009 10:50AM Report Comment
 

5. 51ck-6-51x said...

"""
Oakeshott puts the recovery in London down to "the bonus effect".
"""
They are not to be paid until around Feb 2010, right?
So does this "bonus effect" consist of investors buying up properties they believe will sell to those who are going to get big bonuses? Possible, but I find it hard to believe there will be a huge amount of such an arbitrage play.

Tuesday, October 20, 2009 11:01AM Report Comment
 

6. tenyearstogetmymoneyback said...

magnaman

Without giving too much away who are the subscribers likely to be ?
Apart from the general public I can only think of Housing associations, REITs and Offshore investment trusts ?

Tuesday, October 20, 2009 07:47PM Report Comment
 

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