The BBC carried a story recently on a Torquay woman who lost out on £22,000 after her flat was repossessed and then auctioned by receivers.
The flat was sold by receivers at an auction in London for just £60,000, but just six weeks later it was sold on at another auction for £82,000, meaning that Mrs Smith lost out on £22,000.
This practice, which is standard for borrowers who are unable to stop the repossession of their homes, reveals how some borrowers fail to get the best price for homes when the worst happens, and they are unable to meet mortgage payments.
In this case, Mrs Smith was forced to give up her home after, in order to pay off debts, she had remortgaged her flat, and fell behind with mortgage payments.
She still has to find a further £27,000 to find in order to get out of debt, so the £22,000 she lost out on when the flat was auctioned becomes more significant in this situation.
This is not the only example of homeowners who have lost out on cash because the lenders and receivers are looking for a quick sale of a house or flat.
The BBC lists other examples:
- A flat in Torquay raised £47,000 at auction in London, and then sold for £66,000 just two months later.
- A house in Plymouth sold for £71,000 in London, and then raised £82,000 two months later in a local auction.
- A house in Weymouth sold at auction in London for £100,000 only to sell for £18,000 more within two months.
While the receivers in this case had clearly made an error in not selling the properties locally where they would have raised more cash, there were other options Mrs Smith could have taken.
For instance, if the debts were out of control, selling her house quickly to a property trader would have raised more money selling at auction, prevented the repossession and also allowed her to rent back the property.