Repossession

"When I hear of lenders selling properties for 40 per cent below market value, I'm horrified." CAB Debt Advisor

Repossession

Losing your house is every home owner's nightmare.

But if the worst happened and your house was repossessed, you'd hope that your mortgage lender would sell it for the best possible price to help free you of your debt.

But we've discovered evidence that this may not always be the case.

Last year Susan Smith lost her house and now it's being auctioned for the second time in six weeks.

Susan's not bidding - she's trying to find out if she could be a loser in a repossession rip-off, that some claim is affecting hundreds of people.

Losing your home

Susan Smith's story began 12 months ago when she remortgaged her flat in Torquay, increasing her loan to pay off other debts.

But she started missing payments and ended up owing her mortgage company £87,000.

Susan explains how the situation escalated:

"I tried to sort the arrears with the lender and I paid a huge chunk off the arrears...

"I then tried to sort the rest of the problem out."

Her debts mounted up and before long Susan received the news which she'd been dreading, as she explains:

"In July I received a letter saying they'd put receivers in charge of the property so I could no longer hold keys to the property."

Susan was devastated.

Growing problem

Susan's problem is not unusual - house repossessions are on the increase - in 2007 in the UK the number rose by 70%.

Inside Out has discovered that in their apparent haste to sell this mounting stock of repossessions, many mortgage lenders simply aren't getting the best price for the properties.

Susan Smith lost her house when it was repossessed

This leaves some borrowers in debt even after they've lost their home.

Of course, a lender has the right to sell a property to reclaim an outstanding debt.

But you'd think that to achieve the highest price, Susan's lenders would want to sell her flat in Torquay or the wider region.

Instead it was passed to receivers who decided to auction Susan's flat further afield - out of the region altogether - in London.

It fetched just £60,000, leaving Susan with £27,000 still to find.

"I'm not quite sure how I'm going to pay that back," says Susan.

Higher price?

Plymouth auctioneer Graham Barton believes that South West properties fetch a higher price when auctioned locally.

He does it on a regular basis.

"It's obvious to me that if you take a property to London, fewer people will know about it - fewer people will bid on it…

"I've sold a number of repossessed properties in the South West that have been bought at an 'out of region' auction house, e.g. in London - and then simply put into our next available auction held in Plymouth, sometimes just a couple of weeks later.

"They can get as much as 30-40 per cent extra down here."

Inside Out has learnt of several repossessed properties that were sent to auction in London.

These were sold for well below the price they've gone on to fetch when resold locally soon after.

For instance:

* A flat in Torquay that sold for £47,000 at auction in London, fetched £66,000 just two months later when auctioned again locally.

* A house in Plymouth that sold for £71,000 in London, turned up two months later in a local auction and sold for £82,000.

* And in Weymouth a house that sold at auction in London for £100,000 was sold locally two months later and fetched £118,000.

In a matter of weeks, these three properties alone earned their investors a total profit of £50,000.

Winners and losers

But for every winner, there's a loser.

Since Susan's flat sold for just £60,000 in London, well short of what she borrowed, Susan still owes money to her mortgage lender.

Just weeks after her flat was sold in London, Susan received a further shock.

Auction - Susan's house was put back on the market

She discovered that the new owner has put the flat in another auction - this time much closer to home, in Plymouth.

Susan was shocked, but decided to go along to watch.

The bidding started at £60,000 - the same price Susan's flat actually sold for in the London auction.

Susan's flat eventually sold for 37% more in Plymouth than it had sold for in London just six weeks earlier, earning somebody, somewhere a tidy profit.

"That would've almost cleared my debt," says Susan.

"They could have sold that here and got that for me. I'm extremely miffed."

Auctioneer Graham Barton can understand her frustration:

"There are hundreds of thousands of pounds to be made… but the guys who buy in London and sell in the West Country aren't the bad guys.

"The errors are being made by mortgage lenders and their advisors in taking it to London in the first place.

"You'd have thought the mortgage lenders would have wanted to make the best price rather than give an easy profit to someone."

True value?

Steve Meakin is concerned about the house sales at auctions:

"When I hear that houses are being sold for as much as 40% less than their true value, clearly I'm appalled…

"Lenders do have a duty of care to get a fair price for a property.

Susan Smith reflects on what might have been

"They're not just supposed to get any price that might suit them. They have an obligation to the person they lent the money to in the first place…

"If they don't do that, people are left owing stacks of money even after they've been repossessed and that debt can haunt them for many years afterwards."

Graham Barton is convinced that mortgage lenders across the board are missing a trick if they choose London over the South West:

"For most mortgage lenders the rationale for selling in London is that their sales are more frequent.

"If only they'd wait for my sale. I'd make them more money."

Professional advice

We contacted Susan's lender, GMAC-RFC.

They say that in residential repossession cases they rely on professional advice when deciding where to sell a property and that the lender's duty of care is to obtain the best possible price within a reasonable timeframe.

GMAC say that in residential repossession cases the lender’s duty is to obtain the best possible price within a reasonable timeframe, and this is standard practice across the industry.

They say that when they have no other choice but to repossess a residential property they rely on professional advice.

Under the hammer - Susan Smith's house

The advice to sell by auction, either regionally or in London, will normally only arise in less than 10% of cases - and only where the professional advisers believe that a sale through estate agents will take longer than normal, perhaps due to property condition, type or location.

In Susan's case, GMAC say that the decision to sell her flat in London wasn't made by them.

Because Susan took out a buy-to-let mortgage, GMAC told us they appointed receivers to handle the sale of the flat and it was the receivers who decided to auction it in London.

But Susan has been left counting the costs of this decision.

She still owes her lender and knows they can call in the debt at any time.

Susan now owns another property but fears this too might be repossessed to cover the debt.

She's deeply saddened by what has happened:

"At the end of the day I feel like I've been done over and I'm not happy.

"I've got to find £27,000. At the moment they can swing for it. Because they're not going to get it off me."

Susan remains defiant, but while repossessed properties continue to be sold far from home, it's likely more people could find themselves in the same sorry position.

Advice on debt

Watch the pennies and pounds to avoid debt

If you do get heavily into debt, take action as soon as possible - talk to an expert and get professional advice.

There are several national and local organisations who can help with specific problems.

One of these is the National Debtline who run a freephone help line on 0808 808 4000.

Another good source of advice is the Consumer Credit Counselling Service on 0800 138 1111.

General advice and tips for keeping out of debt:

* Keep track of your outgoings and always check your bank statement.

* Budget for irregular bills and expenses.

* Educate yourself about money management.

* Set limits - cut your cloth to fit your incoming finances.

* If money matters are spiralling out of control, buy everything on a cash basis.

* Seek help early on if debts escalate.

* Speak to specialist mortgage advisers if your finances are shaky - before things spiral out of control.

Links relating to this story:

• BBC News - Repossession
• BBC News - Financial Health Guide
• BBC Business - Mortgages and Housing
• Council of Mortgage Lenders
• National Association of Mortgage Victims
  

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Follow the Rhino birth!

Rhino - watch this space for news of her baby!

BBC South West is breaking new ground and giving you the opportunity to witness a black Rhino birth.

Watch the BBC Devon Rhino web cam

This is the first time that a Rhino birth has ever been filmed and we've dug out the Springwatch cameras and installed them at Paignton Zoo to bring this amazing event direct to your home.

Sita, the pregnant Rhino, is being filmed 24 hours a day in anticipation of the big day.

Zoo keepers are watching her closely as this is the first time a Rhino calf has been born at the Zoo.

You can watch the action on the web and tune in to Inside Out to get the whole story.

Fact File

* Black Rhino are critically endangered. There are now thought to be less than 3,100 black Rhino living in the wild in East and Southern Africa.

* Rhinos can live for up to 45 years in zoos.

* Paignton Zoo supports practical Rhino conservation work in Zimbabwe and Malawi. Conservation work in Zoos is also playing a key role in the survival of the species.

* The parents-to-be are Kingo and Sita.

* Kingo (male) is 23-years- old and has already fathered four calves. He weighs in at 1.8 tonnes and came to Paignton Zoo in 2003 from Port Lympe Zoo in Kent.

* Sita is 16 years old, weighs 1.3 tonnes and is a first time mum. She came from Berlin Zoo in 2002. Sita will stay with her calf until it is able to look after itself but black rhinos are solitary animals so Kingo lives in an adjacent paddock.

* Kingo and Sita are part of the coordinated European Endangered species Programme (EEP) for black rhino.

* If all goes well this will be the first black rhino to be born at Paignton Zoo. At birth the calf could weigh around 40kg.

* The cameras being used were first developed for the Channel 4 series Big Brother and have since been used for the BBC's Springwatch and Autumnwatch series. They can pan and tilt at 360 degrees, and use infra red to film in the dark so whatever happens we won't miss a thing.

Watch the webcam

Watch all the action from Sita's paddock on the BBC Devon webcam.

You might even see her giving birth!

Links relating to this story:

• BBC Devon Web cam and Rhino feature
• Paignton Zoo

The BBC is not responsible for the content of external websites