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How Distressed Property Bargains Can Turn Sour

March 19, 2009Article by Ray Withers

If you are in the market for UK below market value property , then you need to beware of whom you are dealing with. Property investors looking for distressed UK properties, have plenty of chances to dig up some bargains, but need to research carefully before they commit to a deal. Should the property you are seeking to buy be in the hands of an insolvency practitioner, that distressed value might not be the bargain it seems. The insolvency practitioner works for the seller’s creditors – the people they owe money to – and have a legal obligation to raise the best price possible from the seller’s assets.

The insolvency practitioner has to make a report to the Department of Trade and Industry showing accounts for the money raised and fees paid, and no insolvency practitioner would be able to say they had raised the best price by offering the property to just the one prospective buyer.

More likely, the property will be offered to a number of buyers or go to auction. All of a sudden that great discounted property all of a sudden starts to go up in price. To safeguard your interests, it might be worth considering approaching a property consultant who has struck a deal with a developer to offload below market value property.

One Oxford-based company, Property Frontiers, has recently introduced exclusive below market value property deals in London and Liverpool offering massive discounts.

Merchants Court, Wavertree, Liverpool

This is an exclusive below-market-value deal with 30 two bedroom apartments at up to 25% discounts.

The apartments are new and fitted out ready to rent and prices start at just under £90,000. Last year, identical property was selling for £135,000. Wavertree is a popular Liverpool suburb. Merchants Court is a short stroll from the high street, station and top class sports facilities. The city centre is 10 minutes away by train. Gross yields here are expected to lie between 7% and 10%.

The Shrubberies Mews Townhouses, Streatham, London

This is another exclusive development of a small, gated community of just eight townhouses. The developer is offering a massive £75,000 on the certified valuation – bringing the asking price down to just £300,000. The houses are open plan on the ground floor and have two double bedrooms and a family bathroom upstairs. Again, they are a short walk from local shops and stations. The City and West End is within easy reach by train Gross yields of 6% at £18,000 per year are expected from the development.

Both these developers are selling at more or less the price of the land plus build costs to clear the properties from their books.

Independent valuers have certified the property prices. Because Property Frontiers carries out due diligence and has contracts with the developers, you can generally be sure that no insolvency practitioner is not going to step in and spoil your deal. Nevertheless, it’s as well to check with any UK distressed property , deal before committing yourself to any contract.


Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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