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Can I buy a mortgagee sale property? - YouTube
Channel: Prosperity Finance_NZ Mortgage Broker
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- Hey, it's Connie from
Prosperity Finance.
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I hope you're well.
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Finally, we come to school holidays.
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Well, for me, that means
I don't have to pack lunch
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for my daughter and I can
have more time back for work.
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Cause you don't have to
do the pickup and drop off
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and for the kids, it's time off, playtime.
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So, all good.
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I hope,
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if you have kids enjoy the school holiday,
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if not enjoy the lecture, if it gets well.
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So what I'm going to
cover today in this video
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is I'm going to talk about mortgagee sale.
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Now, why choose this topic?
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Well, recently one of my client
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was looking to buy a
mortgagee sale property.
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Well, generally mortgagee sale property,
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normally they were sold
under the market price.
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Definitely, worth well
explore this type of sale,
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but there's a lot of risk involved.
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I'll share that with you.
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In this video, I'm going to talk about
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what is mortgagee sale and
what are the risks involved
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and if you can borrow to buy
a mortgagee sale property.
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So firstly, let's talk
about what is a mortgagee?
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Mortgagee normally is a lending institute
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like a bank or finance company.
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They lend money to you.
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And they also take a
security over your assets,
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like your property.
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Now, what is mortgagee sale?
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Generally speaking, you
repay your loan on time.
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Everything is fine, there
won't be a mortgagee sale.
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However things can change.
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Your health, your job,
everything can change.
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And interest rate can go up in the roof.
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Like during the GFC period,
the interest rate was like 10%,
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but you may not be able to catch
up the extra rate payments.
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So for whatever the reason,
if you can't repay the loan,
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over a period of time and
after legal procedures,
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you can still not repay the loan,
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then unfortunately, the last resort
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is to have a mortgagee sale.
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The lender sell the
property through auction
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to recover the debt.
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So that's a mortgagee sale in a nutshell.
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Now, if you are looking to buy a property
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and then it says a mortgagee
sale, what do you do?
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Mortgagee sale normally is sale
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and purchase agreement has
additional condition in them.
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These conditions you have
to read really careful
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because there's some risk involved.
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So what are the common risks
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with mortgagee sale property agreements?
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So firstly, the mortgagee sale property,
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generally, they don't
guarantee the vacant position.
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Now if you're buying property
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and you want to live by
yourself as a first home,
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there's no guarantee
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the property will be sold
as a vacant position.
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So that's one.
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And secondly, normally the
condition of the property
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is not guaranteed.
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You probably understand
with mortgagee sale,
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the borrowers and be really, really sad.
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They can damage the property
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during the mortgagee sale period.
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So the condition can be really poor.
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So there's no condition
guarantee on the property.
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Now thirdly,
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the normal special condition
chattels in the property,
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is either not included
or there is no warranty.
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Now, chattels can be like
oven, dishwasher, curtains,
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and carpets et cetera.
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Normally they are included in
the sales purchase agreement.
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But with mortgagee sale property,
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they're generally not
included or even the included,
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there's no warranty that they are working.
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And so just be careful
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when you consider buying
mortgagee sale property.
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Also there's another common condition is,
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there's no warranty on
the building permit,
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building consent or boundary.
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So there's a lot of
things, has no guarantee.
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Now the best approach is to
get your solicitor involved
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as early as possible and get
them to review each condition,
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especially those special conditions
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in the sales purchase agreement.
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If you are fully aware of these condition
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and still looking to buy the
property and then that's fine.
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But at least you are aware,
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your purchase price probably doesn't cover
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the value of these titles
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and you probably have to
spend more money to fix these.
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So just be aware.
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So generally, bank is okay
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for you to buy mortgagee sale property
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as long as you are fully
aware of these risks.
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And secondly, the bank normally
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would check the title as well.
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Now on the title normally have the bank,
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the current lender as first mortgagee,
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sometimes there are other
special wordings in the title,
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for example, second mortgage or caveat.
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Those are the security
arrangements after the banks.
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For example, if the
borrower borrows some money
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from someone else
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and someone else normally
register a second mortgage
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or caveat, just in case the
borrower doesn't repay back.
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So they have kind of security
arrangement on the title.
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It's not as strong as the banks
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because they're ranked behind the bank,
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but at least they can't sell
property without the lender.
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So, make sure the vendor
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can repay the loan
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and make sure these other
security arrangements
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is removed on settlements.
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Well, it's not always feasible.
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Sometimes they just don't
have enough money to pay back.
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Now as a result, the settlement
can be severely delayed
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and you already declare unconditional,
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so you can't really buy anything else.
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So just bear in mind,
what is on the title?
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How likely are those second mortgage
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or caveat can be removed from settlements?
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So that's the second,
normally the second condition
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from the bank on top of
the normal conditions.
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So you need to get your sellers involved
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and the sellers normally need
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to work with the vendor's solicitor
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and make sure these are
definitely achievable.
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So, in this video I talk
about what is the mortgagee,
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what is the mortgagee sale?
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And what are the potential
risks that are involved
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if you purchase a property
as a result of mortgage sale?
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So if you're fully aware these risks,
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and you've done all the homework,
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you've checked with the council,
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you check with your solicitors
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and you think is still a
bargain, set a reserve price,
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normally, well below the market price.
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If you can get, I think that
it's definitely worthwhile,
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and you can instantly build
some equity on settlement.
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So definitely worth well
explore this option,
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but just be aware of those risks.
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Thank you for watching this time.
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I hope you find it useful
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and please subscribe
to our YouTube channel
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cause every week we have
really great content
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to share with you.
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Thank you for watching.
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I'll see you next time.
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Bye for now.
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