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