Buying a property through a mortgagee sale: maybe a bargain, but also has risk
A mortgagee sale occurs as a result of a home owner not meeting their obligations under the terms of their mortgage. In this instance, the mortgagee lender (usually a bank) exercises its power of sale by selling the property to recover its debt.
Mortgagee sales often provide an opportunity for a buyer to ‘grab a bargain’. There are, however, significant risks attached to buying at a mortgagee sale; many potential buyers aren’t aware of these risks. The Sale and Purchase Agreement used in a mortgagee sale differs from a standard agreement. You need to know that chattels, such as the stove, light fittings, curtains, carpet and so on aren’t included in the sale price. This means that the previous owner could remove some or all of the chattels from the property. There have been situations where buyers have been left with little more than an empty shell after the previous owners removed all the walls, doors and windows from the property! Also, the mortgagee selling the property won’t guarantee that on settlement the property will be vacated by any unlawful occupants (usually the mortgagor/previous owners). If the occupants refuse to leave the property it will be your responsibility to have them removed; you’ll need to get, and enforce, a trespass notice or a possession order.
The risk of damage caused to the property passes to you, as purchaser, when the Agreement becomes unconditional. You should arrange for the property to be insured from the date the Agreement becomes unconditional. This is often difficult as insurers are wary of insuring a property of which you don’t have legal possession.
Unfortunately, many property buyers don’t ask for legal advice before they sign an Agreement for Sale and Purchase. You also need to remember that a real estate agent acts for the vendor and they have a vested interest in getting an Agreement signed. Your purchase is their means to getting paid. Always get legal advice before you sign an Agreement for Sale and Purchase; it could end up costing you a lot less in the long run.
Vested interest?
RE is unique & challenging industry, not for the faint hearted.
Yes we get paid if a sale is achieved, yes it is the seller who pays our commission based success fee, however that is not possible until we have a seller and a buyer having reached a mutual agreement, while we fulfil our obligation under the legislation of the REAA 2008, adhere to Client Code of Conduct and complete on going professional development to re license annually. Meaning I work very hard in a professional manner, with a willing seller and a willing buyer to bring parties together. When both parties are happy I am happy and then as a result of that I may get paid. I can think of other service providers whom I have paid regardless of the outcome without even room to consider if I was happy with the result.
People are choosing RE as a long term career, they have to be skilled at listening, communicating, marketing, negotiating, planning the list goes on…..
Care has changed from the mentality of just getting the contract signed to a client relationship focus, which requires passion and dedication, where people matter.
I choose RE as a career. It is challenging but so rewarding on many levels. My ‘vested’ interest is having to two mutually understanding & agreeing parties. Much more than to simply get contracts signed.