A Mortgagee sale is often a chance to pick up a great Kiwi ‘doer-upper’, but is also viewed as being very risky. A Mortgagee sale is where a person’s property is sold because they were not able to pay back money they owe to a lender, and the lender is selling the property to get back the money they are owed. Often Mortgagee sales are conducted through an auction which can be high pressure methods of sale. It’s important to have a property lawyer take you through the conveyancing process to ensure you are protected.
Minimise the risks
The terms for a Mortgagee sale are contained in the particulars and conditions of sale prepared by the lawyer who acts for the Mortgagee. These terms are not standardised like the ADLS/REINZ Agreement for Sale and Purchase. These agreements are prepared by the Mortgagee’s solicitor and will contain terms and conditions which give the greatest protection to the mortgagee. Many of the usual protections for buyers are not included. The team at HomeLegal are experienced property lawyers and experts when it comes to conveyancing.
Discuss the Terms & Conditions with your lawyer
The terms and conditions of sale will generally include the following provisions:
• You do not have the right to object to or requisition the title as you would in the normal process. This means that if there are any problems with the title, you will be obliged to fix them yourself at your cost after you have bought the property. Ask our property lawyers to check the title prior to any auction and ensure that it is acceptable to you.
• Chattels including curtains, carpets, the stove, and light fittings could be removed at any time prior to settlement. Even if they in the property, you might find that the seller owed money to finance companies and those companies registered their interest in the items, so that the chattels might not legally become yours. Ask our property lawyers to search the Personal Properties Security Register (PPSR) as part of your due diligence.
• The conditions do not provide for vacant possession. You may have to remove the seller from the property if they are still living in the property on the settlement date. This might mean you have to obtain an order for possession through the courts which could take some time in which the current tenant could be causing damage to your new house. Don’t rely on being able to move into the property immediately on the settlement date.
• The Mortgagee will not warrant that any works done at the property have been approved by the Council and are compliant with any applicable building codes. You will need to check the council records or order a Land Information Memorandum to ensure that any work completed on the property has been authorised properly. Our property lawyers can do this for you.
• The property needs to be insured from the time the agreement becomes unconditional, which in the case of an auction is when the hammer falls. You need to have insurance ready before you bid at auction, because the risk and the need to insure the property passes onto you, once you make the successful bid at auction. You need to discuss this with your insurer and property lawyer well before the auction.
• There is no assurance that you will be able to live in the property on settlement. An unhappy and unwilling seller could cause serious damage before they are forced to move out by the Mortgagee or the unlucky buyer.
• There may be no keys available on settlement. We would always advise changing the locks irrespective of whether or not you have all the keys. For the above reasons it is critical that you do your homework prior to buying from a mortgagee.
The conveyancing process
The conveyancing process can be very confusing and time consuming, our property lawyers are experienced in the transfer of property titles and work on your behalf to ensure all the t’s are crossed and all the i’s are dotted.
• Insurance in place?
• Checked with the local council that all works on the property comply with the relevant codes?
• Checked the Title?
• Searched the PPSR?
• Had a Builder view the property (if possible)?
• Had finance approved?
• Do you have a property lawyer on your side?
The positive aspect of all the risk is that you may get a great bargain. We can help you to minimise those risks as much as possible.