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What to look out for when purchasing a property at a mortgagee sale
A young couple decided to buy a property at a mortgagee sale, as the reserve price at auction was very attractive to them.
Although they were not allowed in the property to view it properly because the owner was angry and uncooperative, they decided to bid at the auction, and succeeded.
When it came to the settlement date, they were able to finally enter the property to check its condition.
They ended up having to pay for a completely new kitchen as the owner had done a large amount of damage, including having ripped out the oven and dishwasher and taken them with them.
A mortgagee sale occurs when a home owner defaults on their home loan repayments, and their mortgagee/bank ultimately exercises their right to sell the property.
While properties being sold at mortgagee sale may seem like a bargain, there are a number of issues to look out for.
1. No guarantee of vacant possession – the owner may not have vacated the property on settlement;
2. Often no ability to carry out a pre-settlement inspection – this can lead to nasty surprises later;
3. No disclosure and no warranties – the bank will cross out standard ‘warranties’ about the condition of the property in the Agreement for Sale and Purchase and won’t disclose any issues with the property. You buy in an ‘as is’ condition.
4. No chattels – things like ovens/curtains and other chattels will often be removed.
5. Difficulty obtaining finance – you may face difficulty in obtaining finance from your bank as too much uncertainty for the bank to lend on.
You need to undertake extra due diligence when buying a property at mortgagee sale as these purchases carry a high degree of risk.
It pays to obtain advice from a legal professional so that you don’t get caught out in trying to take advantage of what may seem like a bargain purchase.