By Bernard Hickey
There is nothing more tempting than a bargain.
New Zealanders seem to have a particular love of finding a 'bargain' and 'beating the market' by buying something cheaper than the regular price.
Witness the enormous success in the last decade of The Warehouse and Trade Me, which it could be argued are the only big retailing brands New Zealand has produced in that time.
The hottest thing in bargain hunting right now is the 'mortgagee sale'.
It is the perfect combination of the nation's two greatest loves: buying property and looking for a bargain.
Mortgagee sales have trebled in the last year, according to sales data from Terralink. Listings have jumped a similar amount on both Trade Me and RealEstate.co.nz and the word "mortgagee" has been one of their most popular search terms.
It is often used by real estate agents to draw the attention of buyers in advertisements.
But the oldest saying in bargain hunting is that you get what you pay for and that's the case with mortgagee sales.
It's worth being extra careful, particularly when reviewing the legal documents and assessing just how much risk the seller is trying to offload onto the buyer. Always get an experienced lawyer to review the documents.
Mortgagee sales can be particularly risky because they are often apartments, units or town houses in either new developments, half finished developments or 'typical' rental properties that come with baggage.
The baggage can be a tenant or an occupant who is grumpy, about to leave, or not guaranteed in any usual way. Or the baggage may be the building itself if it is leaky or damaged.
Most mortgagee sales in the last six months have been forced by finance companies on developers or rental property owners and tend to be either developments, sections or recently built rental property that have a different set of nuances than a regular house in the suburbs that a family would live in.
Mortgagee sales are also inherently more complicated because there are several players involved in the selling process and they often have different motivations.
Here's a 5 point checklist for those looking for a mortgagee bargain.
1. Check to see if property has a proper code of compliance certificate. A bank or finance company simply wants to unload the property with the least possible risk. Check the small print to make sure it has that code of compliance and the correct building warranties.
2. Does the property come with all the correct guarantees over title and boundaries? The phrase "˜as is where is' might be fine for a car but it's dangerous for a house or apartment.
3. Is the tenant included in the deal? Guarantees about rental income and length of tenancy can be particularly fragile in any mortgagee situation.
4. Is the occupant out of the building? Sometimes the owner may be the occupier and may be unhappy about being forced out by the bank. Getting a court order to remove the occupier can be expensive and dangerous.
5. What's the relationship between the 1st and any subsequent mortgage holders? There may be disputes in the background about security and lower ranked mortgagees can be trumped? Also, what does the mortgage insurer think? Sometimes they are reluctant to let go until they've got all their money back.
Many thanks to Tim Jones at law firm Glaister Ennor for his expertise in helping to compile this check list.
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This article was first published in the Herald on Sunday.
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