Mortgagee Auction

[chrislaw]

From: Chris L


Hi all,

I have seen a property that I would like but just one problem.
The couple have split-up badly, she wants to keep the house but won't put in money so he defaulted on payments and now the bank will sell it thru a RE agency at auction in a month.
They had the RE value it and I would happily pay that, the house is in Brisbane but I don't know the bank yet, but do know the RE. The guy said he would like to sell to me but it's out of his hands now and he will know more in a week.
My Q: Can you buy the house before it gets to auction and whats involved?
I would like to know a little more before approaching the RE.

Thanks in advance
Chris

 

[asy]

Reply: 1
From: Asy .


Hi Chris

I have dealt with quite a number of mortgagee auctions, and I will try to detail what happens from the agents point of view.


(Although this was in MEL, but I believe it would be similar here in BNE)


1: The bank issues foreclosure on the 'owners'.

2: The bank gets the right to sell the property (Goes through court)

3: The bank then authorises an agent to market the property, there are several 'clearing house' agents around, these DO NOT sell to the public, they act as a middle man between the banks and the selling agent.

4: The Clearing agent (CA) asks two or three local agents to do a report, including market price, what renovation/cleaning has to be done prior to sale, sales method, etc.

5: The CA then appoints one agent to market the property. The CA and the selling agent split the fee.

Things which must be remembered are that according to the legislation, the bank must sell the property for the realistic market price of the property because any difference between the sale price, and the money owed to the bank MUST be returned to the owner.

This is why the days of the bank just selling the property to cover monies owed are long gone. The defaulting owners of the property have the right to sue the bank for fraud of the bank sells the property too cheaply. This is why these sales usually go to auction, as the bank can then claim that the property went for the true market value.

Anyway, hope this helps.

)

asy.

"Don't forget what happened to the guy who suddenly got everything he ever wanted...
He lived happily ever after.
(Willy Wonka).

 

[chrislaw]

Reply: 1.1
From: Chris L


Hi Asy,

Thanks for that, I know the agency that the CA must have picked as they have the right to do the auction. I have contacted them to see if I can get it now, and they will get back to me.
They did a valuation and the husband was happy with it and so am I. I could fix the place and make a good profit with that price, so I am anxious to buy.
In your opinion, if I meet the RE valuation then would everyone be happy and save the expense of an auction and they get their money earlier, instead of waiting another month to auction and then someones settlement period on top of that.

Chris

 

[asy]

Reply: 1.1.1
From: Asy .


Hi Chris

It wouldn't hurt to try to put an offer in, although, due to the fact that the divorce is messy they may take it to auction. You say the husband is happy with the price, but is the wife?

This is the problem faced with these kind of sales, they can get very messy. Although this is not likely to affect you, as the purchaser, it can still get yucky.

The only way it could affect you is if one party to the sale tries to stop the bank from selling, for example if the couple's consent orders are not yet finalised... This could potentially tie up your deposit since the property may not be able to settle until things are worked out.

I must note, that this would be an extreme case, and not likely, but nevertheless it is a possibility.

Having said all that, GOOD LUCK!!! I really hope you get the property, and that you make lotsa $$!!!

asy. )




"Don't forget what happened to the guy who suddenly got everything he ever wanted...
He lived happily ever after.
(Willy Wonka).

 

[chrislaw]

Reply: 1.1.1.1
From: Chris L


Hi Asy,

Thanks again, I am pushing for a contract today and the RE is trying. Hopefully all will go ahead but time will tell.
It seems to be getting messier already with the mother-in-law being a major lender to the couple also! I don't know how this all works but I'm about to find out.

Chris

 

[asy]

Reply: 1.1.1.1.1
From: Asy .


Well, Good luck with it, and don't forget to let us know!!!

asy


"Don't forget what happened to the guy who suddenly got everything he ever wanted...
He lived happily ever after.
(Willy Wonka).

 

[Owen]

Reply: 1.1.1.1.1.1
From: Owen .


Chris,

I recently bought an IP at a mortgagee auction. I was able to find out the selling agent and rang him about 5 mins after he was notified. I was first through the place, showed lots of interest and sent in an offer well below market value. It was rejected because the property HAD to go to auction. I knew this already but the point of the offer was to set an expectation of what the punters (me) were willing to pay. I knew what the market value was, went to the auction and bought it well below my limit. They were happy with the price though because their indication of the possible sale price was my previous offer and my actual purchase price was well above this.

It always pays to make an offer even knowing it will be rejected.

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"

 

[chrislaw]

Reply: 1.1.1.1.1.1.1
From: Chris L


Hi Owen,

Thanks for the post, well you and Asy are right, the solicitor involved said it must go to auction, so I don't think I will get it.
These types of properties are being snapped up in a day, 2 have gone within an hour of listing, they are all 1/4 acre blocks and demand is very high. My only hope was to get in before an auction, now they have checked with some RE agents and know the real value.
My offer was $20,000 over their initial value (still under market though) but I couldn't convince them to sell, at auction it will go past this so may not be worth it. I will attend anyway, got to keep an eye on the market.

Chris

 

[asy]

Reply: 1.1.1.1.1.1.1.1
From: Asy .


Chris,

Don't give up, Do go to the auction, DEFINATELY take your cheque book.

I remember one auction that I was the agent at, My boss was the auctioneer, and it was a mortgagee auction. The bank was there, the agents were there, and rent-a-crowd was there...

I'd had a previous offer (low) on the property, and they decided to run to auction.

When the time came to start the auction, the auctioneer read out all the stuff you have to read, and took one look at the audience of about 15 - 20 ppl and realised all of them were neighbours. He walked up to them and said, "Are any of you buggers here to bid, or are you all sticky beaks?" The bank guy couldn't believe it.

The crowd confirmed that they were all sticky beaks and the auction was called off.
Anyway, the guy who made the lowball offer came into my office about an hour after the auction, and put in an offer 2k over his previous low offer, and the bank agreed.

i guess my point is that you never know what will happen, and it is ALWAYS worth turning up on the day.

Let us know how things go!

asy )


"Don't forget what happened to the guy who suddenly got everything he ever wanted...
He lived happily ever after.
(Willy Wonka).

 

[paulzag]

Reply: 1.1.1.1.1.1.1.1.1
From: Paul Zagoridis


Until I read Owen's post I had a policy of never submitting pre-auction bids to a mortgagee auction. It sets the floor for an auction that MUST occur in NSW and Vic.

One wrinkle I used was state with the pre-acution bid that should the property pass in to me for less than the pre-auction bid I have obviously over-shotthe market and will NOT match it.

That worked once. My pre-auction offer was $72K. Passed in at $62K, I bought it for $64K.

Surprisingly I also bought a QLD mortgagee in possession in 2001 that never went to auction. Dunno why.

PaulZag
Dreamspinner
WealthEsteem :: Psychology of the Deal
http://www.wealthesteem.org/