Considering buying apartment with expensive body corp

Many punters think this means 'bargain' but it is more indicative that the property will be sold at or above the reserve (determined by the Bank's valuer) & sufficient to clear the loan.

These may be two different amounts, market value may be less than what the property owes to the lender.

 

It can go the way of selling for whatever they can get and the mortgagee making up the difference though also?

 

@Archaon - Yes it can. The planets need to align, then the Bank's asset manager has to make a call as to whether it is better to exit or hold the debt. This can be made more complex where mortgage insurance is involved though the insurer will have little say in the matter.

 

The two mortgagee's I've personally purchased in Brisbane at auction have been sold around market price (Usually slightly under) with the reserve based on the current condition of the property. I don't believe what the seller owes affects the reserve from my experience.

Here are the two:

Property #1 sold for 270k. The seller owed the bank just over $96,000 AFTER the sale proceeds (I've seen the bank statement what the seller owes, usually the bank sends the statement to the property address, not sure why.)

Property #2 Sold for 350k. The seller owed the bank over $135,000 after the sale proceeds. Same story the statement came to the house.

If you're ready to buy on a cash contract with no BnP you will have a chance to buy slightly under market value especially if it's a unit on the Gold Coast in a big building.

 

It is never whatever the seller can get at auction, it's as close to market price as possible on auction day otherwise they pass it in and put it on the market with a list price.

 

Ahh, I see, thank you.

 

When the mortgagor owes way more than the value of the property nothing short of a major boom in the area is going to see the lender recoup the outstanding balance. Hence, they need to assess their position.

This is typical of the exuberance displayed in mining towns, there's no way (in the near future) that the properties will ever resell near their boomtime records without another resources boom.

The Banks have their assessment of market valuation and the agents' appraisals and go to auction in the full knowledge of the extent of the anticipated loss to be endured.

The mortgagor's position is amplified where they have 95% IO loans and the property value drops.

I'm not saying that banks won't sell to avoid crystallising a loss but they have to be seen to have gone to market to achieve the best outcome or risk being sued for improper conduct.

 

Completely agree, but to add to this: Buy somewhere else instead and rent that out. You've got a higher income than I do and apparently don't have a family, you've got no excuse not to invest!

 

Too late - OP has decided to buy

 

Sure the REA isn't pulling a dodgy on you and including balcony and car space in that? 92m² for a one bedder would be huge!

 

Agreed, 92m2 would be a nice size 2bdrm

 

Hey guys, an update onto this

Ultimately I decided on not buying the apartment and am renting a similar apartment on a lower floor for $420 a week

The apartment sold at Auction for $284,000 which was around market value despite being mortgagee in possession

Considering recent events it seems to have turned out to be the better decision considering it’s left me with free capital to invest in ETF’s during this downturn