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Purchasing from mortgagee in possession at auction

Discussion in 'The Buying & Selling Process' started by wobbycarly, 18th Nov, 2015.

  1. wobbycarly

    wobbycarly Well-Known Member

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    Have a property coming up for auction that I'm keen to bid at, but this is the first time I've been involved in a mortgagee in possession sale. Any useful strategies that makes this situation different from a "normal" sale? eg. the agent has said "the property will be sold on the day" (his emphasis), and hinted at a $260k+ range. The mortgage appears to be for $160k (according to the S32). Does this mean anything in this process, or should I ignore that as irrelevant?

    Like us all, looking for a bargain :D, but I guess it depends on who turns up on the day as well!
     
  2. MattA

    MattA Well-Known Member

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    From experience, the bank will still has a reserve in place. Biggest thing is it will be a realistic reserve based on fair market pricing, not a 'emotional home owner my house is worth than what the agent has advised me' reserve.

    Like any auction, go in well researched and prepared to walk away... as you've identified a mortgagee in possession can bring all the bargain hunters out and before you know it, it's no longer a bargain!
     
  3. Xenia

    Xenia Adelaide Property Manager Business Member

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    They will take bids above $160k
     
  4. Kinnon Bell

    Kinnon Bell Finance Broker

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    The bank has a duty of care to achieve a fair market price for the property no matter what the mortgage is.
     
  5. wobbycarly

    wobbycarly Well-Known Member

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    Thanks for the responses. Given we were the only ones at the open last week, either all those interested have stopped coming back for another look, or there really is very little interest. Pending any surprises from the building inspection, I'd be happy to pick it up for about $240k, so might try and start with a cheeky $200k.
     
  6. Ed Barton

    Ed Barton Well-Known Member

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    That's exactly my experience of MIP auctions.
     
  7. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    This. They cant just sell for the mortgage balance. If they cant achieve fair value at an approved reserve at auction it will get passed in and put on for private treaty at the reserve price typically.
     
  8. D.T.

    D.T. Adelaide Property Manager Business Member

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    Ya, whats owing on the property isn't relevant to the legislation
     
  9. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    I would let the auctioneer try and start the bidding to see how low they will start at, if they start above 200k then ask "is the property on the market at this price" (ie has reserve been met) then bid.
    It will be interesting to see who else turns up and how the auction goes.
     
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  10. Azazel

    Azazel Well-Known Member

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    Agree with @Westminster , you can always go up but you can't go back down. Good to start as low as possible.
     
  11. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    On auction day if they have last inspection the auction, talk loudly about how your building inspection came back with structural problems that would cost $50k to fix :cool:
     
  12. dabbler

    dabbler Well-Known Member

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    My experience is this ^^^

    This was to stop those who would act corruptly.
     
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  13. moyjos

    moyjos Well-Known Member

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    Silly question. If the mortgage is $160k and the bank achieves a sale of say $260k. Does the bank keep the $100k (less fees) or does the owner who has presumably lost the house to the bank get the profit?
     
  14. dabbler

    dabbler Well-Known Member

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    No, any excess is the owners, what they do though is as this process goes on they whack extra interest, extra fees, extra whatever they can and they may not rush if there is plenty of equity
     
  15. Scott No Mates

    Scott No Mates Well-Known Member

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    Probably haven't chosen the cheapest marketing package or sales fee structure either.
     
  16. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    The owner gets the surplus less debt recovery, legal costs, auction sales costs and penalty interest. If there is a net loss then the bank will generally lodge with the mortgage insurer for shortfall or write it off if self insured (or too small to be bothered with claiming)
     
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  17. Joshwaaaa

    Joshwaaaa Well-Known Member

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    I have never understood why the owner doesnt sell up before they get to that point? I realise there may be many reasons why but I still do ponder, especially if they do have some form of equity in the place
     
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  18. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I often wonder the same thing. The times that I have seen it happen the owners think they can hold out, that the market is going to turn, that they are coming into some money soon, and that they intended to sell but never got around it it.

    Very strange.
     
  19. Azazel

    Azazel Well-Known Member

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    I assume they still think they have a chance of keeping the house even though they're still missing payments.
     
  20. moyjos

    moyjos Well-Known Member

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    how many missed payments does it take before the bank repossesses?