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Purchasing a home at mortgagee sale

With interest rates sitting high and the cost of living putting pressure on many, we are starting to see a rise in mortgagee sales. This is where a home is sold by the bank due to the borrowers being unable to afford the mortgage.

Purchasing a home via a mortgagee sale can present a unique set of challenges, however it can also make the home purchase more affordable than a regular home. It’s important to be aware of your rights when it comes to buying via this method, so we’ve outlined things to consider to ensure the purchase goes smoothly. 

Limited Property Access

In a mortgagee sale, the home is being sold against the owner's wishes, leading to potential hurdles in property access. Owners may refuse to allow viewings or building inspections. It's advisable to anticipate these challenges and work closely with your real estate agent to navigate access issues and gather as much information as possible about the property's condition.

Uncertainty Regarding Property Availability

Unlike traditional property transactions, the owner in a mortgagee sale has the ability to repay their mortgage before settlement, removing the property from the market unexpectedly. Buyers should be prepared for this uncertainty and have contingency plans in place. Regular communication with the listing agent is key here. 

Occupancy Concerns

Buyers should be aware that the lender does not guarantee that the property will be vacant at settlement. This introduces the risk of the current owner refusing to leave post-settlement, requiring legal steps for eviction. It’s important to understand the legal process around having to get someone to vacate the property, should this happen at settlement date. 

Chattel Quality Assurance

In a mortgagee sale, the lender is not obligated to ensure the quality of chattels included in the transaction, such as non-permanent items like fridges, washing machines, and ovens. Buyers must carefully assess the condition of these items independently and, if necessary, negotiate their inclusion or replacement before finalising the deal.

Lack of Warranties and Documentation

Unlike standard property transactions, lenders in mortgagee sales are not required to provide warranties or supporting documentation related to the building, fixtures, or fittings. Buyers are strongly encouraged to engage legal professionals to review all documents, including the sale and purchase agreement, LIM report, and record of title. Thorough due diligence is essential to understanding the potential risks and implications associated with the purchase.

If you are considering buying a property at mortgagee sale, then we encourage you to ensure you have the right home buying team on your side. A good mortgage advisor and lawyer will be crucial in ensuring the deal goes through as easily as possible. 



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