What is a mortgagee sale?

A number of mortgage holders on fixed terms will experience the reality of paying increased mortgage payments when they re-fix for the next term in the wake of recent interest rate rises. Some homeowners may no longer be able to keep up their mortgage payments and if all attempts to help them with this fail, a mortgagee sale will then follow, where the mortgagee, usually a bank or second tier lender, sells the property to recover their funds.

An important thing to understand is that the owner isn’t the seller, and, because they don’t want to sell, they may be unwilling participants in the sales process. This means the buyer may not be able to view the property inside before making their offer, they may not be able to do a pre-settlement inspection, or get an understanding of whether any work was carried out on the house and whether it was consented.

The mortgagee doesn't have to offer the property for sale with chattels, appliances or fittings, nor do they need to provide any warranties, building consents or code compliance certificates on work done.

The terms and conditions of the sale in a mortgagee sale are what make it quite different from a normal home transaction. Properties are sold “as is”, with no guarantees. Also, chattels are not included because the chattels don’t belong to the bank.

All of this is not to say don’t buy a mortgagee sale property, but just go in with your eyes open. Engage your lawyer as early on as possible when looking at a mortgagee sale property and do as much due diligence beforehand.