More and more properties are being offered for sale as a mortgagee sale. This can provide the opportunity for a bargain, however the risks involved cannot be underestimated. Our advice? Before you buy at mortgagee sale, consult your legal adviser.
Here are a few practical tips to help you.
Chattels
The bank does not usually have the right to sell chattels. This means that the house-owner may take these with them. During the emotional crisis of the mortgagee sale, many people do not stop to consider the niceties of whether a particular item is a “chattel” or a “fixture” (Fixtures must legally remain with the house – these are items that are permanently fixed to the house).
We have seen the following items removed in a mortgagee sale: carpets, drapes, lampshades and electrical fittings, heat pumps, garden plants, trees, watering systems, security systems, house keys, garage door opener, clothesline, oven, dish washer and the occasional kitchen joinery – all of these would normally be included in a standard sale..
Vacant possession
The vendor bank will not guarantee vacant possession. The owner is not entitled to remain in the house once possession is granted but if they do so then you can face an expensive legal process to remove them.
Warranties
The usual sale documents are heavily amended by banks in a mortgagee sale. They give no warranties as to building work having been competed to code, boundaries or misdescription. You must read and understand the sale terms. It really is ‘buyer beware’. If the property is not up to your expectations, then you have limited remedies.
Delayed settlement
Most banks also retain the right to delay settlement if an impediment to settlement arises. This could be an injunction or objection from the vendor. Typically they will allow the right to delay a settlement for three calendar months after the possession date. During this time you are left in limbo, as you are obliged to purchase but cannot take possession.
Our key messages? Take extra care. Consult your advisors early. Factor these matters into your decision to buy and the price you are willing to pay.
