Mortgagees back in vogue?

Mortgagee sales are likely to hit the headlines again when the latest stats come out showing a big increase in the number of properties sold this way.

We’ve been looking at this issue for an article in the next edition of the NZ Property Investor magazine. Mortgagee sales are interesting, as most people think that banks are unhelpful and will move to a sale quickly.

It reinforces that notion banks are bastards.

Indeed the opposite appears to be true. Around 30-40% of mortgagee sales are conducted by banks, yet they are responsible for more than 80% of all home loans written.

That suggest second tier lenders, particularly finance companies and mortgage funds, are the ones fuelling this market along.

The latest stats, yet to be released by Terralink, will show that the number of mortgagee sales have increased yet again from just over 200 in March to more than 250 in April. No doubt this will be trumpeted as some additional sign of doom and gloom for the property market.

However, if this market is being driven by the second tier lenders rather than that banks, then it wouldn’t be out-of-line to assume that they are well through the process of liquidating their loan books and the number will start falling again.

So for investors looking to nab a bargain (according to QV the sale price of a property is on average 16% below market value), then they better get in quick.

The other thing which came up when researching this area was that banks actually want to avoid mortgagee sales.

As one said: “It is in the bank and customer’s best interests to not force the sale of a property, due to increased costs and the risk of the end sale price being lower than what could have been reached through a normal sale.”