Buyer beware on mortgagee sale
Question from Wendy updated on 26th May 2015:
I am looking to buy a property on mortgagee auction. I've been told by the real estate agent that there is a risk of chattels being removed. Do you know if there has ever been a case of items like windows being removed? Is it legal for the former owner to do so? I'd also appreciate any advice with regards to buying properties under mortgagee auctions.
Our expert Ron Hoy Fong responded:
Mortgagee sales happen when the vendor is having or had a set of unfortunate circumstances financially and is unable to make payments on a property, thereby defaulting on the mortgage with the bank. If the place is tenanted the there is a smaller chance of damages or removal of chattels. However do, do your due diligence and find out as much background information as possible. Chattels, fittings and fixtures being removed or malicious damage is possibility with mortgagee sale. Someone is being forced out of their property and emotions can set in. Also, the vendor may refuse to leave the house until evicted and there is no warranty by the bank or vendor to ensure vacant possession. You probably have to accept the risk at an auction sale where all standard vendor warranties are removed, note you may have difficulty insuring a place until the settlement date. Your bank may refuse to advance the funds to settle, if you fail to settle you may lose your deposit and still be required to settle any shortfalls. Probably the best price to pay for the property would be for the land value only. Anything higher should be treated with caution. Whatever you do, take as much legal advice as possible and remember Caveat Emptor “let the buyer beware.”
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