NICK COWDY / Residential Sales Consultant, Principal Agent
Mortgagee

Mortgagee sales are becoming more noticeable in the New Zealand property market, although they remain a small fraction of total sales. A mortgagee sale occurs when a homeowner, unable to meet mortgage repayments, has their property sold by the lender to recover the outstanding debt. As of early July 2024, TradeMe had 65 residential properties listed as mortgagee sales, a 35% increase from the same period last year.

A mortgagee sale involves a mortgagee — a lender such as a bank or finance company — who has provided a loan secured against a property owned by the borrower (mortgagor). When the borrower fails to meet the loan obligations, the mortgagee has the legal right to sell the property to recoup the loaned amount.

Mortgagee sales are generally conducted through public auction or tender, and they come with specific terms and conditions that differ from standard property sales. Notably, these properties are often sold without vacant possession, meaning the buyer may not have immediate access to the property. Additionally, chattels (movable property) are typically not included, and the property is sold in an “as-is” condition, with no warranties provided on the state of the property.

Buyers need to be aware that mortgagee sales often lack certain assurances:

  • The property may not be available for internal viewing before the sale.
  • There are usually no guarantees regarding building permits, code compliance certificates, or boundary definitions.
  • The buyer may also be responsible for any outstanding rates, body corporate fees, or other liabilities.

Given these unique conditions, it’s crucial for prospective buyers to conduct thorough research. They should review all sale documents, such as the auction particulars and tender conditions, and seek legal advice to fully understand the terms of sale. This due diligence helps avoid unexpected surprises post-purchase, such as unapproved building work or unresolved property disputes.

Mortgagee sales can offer opportunities to purchase properties at lower prices, but they come with significant risks. Buyers must be well-informed and prepared to handle the complexities and potential issues associated with these sales. Consulting with legal and real estate professionals is essential to navigate these transactions successfully.