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Mortgagee -in-possession sales

Discussion in 'Real Estate' started by Jacque, 5th Feb, 2006.

  1. Jacque

    Jacque Team InvestEd

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    Interesting to read in today's Weekend Property (from Sun Herald) that an Art Deco apartment at Point Piper failed to sell when the highest bid ($695K) was said to have fallen $35K short of the bank's reserve.
    I was under the impression that MIP properties were more realistically priced, to at least cover 80% of the original mortgage and other costs (legal, maintenance, selling costs etc), hence their popularity for buyers seeking a bargain. Unusual to hear of one not selling, especially when it has harbour views.
    Then again, it's not really an area of Sydney I'm familiar with price-wise.

    ANZ spokesman Paul Edwards was also quoted in the same article as saying that loan defaults such as this one were NOT on the rise in Sydney and MIP sales were in no greater numbers than normal.
    Things will change if interest rates rise in the next few years, but even that isn't looking likely right now. Sydney appears to be in a "settling down" period of price adjustment, in my opinion.
     
  2. KevinH

    KevinH Well-Known Member

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    Surely they would have to have another reason for passing it in ??
    Maybe the bank is owed extra on a 2nd mortgage or something ?

    I was under the impression that they go after the borrower for any shortfall in the mortgage if the sale price does not cover it ?

    As he said, loan defaults are not on the rise so maybe the banks do not have to liquidate in a hurry as they do not ( yet) have a bagful of bad loans to write off..
     
  3. Jacque

    Jacque Team InvestEd

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    Hi Kevin
    The other scenario could have been that the owner bought at the peak of the last boom and now, for whatever reason, has to sell in a down market. It happens.
     
  4. Nigel Ward

    Nigel Ward Team InvestEd

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    The bank would typically set the reserve at sufficient to payout the mortgage plus costs.

    Yes they do go after the borrower.

    Perhaps the bank has decided to hold onto the property in the short term, rent it out and then put it back to the market with a revised ad campaign or with a different agent?

    Interesting comment from the ANZ guy. I thought I'd read a media report saying mortgagee sales were slowly on the rise?

    Cheers
    N.
     
  5. D&K

    D&K Well-Known Member

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    Hi Jacque

    It could be as you suggest or that the bank needs more money back than 80% plus fees. Even if the property hadn't dropped much in value, I have heard (and know of a few people) who have done 90%+ loans on their house. Thats is, as an approximate, $60k (part being FHOG) to secure a $600k house with an extension to the loan to cover mortgage insurance and other fees. :eek:

    Add to that a car loan (where the asset depreciates far faster than the outstanding loan balance) and the bank may be trying to recover a fairly high debt. Think what another 1/4 or 1/2 percent interest will do to some...

    ... and STG have just announced a 0% deposit housing loan. Does that mean STG figure the market has hit bottom? No doubt they are playing a numbers game based on only a small percentage folding.

    Interesting that the bank would consider renting the property out, not really their core business.

    Dave