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A Primer on Mortgagee Sales

auction clearanceThe mortgagee or the lender holds the right to the sale of a property if the borrower does not fulfil his end of the mortgage commitment. Of course, this does not happen unless the mortgage default is severe or the borrower is in no position to pay back the debt. Such type of sale is called mortgagee sale. It is also called Foreclosure sale.

How are mortgagee sales conducted?

The properties under the mortgagee sales are offered to the general public either through tender or through auction. While these are times of emotional discomfort for the borrowers in question, it is perhaps the best suited path when it comes to the welfare of both the lender and the borrower.

How are they different from the traditional sale?

Mortgagee sales are different from the traditional form of property sale. Here, the mortgagee or the lender does not give warranties pertaining to building permits, does not talk encroachments unless asked specifically, and offers no warranty either on the code of compliance.

What is given in writing to the prospective buyers?

Ideally, it is expected that the prospective buyers will go through all the conditions of sale already distributed in writing by the mortgagee. In the event of vagueness regarding any condition, the solicitor engaged in the transaction is the best person to go to.

While the banks disclose all they possibly can, they do not conduct building reports and Due Diligence, thus, becomes a must for prospective buyers.

They are largely in weak markets

Many investors assume foreclosure sales to be bargain sales but again, a majority of these properties are in weak markets and thus the whole shout about capital growth may be a meek one irrespective of the price you fetch the property for.

What if the mortgagor wants to win back the property?

If the mortgagor or the borrower somehow manages the amount needed to revoke the auctioning of the property, he gets the first access to the mortgagee. Of course, he needs to adequately fulfil the conditions for the property to be re-handed to him.