The number of mortgagee sales more than doubled in February compared to January, Trade Me reports.
Trade Me property sales director Gavin Lloyd said while the 233% increase seemed large, it was important to note the number of mortgagee sales remained very small.
Lloyd said of the 37,000 properties for sale on the site, there were only 29 mortgagee sales listed.
“Given this low base, it’s too early to say whether this is a trend,” he said.
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“There is not much going on there right now, but it’s something we can keep an eye on in the future.”
Investor and property coach Steve Goodey said mortgagee sales were beginning to crop up, but remained rare.
The main shift he and his clients had noticed was that when a mortgagee sale was announced, it was becoming increasingly likely it would complete as a forced sale.
In the past when prices were going up, distressed owners could often refinance, benefit from the increased equity in their property, and keep the property, Goodey said.
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Steve Goodey had a client who recently made an offer on a property where the seller was being forced to sell by customs, and said deals are starting to emerge.
Goodey said investors were on the lookout for mortgagee sales.
“The property is going to sell on the day, it’s being forced, so at least you know you’re going to get an outcome, and that’s why they sort of appeal to us.”
But Goodey said he avoided mortgagee sales because they attracted a lot of buyers hunting a bargain.
He used the example of a recent sale of a fire-damaged property in Auckland, which attracted 32 registered bidders.
“They flock to it and it ends up finding its own correct price,” he said.
“I don’t want to compete with 30 people.”
There were also difficulties to consider when going for a mortgagee sale, for example an owner might refuse to vacate, or might leave with the property’s chattels.
“Some people get shitty and take all the chattels with them, and by that I mean the kitchen, the bath, the plumbing, and I’m just left with the house.”
Despite the number of mortgagee sales remaining small, Goodey said it was likely to be the start of a trend.
“We all know this is a point of the market where mortgagee sales come in because if someone bought a house a year or two years ago at a 3% interest rate fixed and is now going onto 6.5%, that’s an issue.
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Trade Me property sales director Gavin Lloyd says in some cases those forced to sell will not advertise that the property is a mortgagee sale.
“They can’t save that with cash flow – the rental market’s not there to support it.
“There’s literally just going to be more mortgagee sales, that’s just how it’s going to be.”
To identify mortgagee sales, Trade Me searched for listings containing the word “mortgagee”, then vetted each listing.
Lloyd said using other common phrases, like ”buyer must sell” was unreliable as the phrase was too common for sellers looking for a quick sale.
The detection method was not perfect.
“Mortgagee sales are understandably a very stressful process for homeowners. In some cases, vendors might prefer ‘mortgagee sale’ not to be included when advertising their property for a number of reasons,” Lloyd said.
“However, including the term ‘mortgagee’ in a listing can be helpful to communicate to potential buyers the urgency of the sale.”
