Published by Steve Wong on March 21, 2012

The terms for the mortgagee sale are contained in the particulars and conditions of sale.  These conditions of sale generally include, amongst other things, provision that: 

(i)             You cannot object to the title as in a normal sale and purchase process, ie you accept the title  " as is " .  Accordingly, you will need to check the title before going to the auction and ensuring it is in order or acceptable to your needs. 

(ii)           The chattels are generally not included in the sale and you run the risk that they can be removed at any time up to the settlement date by the defaulting owner of the house. 

(iii)          The conditions do not provide for vacant possession so that any sale to you is subject to “holding over by the defaulting owner ”.  In that instance it is left to you to arrange vacant possession of the house once you have settled your purchase.  This can involve obtaining an order for possession  and will take time.  All the while you will be worrying about what damage is being done to the house.  

(iv)         Some times the risk in the house passes to the Purchaser of the house on the fall of the hammer.  In that instance you should ensure that you insurers will be able to insure the house immediately once you have purchased it.  The downside is that more often than not most insurers are not willing to do this until you actually own it.

In these circumstances you should check in advance with your insurer if they can provide you with cover at the  fall of the hammer rather than on settlement.  Generally however the risk remains with the mortgagee selling the property until you settle the purchase. 

In light of the above and to minimise risk you will need to do your homework on the property before you go to auction and in the knowledge that after all that your  bid may not even be successful. 

The upside is that you may have bought yourself a bargain if your bid is successful. That’s the risk you take.

 

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