Mortgagee Auction - What price to pay?

[Rogerville]

I'm a novice and have never bought at a mortgagee auction before. I know the area well, and think I have a good idea of the market value of the house I'm interested in. Allowing for the unknowns of whether there will be vacant possession, repairs that may be required (the house is about 50 years old and doesn't look that well maintained from the outside), the possibility of unpermitted works, chattels that may be removed, damage that could be done and the possibility that viewing may be denied, can anyone suggest a ballpark percentage below market value that would be a sensible price to pay at auction? My intentions would be to live in the house myself, renovate and sell in a year or so with a view to making a modest profit.

[whitt]

Hard to tell without doing all the numbers. Can you work out your costings and allow for a profit? Then work backwards on what max you need to pay is.
How about making a written offer prior to auction? Ignore what agent says about going to auction and hand them a written offer. They have to present it to vendor, you may be suprised and get a counter offer. Saves vendor the hassle of auction etc..

Try think of a win win situation for vendor, what do they want out of sale? long/ short settlement etc..

[xris]

can anyone suggest a ballpark percentage below market value that would be a sensible price to pay at auction?

Land value.

xris

[Dean@Massiveaction]

At least 20% below current value as is, to be safe.

[Rogerville]

Thanks for that. I did do the calculations and it did actually come out to 20% below what I believe market value to be, but it seemed an awfully low figure, which I'm sure someone (hopefully not me!) will pay more than. I guess I'll just have to wait and see, and learn from experience.

[RonHoyFong]

Thanks for that. I did do the calculations and it did actually come out to 20% below what I believe market value to be, but it seemed an awfully low figure, which I'm sure someone (hopefully not me!) will pay more than. I guess I'll just have to wait and see, and learn from experience.

Hi Rogerville

If you are dealing with the listing agent they will have an idea of what is likely to be the estimated reserve price pre-auction. If you are doing the due diligence around the property particularly on the open home day (and hoping no-one is around) ask the agent "What is the selling range?"
The agent cannot tell you the vendor’s bottom line price but certainly will possibly give you an indication from the way you ask the question. However this question is best put when you are at the negotiation stage and the timing needs to be at a time when the agent is trying to close you.

"What is the Selling Range?"... http://www.propertytalk.com/forum/sh...t=2637&page=12

Cheers Ron

[Glenn]

If it is a true mortgagee sale then you are permitted to ask the agent or the mortgage holder what the redemption price is. This is the amount of the mortgage that is unpaid along with all fees. The bank must supply this figure to get permission to do the sale. Most agents will fight hammer tooth and nail to hide this information but you are permitted to ask and entitled to be given it. In the end of the day this generally is the reserve price.
A good place to get it is the lawyers who represent the bank. Perhaps a question from your lawyer to theirs is back up route. Just mention that this is what you are going to do. Often but not always the bank are the ones that engage the agents so the agents will be a bit touchy about having questions bypass them.

[xris]

Thank you Glenn. Good advice

[JohnL]

It will be interesting to see what it goes for. Although I have had a couple of great bargains before the property boom started in South Auckland, for the last few years they been bid up well above their value. The banks must have been very happy.

A major 2 bedroom do-up in Tokoroa, which I might have paid $15k for went around $35K last Thursday!!!

So good luck, but I wouldn't put too much effort into it. There is much better buying out on the streets. At the most, I occassionally bid via telephone bidding as this takes no time at all and if you aren't in the bidding you definetly won't be the one buying it.

At some stage, they will be worth the effort again!!!

What is everyone else finding at the moment?

John

[4thecat]

A Price Guide

It depends a lot on :
Is the property vacant , or rented ? If it is , you most likely will pay a " Retail price" for it. So don’t expect to get a bargain at all.

If the owner is still in the property, that’s when thinks become more interesting , and cheaper !
If you can’t get into the property, to have a look , well expect a bargain.

Because you still need to get the person out of the house ! And there are not to many people that are willing to face a home owner , with his friend "Winchester" and hungry pit bull terriers waiting to be told to vacate the property, because you just bought it
Basically the more "difficult the home owner is " the cheaper the property gets.

Yes, you can get some good deals on Mortgage sales , I bought enough of them over the years, but do expect the unexpected as well. Like having all electrical wires shortened buy 30cm , and you end up having to rewire an entire House !. Or you think you have a Skyline garage, only to discover it made a midnight move with the kitchen sink, taps , the hot water cylinder and there friends , called the Doors .
Or you may find, the evicted owner had a bit of " bad day " and smashed every Gib panel in the entire house. Between the time you looked at it and it was actioned off.

One thing I learned, Expect the unexpected

Happy bidding !

[Rogerville]

Heavens! The owner is still occupying the property and has so far not allowed access, so yes, I had considered the possibility of the taps and oven etc deciding to leave home, but not to the extent of the garage and hot water cylinder! Might have to re-think my "top dollar" . . .

[4thecat]

Don’t worry too much, just be aware that this can, and will happen.

You are dealing with people that are about getting kick out of there own home. So you can’t blame people trying to get "Even" with there banks ! They let there frustrations out on the property, thinking they get even with there "horrible bank manager "

Mortgagee auctions are a brilliant , if you are in a market where nobody want’s to buy a house anyway.

I personally think this market is still coming . There will be pressure on a large number of Homeowners, later on this year when it comes to refinancing existing home loans. Some will be in for a surprise at the best of times .

On top of this , all it needs , is someone in Iran to point a single rifle towards the strait of Hormuz . (32% of the world’s oil production need to get past that point ) and Oil prices will go up to $100 a barrel if not more.
Just imagine having to pay $2.50 + a liter for your petrol ! This could create " D " day for a lot of people that borrowed to the hilt ! or for people that are highly dependent on there weekly rental income ,where there is hardly any room for error .

There are interesting times ahead.

[Glenn]

I personally think this market is still coming . There will be pressure on a large number of Homeowners, later on this year when it comes to refinancing existing home loans. Some will be in for a surprise at the best of times .

One thought that enters my mind is that in our city it is far cheaper to rent rather than be an owner occupier. It really makes a lot of sense to a growing number of people to sell and become a tenant. Certainly I have a number of really good tenants who appear to have a few bucks, having sold and are now renting. One or two have used the money to buy a business but more appear to have popped their money into I guess the bank. Not that I go around and ask people where they have put their money. I saw a few do this when the market was going up and I shook my head. Now I nod my head. As if I or anyone else knows what the market is going to do.
So yes without a doubt the slopes are getting steeper and some skiers are picking up speed.

[4thecat]

I noticed this myself about 6-8 month ago, a lot of investment properties got sold off by what I would call " people that have been in the game " for some time. It is almost impossible to pick the top and the bottoms of the property market. Just like the Stock market, if you want to sell your shares you need to sell them at a price, where the person that buys your shares thinks he will still make some profit on them. If they think they can’t, they simply won’t buy your shares. I think the same principal applies to the Property market, therefore it’s almost impossible to sell at the top. Putting it in the bank may not be a silly idea at all , Commercial notes where paying close to 10% interest , December last year and are very liquid if you wanted to cash them in. That’s where I am parked at the moment , waiting of new opportunities to come along in the property market.

For short term excitement and almost garantied profits , shares in oil companies ( with large proven oil reserves) will pay off handsomely if you put some of your fund in them. With the Gulf of Mexico getting ready for a new Hurricane season, (and over 20% of its production is still Off Line from the last Hurricane season !) it only will take one " trigger happy Mulla in Iran " and Oil prices will shoot up by 50% in a matter of days. Try to make 50% on a property in days !
The way the market is at the moment , I think a good balance is to have 1/3 in Property, 1/3 in cash ( or high interest baring liquid investments. ( ready to invest in opportunities at a moments notice )
and 1/3 in specific Stocks , mainly oil or gold. Oil because the chances of supply problems are huge, and Gold, because if there is any problem in the middle east, where are all those American Petroleum $$$ going to be kept save ? Papermoney that can be printed by the truck loads ,if nessessary.?
I wish I had a crystal Ball, but an educated guess is sometimes just as good.

[xris]

Q Try to make 50% on a property in days !

Or try losing 50% on a property in days!