Bank Foreclosures

[warrioress]

After reading Rich Dad, I noticed that he spoke about bank foreclosures on homes quite a bit, and how he made money by trading...

My property strategy like many is to hold on to IPs as long as possible, but I wondering whether we have some sort of database where you can find out about bank foreclosures in Australia.

I have searched the net, and can only find US versions. I think there are potential bargains out there, but I'm not sure where to find such information.

If someone could enlighten me, that would be most appreciated

 

[lizzie]

from what i can gather ... in australia you'll find the foreclosure process quite different and that the bank will attempt to sell the house thru a licenced real estate agent for a fair market price - instead of just getting the minimum amount to cover their loan, like they seem to do in the usa. the bank will also, usually, recommend that the mortgagee attempt to sell the house themselves first.

you will occasionally see in the paper a "mortgagee in possession" sale, but it is either then for sale thru an auction process or at market rates ... so there is not necessarily a very low priced deal to be had.

 

[alexlee]

I have no stats to back this up, but does anyone else think there seem to be more actual foreclosures (i.e. bank taking the house and kicking the owner out) in the US than in Australia? This is reflected in how buying foreclosures is a popular investment strategy in the US but not in Oz.

I would imagine, then, there is potential in the pre-foreclosure stage. i.e. find people who are having financial problems and are already behind in their payments. Is there any database that has lists of people who are behind in their mortgage?

If the market gets worse (and I think it will) a small classified ad in the local newspaper saying you can help people with financial problems might yield dividends.
Alex

 

[warrioress]

Thanks for that Lizzie - and here I thought I was missing out on some bargains!

 

[grossreal]

hi warrioress
thre things
you will find them in mortagee in pocession
and the other is liquidated they are very different.
and the other isreceivership and you would need to read up on what and how they differ and they are very different
we don't have foreclosures here nor would I for one like to have either our system is bad enough with out adding that type of closures.

 

[Bargain Hunter]

We have bought a couple of foreclosure and ex-commission properties. Although they were bargains they were not give aways. Banks and the commission aim to get fair market value and are not against passing properties in if they do not make the mark.

At the start of the drop in the housing market many properties went to private treaty because the powers to be had set prices based on the performance of the previous months. You can now get a bargain because they have been re-educated by the market. But as TigerG points out in another thread, they will still allow the property to pass in if their expectations aren't meet.

Kiyosaki certainly mentions buying for a few thousand dollars. This definitely doesn't happen here, if the property sells for more than what is owing the mortgagor gets the difference less expenses. I don't think I would feel good buying a house for a few thousand dollars knowing that's all someone needed to keep a roof over their heads. A bit too cruel for me.

Regards

Andrew

 

[Nigel Kibel]

forclosures

In Australia if a house finally goes to the sheriffs office it has been order by the Supreme court. You CAN IMAGINE THAT IT IS THE FINAL STRAW.

if you get the opportunity to bid you are only bidding on the equity in the property. The reserve is determined by a curb side valuation. I had the pleasure of spending half a day at the sheriffs office in Melbourne a few years ago where they kindly explained the full process.

If a house is a in trouble because the owner is broke or if it is the result of crime the house may be sold via a real estate agent. In this case you may never know the reason for sale.

In the United States it is quite different. If you are behind in your house payments by 3 months you can be forclosed and you home is sold on the court house steps, for the highest bid. There is certainly a lot more opportunity in the United States than in Australia.

 

[Meisterin]

We have bought a couple of foreclosure and ex-commission properties. Although they were bargains they were not give aways. Banks and the commission aim to get fair market value and are not against passing properties in if they do not make the mark.

As far as I am aware, the banks must obtain valuation from an independent valuer before they can sell either at auction or by private treaty. Otherwise, they can be sued for negligence from the owner for not obtaining market value.

 

[Meisterin]

We have bought a couple of foreclosure and ex-commission properties. Although they were bargains they were not give aways. Banks and the commission aim to get fair market value and are not against passing properties in if they do not make the mark.

As far as I am aware, the banks must obtain valuation from an independent valuer before they can sell either at auction or by private treaty. Otherwise, they can be sued for negligence from the owner for not obtaining market value.

 

[Bricks & Mortar]

food for thought...

Banks aren't in the habit of giving anything away in Australia.

Sure their main interest lies in obtaining the amount due by the defaultie,
however it lies in their best interests to get as high as possible price given the circumstances........I'm sure they dont want adverse publicity in the press , when someone can't meet their repayments.
but before anything else, their interest is to recover monies owed. The rest is just goodwill and alleviates pressure form the people who can no longer meet the repayments.(and bad press)

Despite reasonable prices from Government ex-commission house they are valued prior to sale and if you are attempting to reduce the price, they in turn need to get the house re-valued before selling. So I'm guessing fair market value is given but they are not at a give away price!

cheers

Timm

 

[Terryw]

I have a friend who has just today received a notice from the Sheriff to vacate his property within 3 weeks. He is a cronic non payer (I cannot understand why he doesn't just pay).

Once the house is vacated, the mortgagee will reposses it and it will go to auction. If the price fetched were on the low side, my friend would not be too happy, and could easily commence legal action. So the banks have a duty of care to get the highest price possible for a 'forclosure'.

We are quickly trying to get him a loan to get him out of trouble.

Regards

Terryw

 

[shaunwalker1]

in new zealand they advertise properties as mortgagee sales.
i went to a couple thinking i'd get a decent deal.
inspected the property etc, worked out how much i was willing to spend.
alot of them over there needed cosmetic work done on them, ie holes in walls no wardrobes, new kitchen etc.
but what i found was, say i reckon the house is worth 120k tops, add 10k reno to the place and "flip" within 2 months for say 160k. people went mad at the auction thinking they were getting a bargain and actually ended up buying it for over 160k.
it was at that stage i saw "madness in the market" i would go and talk to the person and ask why they bought it at that price etc. most were muma and dad investors and "thought" it was a good deal.
after that i didnt buy any more properties but started flogging off everything i had.

cheers all

shaun

 

[skater]

say i reckon the house is worth 120k tops, add 10k reno to the place and "flip" within 2 months for say 160k. people went mad at the auction thinking they were getting a bargain and actually ended up buying it for over 160k.

We saw exactly the same thing here just prior to the end of the boom. Although you could add another $100k to the prices. AND this was for burnt out properties that would have been worth around $260-280k done up.

 

[Pablo]

Building wealth one house at a time, by John W schuab has allot of info on how to buy a house that is a foreclosure and even how to find financially distressed vendors where a foreclosure is imminent.

This is however an American book so I don't know how much is relevant/legal here in Australia.

One of the ideas was to pay employees at loan brokers a finders fee if they put you in contact with people on the brink of bankruptcy. You would then offer to take on all their debts and pay them out a portion of the leftover equity in exchange for their house. In addition to this he said you can before purchasing negotiate to pay off debts at a reduced amount in exchange for paying it off in a lump sum and eliminating the chance of the debt not being paid off at all if the vendor was to go bankrupt.

Cheers Pablo.

 

[alexlee]

That's an interesting strategy. So you can get referrals from mortgage brokers, accountants, lawyers, etc who might know about people on the edge. Then use a combination of debt counselling and sale-lease-backs (emphasising that the person can clear their debts without moving out of their property), maybe giving an option to the seller, etc.

This would be a strategy to try if (when?) the market falls further, coupled with a recession. The NSW economy isn't looking that good right now.

Can any of the mortgage brokers comment on whether such referrals are common, or legal?
Alex

 

[skater]

Building wealth one house at a time, by John W schuab has allot of info on how to buy a house that is a foreclosure and even how to find financially distressed vendors where a foreclosure is imminent.

This is however an American book so I don't know how much is relevant/legal here in Australia.

One of the ideas was to pay employees at loan brokers a finders fee if they put you in contact with people on the brink of bankruptcy. You would then offer to take on all their debts and pay them out a portion of the leftover equity in exchange for their house. In addition to this he said you can before purchasing negotiate to pay off debts at a reduced amount in exchange for paying it off in a lump sum and eliminating the chance of the debt not being paid off at all if the vendor was to go bankrupt.

Cheers Pablo.

With all due respect, that is an American strategy that does not work in Australia. I think you will find that the Privacy Laws makes it illegal for brokers & others in the know, to pass on the details of people that are having finacial troubles. Assumable mortgages are legal in America, not so in Australia.

 

[grossreal]

hi alex
under the banking rules
any lender is not allowed to give this type of information out unless the customer expressly tells the lender to do so including brokers that here of a deal as its a privacy issue.
the way to get this information is relatively easy a real estate tells you about a site that is having problems.
you guess what the site is worth and try by grillling the real estate what is owed,
then you talk with the owners to find out what the debt is
and get them to get the bank to release the information.
and then you start to negotiate.
there is unlike the states no foreclosure system here.
the lender ( contrary to popular believe) does not have to take the highest offer nor does it sell just to cover it costs.
when you get to negotiating on one of these deals they are usually not a deal but a soup that needs clarity.
oh and just for those little bank emplyee that were to consider being paid to give out information thats called insider trading( gaining income from within a listed company and using that companies information for ones own purpose) so I wouldn't go down that track.

 

[dwlakeshores]

I have done several mortgagee sales in the past 3 months, so although I don't now the legal ins and outs, I have some experience on the subject from an agents point of view.

Basically we receive a communication direct from the mortgagee/collection agency (there are several around, such as bluestone, zenium, etc usually the end-of-the-line type lenders), along with 1-2 other real estate offices in the area, and are all asked to do a market appraisal. A licensed valuer is also sourced to do so as well.

We then submit our proposal to the company/mortgagee and wait to hear if we have secured the business.

If the property was on the market before it was taken by the bank, then sometimes the bank will contact that agent directly to see if they have any possible buyers for the property - otherwise the agent who had it on the market cannot be involved in the sale as it is a confilct of interest.

Once we are appointed as the selling agent - we start the auction campaign (most mortgagees will prefer an auction campaign, and a few people have told me legally they HAVE to put the property to public auction).

The reserve figure is derived from the valuation.

The best thing i can see on buying from mortgagee sales is that you are buying the property at true market value - as there is no vendor involved wanting a certain price. So while they are not "bargains" - they are often seen as a good deal.

I hope this helped and any more questions just ask.

-DW

 

[dwlakeshores]

To answer the inital question of is there a database of mortagee sales - the best way to find them is looking in ads. All of mine were advertised as Mortgagee in Possession sales or similar, as it's commonly seen as a great way to get a good buy.

There are also several companies that specialise in outsourcing the mortgagee sales -

www.propertyonline.net.au
and Tagma Property Consultants are two that I know of.

 

[skater]

Sometimes an "out of area" Agent gets the rights to auction off a Mortgagee Sale, as in the case of one we bought last year. This particular Agent does all the Mortgagee Sales in the Sydney basin for one of the (more obscure) lenders.

There was a tiny add in one of our local papers & the house was only available for one hour, 2 days a week as an open inspection. It was only advertised twice.

I went to the daytime open by myself & told the Agent that I liked the property but could only afford $170k. Gave him my details.

Hubby went to the Saturday open the week before the auction & spoke with the agent at length. Agent told him that there was a single mum looking at it as well. Hubby went over it with a fine tooth comb & told the Agent that it needed a considerable amount of work done to it (it did, but it was all cosmetic & cost us less than $2k) & based on that he wouldn't be prepared to pay over $170k. Hubby gave him his work address & phone number so Agent could send a contract there.

I sat up the street from it at the Wednesday open before the Auction & nobody turned up. On the day of the Auction another investor did turn up but it was only because he was in the area & stopped by. He bid against us but had to stop at $179k as he didn't have finance in place for this one. We bought it for $180k. We knew it was worth $260k after a quick tidy up, being a sub-divideable corner block.

The Agent later told us that the reserve had been set at $170k as that was the feedback he had received. He didn't realise we were together until the start of the Auction, otherwise I am sure there would have been more marketing.