What is mortgagee repossession?
When a borrower defaults on payments to a lending institution (Bank, Building Society, Financier) the institution has certain rights under its loan agreement with the borrower.
The lender may issue a default notice that could include several options for them to exercise if the default continues after a specified date.
If the default (non-payment of instalments) is not corrected within the period specified by the lender in the default notice, the lender may seek the total recovery of its funds. To do this the lender will apply to the courts using the mortgage agreement and history of payments as evidence to have an eviction notice drawn against the borrower.
Once vacated the property is offered for sale via a Licensed Real Estate Agent acting for the lender (not the borrower) and the proceeds of the sale together with the lenders costs are deducted by the lender and the balance if any is forwarded to the borrower.
If there is a shortfall to the lender the borrower remains liable and is required under the contract and by law to reimburse the lender for all monies due under the mortgage contract including interest, costs, penalty interest, conveyancing, advertising, agents fees and so on.
This unwinding process is clearly stated in all mortgage agreements and inclusion is required under Australian Federal Financial Regulatory Law.
Historically a percentage of all mortgages will fail, so this is a necessary protection for lenders; also when a property is offered for sale’ free and clear’ potential buyers must be informed that the property is unencumbered in any way; this process separates ownership so the Real Estate market can continue in its function and cycle.
Why Buy A Mortgagee Repossession Property?
Mortgagee repossessions are generally properties that represent greater profit potential for investors and home-buyers; they are often sold under market value and for this reason usually realise a greater margin when re-sold.
The moral issue faced by many investors and home-buyers when faced with these opportunities is a personal dilemma. The simple fact is that the property is offered and will be sold. The mortgagee relies on the sale to repay the loan and move on, the lender seeks the sale to recover its funds - it is a process of the market that sometimes seems unfair for home-owners in financial difficulty, but the circumstances could be even worse if the property is not sold.
When these properties don’t sell, the impact on local values for all home-owners in the area and surrounding suburbs can mean lower values and greater pressure on equity; In addition the costs to the borrower can escalate beyond the borrowers equity.
A short detail of the advantages to buyers at nmddata.com.au
- These properties can be bought at market value less 10% - 15% depending on condition and position, they
- Offer a lower entry point for first home-buyers
- May only require minimal renovation and repair
- Can be rented out easily, given the rental market in all states
- Can realise a better yield due to lower purchase price (depends on equity)
- Properties are generally offered as vacant possession
- Investors can claim depreciation on fittings, fixtures and the improvements (buildings)
- Can be geared effectively for tax purposes - positive or negative
- Create tax deductions - as landlords, agents fees, repairs, insurance, maintenance are legitimate deductions
- Create equity that can be leveraged for further property or financial investment
The nmddata.com.au website is a substantial resource for these much sought after opportunities.
The risks when buying
- Overpayment - investors who do not research local values may pay too much
- Over-capitalization - overspending on renovation and upgrades.
- Slow or negative growth - property / location may be in a stagnated or minimal capital growth area.
Deceased Estates on nmddata.com.au
When considering deceased estates investors should be aware of some of the issues frequently faced by vendors. Often the property is a shared asset that may have sentimental value to some of the beneficiaries but represents only a cash value to the others. Frequently they cannot reach agreement over a range of issues including price; for this reason these properties often find their way under the auctioneer’s hammer. There is a possibility that these properties get passed in at auction but generally they sell - the vendors usually want to realise the value and not incur additional marketing costs.
The nmddata.com.au online service is also an excellent source of these properties.
- Deceased estates are usually found in established areas, close to infrastructure and local facilities
- Established areas offer developers a safer investment and are normally better capital growth.
- Frequently these properties require renovation and the extent of this determines price.
- Many are have excellent potential for period restoration without over-capitalization.
Things to consider
- Research prior to auction (frequently check nmddata.com.au) and don’t exceed your limit when bidding.
- Observe market value and do not over-capitalize, stay within a planned budget when renovating.
- Calculate values after two years when estimating your renovation.
What are trustees, executors and public trustees?
There are a range of circumstances where estates are administered by either privately or publicly appointed organizations and individuals. These arrangements occur for a variety of reasons...
- If it is so stated in a will to maintain impartiality and fairness for the beneficiaries.
- If required by law, where assets are owned by Government Departments or Instrumentalities.
- If a group of beneficiaries choose to appoint an impartial third party.
- If a court rules that an estate be realised for the benefit of the owner eg. (in the case of mental illness).
There are great many more good, valid and legal reasons why assets and property are dealt with by independent or appointed representative of the owners.
Usually an executor is an individual, legal firm or public instrument that has agreed or been instructed to act for a party in the event of death, disability or malady, they are charged with the function of dispensing the wishes of the deceased or to act for the benefit of beneficiaries and must act in accordance with the laws that govern such responsibilities
A trustee is charged with the ongoing administration of an estate where the assets and finances are managed for the beneficiaries and funds are disbursed at established intervals under the will or by law over time.
A trustee can be a family member, a family friend, an independent representative of the deceased such as a lawyer or a public trustee.
The work of the trustee may be for a short period but in some cases may last many years and in the case of very large estates may involve many generations.
Normally a public trustee is appointed for extended periods so that funds and assets derived from an estate are bequeathed to beneficiaries at predetermined intervals such as an 18th or 21st birthday or when an individual achieves an academic level or a situation specified in the deceased’s will.
The public trustee may be required to manage significant assets that are loaned or bequeathed to Art Galleries and Museums.
The public trustee’s role requires a sound knowledge of the legal, tax and accounting skills needed to protect the assets on behalf of the beneficiaries over the period defined in the will or within the statutes governing the administration.
Properties Offered By Public Trustees on nmddata.com.au
Public Trustees often act in the disposal of real estate through a panel of preferred Real Estate Agents in all areas of Australia.
These properties are drawn from a diverse range of specific responsibilities required under the provisions of the deeds and devices that they are instructed to execute. Such properties may include assets sourced from deceased estates, powers of attorney, VCAT orders (Victoria), Guardianships, life tenancies and so on.
In addition Public Trustees are also charged with the disposal of public housing, defence housing, council, vacant land from land instrumentalities and many other Government sources.
Some of the benefits of these properties include CPI indexed rental with long term leases or pre-payment of the lease term after settlement, fixed fee property management and maintenance and may include property restoration at lease maturity.
Generally these properties represent an opportunity for profitable investment and are listed comprehensively on www.nmddata.com.au
You don't have to be a property dealer to benefit from these investments. Contrary to popular belief the main barrier to making profit in property is not money. Many property entrepreneurs have started out from zero or worse!
The only true barrier is knowledge... exactly where to look.
AND THAT'S PRECISELY THE INFORMATION WE PROVIDE.
The Best Valued Property in the Country