Mortgagee Sales
Mortgagee Sales now account for 4% of all house sales. This is a disturbing statistic. It is horrifying to think that 1 in 25 houses selling on the market today are mortgagee sales. Seen over the course of the past 3 years it is very clear the impact that the economic recession had on distressed homeowners who were forced to accept mortgagee sales as a route to exit the debt burden.
Swapping your home could provide you with a practical and life saving alternative to losing your home to a forced mortgagee sale.
A mortgagee sale is a sale of the borrower's property by the financier holding a mortgage over the property. It generally follows the borrower being unable to service his or her mortgage committments and the issue of a Property Law Act Notice requiring the default to be remedied within a specified period. Although, under the Property Law Act 2007, the mortgagee owes a duty of reasonable care to obtain the best price reasonably obtainable as at the time of sale, almost invariably the full value of the property is seldom achieved.
A key to avoiding a forced mortgagee sale is to react to your financial situation as early as possible. Generally this means 'selling early'. If you do manage to sell early, you may avoid a mortgagee sale, but you are still likely to sell your property for significantly less that what the property is actually worth. A quick sale is obviously not the best way to get the best price. Either way you will loose that valuable equity built up during the term of your ownership.
Swapping your home offers you a very practical and innovative way of avoiding the 'mortgagee sale trap'.
A key principal upon which homes2swap is built, is in matching people who are seeking to up-size their property with people who are seeking to down-size their property. If you are unable to service your current mortgage, then maybe an option for you is to down-size your property to a more affordable one.
The following example illistrates the opportunities that swapping your property on homes2swap.co.nz presents:-
John & Kim
Own a three bedroom property that they have owned for 8 years. After many years of renovations, a recent valuation has their 15 year old property valued at $410,000. Recently they have hit hard times and have found it increasingly difficult to service their $250,000 mortgage. To this point John and Kim have built up around $160,000 equity in their property and it is this value that is likely to be lost through a quick sale or forced mortgagee sale.
Steph & Brian
Own a three bedroom property in the same area that needs a bit of work. They have owned the property for many years and are now mortgage free and have managed to build up quite a nest-egg. A recent valuation of their 25 year old property came in at $310,000. Steph would like a nicer house but knows that 'now is not the right time to sell'.
Both John & Kim and Steph & Brian list their homes on homes2swap.co.nz.
The end result:-
Steph & Brian now own a much nicer property previously owned by John & Kim. To secure the purchase of the home, they used $100,000 savings to compliment the $310,000 equity they retained from the sale of their previous property. A few hundred dollars for the valuation and legal fees sealed the deal for them.
John & Kim now own the three bedroom property previously owned by Steph & Brian. Although it needs some work, it has good bones and can be updated without too much effort or cost. Because they swapped at the full registered valuation for each property, John & Kim retained all $160,000 equity built up from their previous home. Their resulting $150,000 mortgage is significantly more affordable than before and will save them more than $500 per month.
Through this very simple and practical process, both couples have achieved what they were each seeking. And in doing so they have managed to retain the built-up value in their properties, their hard-earened equity.
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