A mortgagee sale: what does it mean for you?

The property market in Christchurch is, let’s say, buoyant. In comparison with other cities in New Zealand, Christchurch is bucking the trend as house prices have risen significantly compared to pre-Covid levels. But there’s also been high interest rates since May 2023 which has seen many households face financial strain – the perfect breeding ground for mortgage arrears and mortgagee sales.

Understanding a mortgagee sale

A mortgagee sale occurs when a lender (the mortgagee) sells a property to recover funds from a borrower (the mortgagor) who has defaulted on their loan. Defaults occur in several ways, such as failing to make repayments, missing interest payments, or not maintaining or insuring the property as stipulated in the loan agreement.

Lenders are typically keen to sell the property swiftly – they want their money back, and so a mortgagee sale can be a great opportunity for people buying a house in Christchurch to purchase a house below its true market value. But before you rub your hands in glee, a mortgagee sale brings with it a host of risks and issues that are not present in ‘regular’ transactions.

The risks of a mortgagee sale

Navigating the complexities of a mortgagee sale can be challenging, particularly for those unfamiliar with the legal and financial implications. If you are considering buying a mortgagee sale property, it cannot be overstated the importance of seeking legal advice from an experienced property conveyancing Christchurch lawyer before signing a sale and purchase agreement or bidding on a property at auction. These sales are often problematic from the outset so its important you understand what a mortgagee sale entails, the steps involved, and how seeking professional legal advice can help mitigate risks and protect your interests. 



The most obvious issue is that the owner isn’t the seller. While this sounds like a minor administration issue, the impact on the sale is significant. Aside from the owner being resistant to the sale, mortgagee sales have very different terms and conditions to non-mortgagee sales:

• Property owners can feel the agents are not trying to get the best price and engage their own agents to make a sale, which can complicate and delay a purchase.

• The owner may still be living at the property so you may need to go to court for a possession order.

• The owner may still be living at the property and not allow viewings, a pre-settlement inspection or confirm whether any works have been undertaken.

• The mortgagee does not have to provide information or supporting documentation for building consents or code compliance certificates, or confirm boundaries

• The mortgagee does not have to guarantee the property will be vacant on settlement.

• The mortgagee is not liable for the condition of the property.

• Chattels are not included in the sale, and if there are any left in the property, they are ‘as is, where is’.

• The mortgagee can surrender responsibility for the property after you’ve signed the sale and purchase agreement, so you will need to insure the property from this date.

• Buyers can be liable for outstanding body corporate fees, rates or other payments.

Mortgagee sales often proceed quickly, but the lenders can cancel the agreement at any time prior to settlement, plus if the property owner restores their finances in time, they can take the property off the market.