Buying a Mortgagee Sale Property in New Zealand: What You Need to Know

Buying a mortgagee sale property in New Zealand means purchasing a home or investment property that is being sold by the lender rather than the owner, typically after a mortgage default. These properties are sold "as is, where is" with limited warranties, often by auction or tender, and buyers must complete thorough due diligence before committing.

Mortgagee sales represent a growing segment of the New Zealand property market. For well-prepared buyers, these sales can present genuine opportunities, but they come with specific risks and processes that differ significantly from buying through a standard sale.

This guide explains exactly what you need to know before buying a mortgagee sale property in New Zealand, drawing on our experience as one of New Zealand's most active specialist mortgagee sales teams.

What Does "As Is, Where Is" Actually Mean for Buyers?

This is one of the most important concepts to understand when buying a mortgagee sale property. "As is, where is" means:

• No vendor warranties: The lender makes no promises about the property's condition, compliance, or fitness for any purpose.
• No chattels included: No chattels are included or warranted as part of the sale.
• No vacant possession guaranteed: The former owner or tenants may still be occupying the property. While the lender's solicitor typically manages this process, vacant possession is not guaranteed in the way it would be in a standard sale. Buyers should confirm the occupancy status during due diligence.
• Limited disclosure obligations: Unlike a standard sale where the vendor must disclose known defects, a mortgagee vendor is selling a property they or the salespeople may never have physically inspected.
• Buyer beware: The entire burden of due diligence falls on you as the buyer. If you discover problems after purchase, you generally have no recourse against the seller.

In practice, this means that thorough due diligence is critical. Where access to the property is available, building inspections and professional reports are among the most valuable investments you can make. However, access is not always possible with mortgagee sale properties due to occupancy or other circumstances. In those cases, buyers should factor additional risk into their budget and rely on other available information such as title searches, LIM reports, and council property files.

Essential Due Diligence Checklist

Before bidding at auction or making an offer on a mortgagee sale property in New Zealand, complete the following due diligence:

Buying at Mortgagee Auction: What to Expect

Many mortgagee sale properties in New Zealand are sold by auction. Here is what the auction process looks like:

Before the Auction

• View the property if possible: View the property at least once, ideally with your building inspector.
• Complete all due diligence: The auction sale is unconditional. Once the hammer falls, you are legally committed. There is no cooling-off period and no opportunity to add conditions after the fact.
• Arrange finance: Get pre-approval from your bank or mortgage broker. You need to be confident in your budget before you bid.
• Arrange insurance: Most lenders require property insurance to be in place from the date of the agreement. Mortgagee sale properties can be harder to insure through standard channels, so arrange this early. Harcourts offers specially designed mortgagee sale insurance policies through our partner insurance brokers. Ask our team for details.
• Review the agreement: Have your solicitor review the Particulars and Conditions of Sale before auction day. Mortgagee sale agreements have specific clauses that differ from standard contracts.
• Set your maximum bid: Decide on your absolute maximum and commit to it. Auction rooms can be emotional, so having a firm limit protects you from overpaying.

On Auction Day

• Register as a bidder (sometimes you will need photo ID and proof of deposit funds)
• The auctioneer will read the terms of sale before bidding begins
• Bidding is open and transparent, with all bids visible to the room
• The property has a reserve price. If bidding does not reach the reserve, there could be negotiation on the floor or the property is "passed in" and the interested parties can start post-auction negotiations with the mortgagee
• If the reserve is met and the hammer falls on your bid, you sign the agreement immediately and pay the deposit (usually 10% of the purchase price).

After the Auction

If the property is passed in (not sold), there is often an opportunity to negotiate with the mortgagee directly through the agent. Many mortgagee properties sell within one to two weeks post-auction, so if you are interested, stay in contact with the agent.

What Are the Risks of Buying a Mortgagee Sale Property?

Being clear-eyed about the risks helps you make a better decision:

• No warranties on condition: You accept the property exactly as it is. Undiscovered defects are your responsibility after settlement.
• Limited information: The lender may not have detailed knowledge about the property's history, maintenance, or issues.
• Occupancy: In some cases, the former owner or tenants may still be in the property. There is usually no guarantee of vacant possession for mortgagee sales.
• Limited negotiation on terms: Mortgagee sale agreements are largely non-negotiable. The lender sets the terms and buyers must accept them as presented. Sometimes variations can be made (for example, a different settlement date or deposit amount) but this is not guaranteed.
• Auction pressure: The unconditional nature of auction purchases means mistakes are costly. If you overbid or miss something in due diligence, you cannot walk away without significant legal and financial consequences.

A Step-by-Step Guide for Buyers

1. Get your finances sorted first. Talk to your bank or mortgage broker and get pre-approval. Know your budget before you start looking.
2. Engage a solicitor early. Find a property lawyer experienced with mortgagee sales. They will review contracts and advise you on the specific risks of each property.
3. Identify properties. Search all advertising channels for mortgagee sale listings. You can also register with our team to be notified of new listings.
4. View and inspect (if possible). Attend open homes and arrange building inspections. For properties with known issues, engage relevant specialists. If inspection is not possible, buyers are often encouraged to factor additional risk into their budget.
5. Arrange insurance early. Mortgagee sale properties can be difficult to insure through standard providers. Harcourts has specially designed mortgagee sale insurance policies available through our partner insurance brokers. Contact our team to arrange cover before auction day.
6. Complete all due diligence. Use the checklist above. Do not skip any steps. The "as is, where is" nature of the sale means you cannot rely on the seller for anything.
7. Attend the auction with confidence. Arrive registered, funded, and informed. Bid within your limit and do not let emotion drive your decisions.

Frequently Asked Questions