VIC Mortgagee Question: Can I but a mortgagee property direct from the bank?

[04tmeal]

Long story short there is a property next door that has been abandoned after a drug bust and I assume there is a possibility that it might soon be mortgagee property and put up by the bank for sales or auction.

Is it possible that I contact the bank prior to this and just make them an offer?

I assume they'd want to get the debt paid out asap and should and offer cross them they might take it, however I assume that they would potentially make more via an agent if put up for sale and of course they may not want to be pestered with these types of queries.

Also I imagine there might be some law or guidance around selling as close to market value.

So the question again is; Is it possible that I contact the bank prior to this and just make them an offer? And legally are they allowed to accept it and a sales to go ahead?

Thank you

PS this forum is awesome. I have tried to use a different legal forum and it was a heap of steaming you know what!!!

 

[Rob Legat - SBPL]

Please note I don't practice in Victoria property law - I'm applying my knowledge of the Queensland situation and my reading of the Victoria legislation.

The simple answer to your question is: yes, if they're comfortable in doing so.

Section 77 of the Transfer of Land Act 1958 (Vic) (TRANSFER OF LAND ACT 1958 - SECT 77 Power of sale under a mortgage or charge) provides that a power of sale under a mortgage can be by way of "public auction or by private contract".

The difficulty is in ensuring that fair market value is obtained, which is a standard requirement for mortgagees exercising power of sale. If they fail to do so, they may open themselves up to a claim for damages by the owner who has been foreclosed on. The standard way to ensure market value is obtained is by way of properly advertised and run public auction. Despite the problems with this (especially if potential buyers know it's a mortgagee sale and try to 'low ball' the bids), it's the 'best practice' available.

It would therefore be up to the mortgagee to ensure they're comfortable that any method other than public auction achieves fair market value. Some/many mortgagees will automatically go the public auction route.

Another option I've seen used is for you to approach the owner if you know them, and make an offer to buy. If the offer is acceptable to the owner and co-ordinated with the bank, you can overcome the obtaining fair market value requirement because the owner won't be sable to make a claim against the mortgagee as it was a price they were happy with and the bank didn't dictate it.

 

[Rod]

I agree with @Rob. The bank has an obligation to get fair market value.

You are not going to get an absolute bargain unless the bank makes a mistake.