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Mortgagee sales spark feeding frenzy


Home investors and buyers are in a frenzy over an estimated five-fold increase in mortgagee sales in the last year, but bargain hunters are set to be disappointed.

Demand for mortgagee house sales is much higher than supply, and the New Zealand Property Investors' Federation says people may not get a cut-price deal.

"There's so much interest in them, and what's happening now is people end up paying top price for them anyway," federation president Martin Evans said.

New figures from property website show the number of listings on its site with the word "mortgagee" went from 50 in July last year to 256 this week.

Additional listings on take the total listings mentioning "mortgagee" to about 400.

Interest in mortgagee sales surged, with 5600 searches on the word "mortgagee" in July well up on the 1500 searches a year earlier.

Interest peaked in April, with about 7000 hits on the mortgagee buzzword.

"Relatively, there is ever more demand than supply," chief executive Alistair Helm said.

He said real estate agents were capitalising on the demand for mortagagee sales and may be dropping "the M word" into their advertisements to get people to look at the property, even if it was not a mortgagee sale.

A mortgagee sale was previously seen as a liability because it led to lower prices, Helm said.

"Probably the reverse is now true, and they see it as a marketing tactic and it may actually not be a mortgagee property at all," he said.

Evans said he was suspicious of the number of properties advertised as mortgagee sales.

"Real estate agents will pick up on anything to get a sale and if they think more and more people are after mortgagee sales, they'll call it anything to get a sale. They'll use any tactic," he said.

Genuine mortgagee sales should never be passed in at auction, but many were, he said.

"It makes me a wee bit suspicious when they're passed in. Are they genuine mortgagee sales?" Evans said.

Cedric King, Grenadier Real Estate's principal officer and the head of its Christchurch mortgagee sales division, said mortgagee sales were "not all wine and roses".

"There could well be the perception that you will get a bargain it's not necessarily the case," he said.

King said he did not think agents would be so dishonest as to falsely advertise a mortgagee sale. "That would have to be misrepresenting something," he said. "I think that would be a very dangerous way to advertise things. Expectations would be altered."

Commerce Commission spokeswoman Felicity Connell said "using the M word" where it was not a mortgagee sale was a potential breach of the Fair Trading Act.

"Broadly speaking, anything that misleads could possibly be a breach of the act. It may be something that we're interested in," she said.

She encouraged people who thought they had been misled over a falsely touted mortgagee sale to contact the commission.

House prices are in nationwide decline and looming interest-rate cuts are spurring an improvement in the market, observers say.

An ASB Bank housing confidence survey released this week revealed a 19 percentage point leap in the number of people expecting lower house prices.

The latest Wizard Home Loans affordability index released this week showed house prices creeping back within reach of middle-income New Zealanders.


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