Unscrupulous investors target homeowners

01:43, Jan 31 2009

Struggling homeowners staring down the barrel of a mortgagee sale are being targeted by investors eager to make a profit from those in a vulnerable position.

And as the sharks circle, evidence is mounting of dubious practices. Last week a Ray White real estate agent revealed his office had received an email offering a $5000 fee if an agent put them in touch with a mortgagee sale vendor.

Sent via the TradeMe property website the email reads: "Could you ask if the seller will negotiate a deal where we take care of all arrears and penalty interest, get everything financially ship shape and also pay you a $5K fee for your time. We simply take over all mortgage payments and holding costs etc . . . Good option if not sold!"

Ray White partner and residential sales manager Tony Judson would not identify who sent the email, saying it would breach the Real Estate Institute code of ethics which prevents companies from "degrading a competitor". But he said he was unhappy that such operators were in the market.

But as mortgagee sales rise, industry insiders say vendors will continue to be approached by buyers keen for a profit. In many cases, sellers received three to four letters as soon as their properties went on the market, some from legitimate brokers and others from cash buyers offering below-market rates.

Exact figures around mortgagee sales are difficult to determine because that sales data is not collected by a central agency. But agents who handle them are reporting increases as rising interest rates and living costs slam household budgets.

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Hamilton-based mortgagee sale specialist Lynn Eagar says he has dealt with more mortgagee sales this year than he did for all of 2007. He is seeing practices that many would think are questionable, including buyers offering cash deals considerably below what a property is worth or playing "mind games" with the mortgagor. "The poor old mortgagor in that situation is very, very vulnerable."

Auckland-based First Rate mortgage broker Steve McGowan knows of private buyers who target vendors facing a mortgagee sale. "They knock on their door and say 'we'll sort it out for you'."

But he says although the credit crunch is making it harder to come up with refinancing packages, there are better options. Brokers may be able to organise bridging finance where homeowners borrow an amount for six months to allow them to sell the house normally without the stigma or pressure of a mortgagee sale. If nothing can be arranged a mortgagee sale can get a better result as competitive bidding often pushes the price up.

All the experts spoken to by the Sunday Star-Times advised homeowners to seek independent legal advice if approached by a buyer and to talk to their mortgage provider immediately if they fell behind on payments, saying lenders were often more willing to work with people who contacted them.

Broker Kim Lyons says some people will be hurting. "Go and see your bank manager or broker as soon as possible."

TIPS FOR TROUBLE

* Get help early - review the household budget to see if you can make savings to avoid getting into trouble.

* If you do get into trouble talk to your bank or mortgage provider immediately.

* Don't panic and accept the first offer from someone knocking on your door. Seek advice from your lender or an independent and registered broker or advisor.

* Always get independent legal advice before signing any deal

Sunday Star Times