But wait, there's a catch with Mortgagee Sales.

Analysis by PropertyIQ reveals mortgagee sale properties are snapped up at an average 16 per cent discount off their estimated market value. Research director Jonno Ingerson studied mortgagee sales from January 2004 until March this year and says 88 per cent of those properties sold below their market value at the time, while for regular sales that figure is only 50 per cent. That proportion selling below market value hasn't changed as the volume of mortgagee sales has climbed, and neither has the average discount.

Mortgagee sales have trebled in the past year, sales data from Terralink shows. Listings have jumped a similar amount on Trade Me and realestate. co.nz, and the word "mortgagee" has been one of its most popular search words.

It is often used by real estate agents in advertisements to capture the attention of buyers.

Alistair Helm, chief executive of realestate.co.nz, says real estate agents will advertise properties as mortgagee sales to "lure people in" on the premise of a great buying opportunity, then take them to auction and achieve a higher price than what was expected by the mortgagee.

John Ross, of Professionals Upper Hutt, acknowledges promoting mortgagee sales frequently results in "run away successes" because buyers become "hooked thinking they'll get a great bargain".

"We put them in our auction room and many times we've sold above expectation, even surprising ourselves," Ross says. Despite Ingerson's data supporting the public perception that mortgagee sales offer a bargain, Helm says the reality is demand in the market is now driving sale prices to the same level they'd be in a regular sale.

Perhaps this explains why canny property investors like Trevor Rapson - who unabashedly describes himself as "a vulture waiting to pick over the corpses of ill-advised investors motivated by greed and fear when they fall over" - maintains there are no bargains to be had at mortgagee sale. In fact he says "uninformed" buyers invariably pay too much at mortgagee sales.

To read the full NZ Herald article click here.

Posted: 4 May 2009

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