Mortgagor sale vs Distressed Vendor vs Bankrupt Estate vs Deceased Estate

OK, so you’ve found out a property is on the market because the

1. Vendor is having a cash crisis and needs to sell or
2. The mortgagor has taken possession of the property and is forcing a sale or
3. The owner of the house has gone bankrupt, or in the case of the property being owned by a company, the company has gone bust or
4. The owner has died and the property being sold as part of a deceased estate or

(1) Vendor in a cash crisis.

This is an ideal situation to be making lowball offers, especially if your funding had already been approved.  A vendor needing to sell to avoid a forced sale where they will lose even more money will often listen to any offer.

(2) Mortgagor has taken possession.

Another ideal situation.  The mortgagor wants to recover the money loaned on the mortgage, but without mortgage payments being made, they will not wish to wait 12-18 months to make a sale.  They want their mortgage repaid or as much of it as possible, but that may well be at a price below the market value.  Of course the mortgagor has a responsibility to sell for as much as reasonably possible, but showing they took an unreasonable  lowball offer when yours is the best offer they got is a hard thing to show indeed.

(3) Owner of the house has gone bankrupt.

The important factor here is to know if the trustee the  Government run Insolvency and Trustee Service, or is it a private trustee?

If it’s ITSA, the property is probably going to auction with the reserve set at the valuation price.  If prices are on the way UP, then you are going to get a good price, as by the time the property sells, the valuation will be wrong.  If prices are heading south, steer clear.

If it’s a sale through a private trustee, things are better for the buyer.  The private trustee certainly has a responsibility to sell the property for as much as they can… but like a mortgagor in possession they are more interested in a quick sale than ITSA and at the end of the day, the need to see property sell so they can collect fees and get paid.  The people at ITSA get paid whether the property sells or not so they are not so motivated to make a sale happen.

Propeties owned by companies that have been placed into liquidation are always managed by a private trustee so if you find out about one of these, get your check book ready.

(4) Deceased Estates

Great if you are after furniture to go with the house(though it’s likely to be old and dated….) Deceased estates vary too differently to fall into a category.  Sometimes the executors are looking for a quick sale to both put cash in their pockets and the death of a family member behind them.  Other times, they may be prepared to wait for the big offer.  Such properties also vary greatly in quality.  Elderly people often let the upkeep of their house slip and such properties will need a fair bit of work to bring them up to scratch.

So look out for

1. Vendors in distress.
2. Properties for sale by a private trustee.

That’s where you’ll find truly motivated vendors.