Articles by Matthew Gilligan
A recent article by the NBR concerning the wilful trashing of the former family home of bankrupt Merlot Homes director Stuart Herron, which recently sold at mortgagee auction, raises some interesting issues.
To summarise the story, in the four weeks between the auction hammer falling and the moving-in date by the new owners, the house was torn to shreds.
It seems the loss was not only limited to the removal of chattels (shower heads, carpets and stove hob for example), but also malicious and wilful damage including the poisoning of trees and other damage.
Who caused the damage? Who knows; it seems there could be a number of culprits from creditors to the Herrons themselves – but that's speculation - despite calls for the police to get involved.
The new owners are now faced with the expense (both financial and emotional) of fixing the property.
Get Real & 'Caveat Emptor'
So what does this mean for house-hunters looking for a bargain?
Each week there are pages of mortgagee auctions in the major newspapers and it's naïve to imagine that the former owners are going to walk away 'quietly'. It's well-know in the real estate industry and there stories around of how disgruntled debtors have done damage ranging from leaving rubbish to trashing the place.
As a bargain-hunter looking to buy one of these properties, you, too, need to get real and be aware that it just might happen to you. It's a risk that exists which is why you must build in a contingency factor .
Remember, buying a house at mortgagee sale is like buying a car 'as is, where is'. The normal rules don't apply. All the usual warranties are taken out of the normal Sale & Purchase contract, so the vendor (the mortgagee) doesn't warrant that the place will have any chattels in it, or be in a good state, or even vacant when you settle.
The reason properties sell at mortgagee sales for typically 30% less than their open market value is that you are NOT buying the chattels and fixtures.
So as the purchaser, you buy knowing all of this in advance and take your chances when you buy a house at mortgagee sale.
In the absence of any contract with the owners, and with the bank documents SPECIFICALLY EXCLUDING CHATTELS AND FIXTURES, any purchaser must be sure of what they are buying.
It is accepted law that chattels are furniture, drapes, dishwasher, microwave and any non-hardwired appliances. Fixtures are chattels that have been attached to the property. For example, this would include the kitchen the bathroom fittings all light fittings, TV aerials and any hardwired appliances.
At a stretch, it could even be argued that doors, handrails and anything in the garden is a fixture. The vendor clearly states that it is not passing title to any of these items.
The purchaser has contracted to buy the property with none of those items included in the purchase price. This is the legal reality.
Minimising the Risk
Arranging to settle with vacant possession on or as close to the auction day as possible will help to minimise risk, as will factoring the chance of potential damage into the price you are prepared to pay.
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