Distressed properties could mean big savings for buyers

Belinda Punshon 19 April 2016


A number of distressed properties are scattered across the nation, which may lead to favourable terms for purchasers.

Recent data from SQM Research finds that there are almost 27,000 distressed properties now on the market, which could translate to big bargains for buyers as lenders attempt to recoup their losses.

Death, divorce, mortgagee sales or undesirable suburb characteristics are often the driving forces behind a highly motivated vendor. In these cases, and particularly for mortgagee in possession sales, the vendor is generally willing to negotiate a low price that is 5-10% below reserve and agree to a short settlement that is typically 30-60 days.

Although lenders are generally reluctant to repossess properties because of the legal and administrative costs required, it is possible for many home loan customers to experience mortgage stress at some point throughout the loan term and for banks to subsequently take over.

The latest data from the Adelaide Bank/ Real Estate Institute revealed that some states, including NSW and VIC, require more than 30% of household income to service mortgage repayments which indicates the reduced affordability of property in these regions.

You can deal with mortgage stress by asking for a repayment holiday or by refinancing your home loan to scout for a better rate or features. Given a low-interest rate environment, you can get ahead on your mortgage and build up equity if you practice due diligence and take advantage of useful features including the ability to make extra repayments or an offset account.

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