Don’t sell my home! Four tips for navigating a mortgagee sale

Mortgagee sales can be a stressful process for all parties and we hear about the things that go wrong. The owner of the property may be losing their family home. The mortgagee (usually a bank) needs to make sure they follow the correct legal process to make sure the sale isn’t challenged, and you as the licensee may have the challenge of working in the mortgagee’s best interests while being sensitive to the owner's situation.

1. Be clear who you are working for and what their instructions are

When you’re selling a property by mortgagee sale, be clear that the mortgagee is your client. The mortgagee will decide how the property is marketed, what sale process is followed and what the reserve price at auction will be.

We hear from owners that they feel they should have some say over how the property is marketed, for example, the use of the term ‘mortgagee sale’ is often an issue for owners because of the stigma associated with it. While you can relay their views back to your client and your client may consider these views to maintain a relationship with the owner, the mortgagee has the final decision.

Follow the mortgagee's instructions, and make sure to get these in writing.

2. Agree on a communication plan with the owner

REA occasionally receives calls from property owners who are going through a mortgagee sale. One of their main concerns is that they feel the licensee working for the mortgagee didn’t get the best possible price for the property.

Talk to the mortgagee early in the process about what information you can share with the owner. The more transparent you’re able to be with the owner and the more you’re able to keep them updated, the less likely they are to feel it was an unfair process. Help your client, the mortgagee, to understand the value of good communication in the sale process and in their relationship with the owner.

3. Agree on a communication plan with any other agency involved

In some cases, the owner may try to sell the property at the same time as the mortgagee sale process. If you’re in this situation, try to get the mortgagee to agree to a communication plan with the other agency. Whether your client is the owner or the mortgagee, you’re likely to get a better outcome for all parties if you’re able to talk to the other agent about interested parties and potential viewings, and, most importantly, ensuring two offers are not accepted at the same time.

4. Apply all normal rules

We sometimes get questions from the listing agent about whether conflict of interest provisions apply to a mortgagee sale. They absolutely do!

In terms of the rules and Act, a mortgagee sale is just like any other sale. The mortgagee is your client, and you have a fiduciary duty to act in their best interests. All other rules and sections of the Act will apply as usual – for example, treating all parties fairly and providing the mortgagee with an appraisal.

In terms of disclosure, it may be more challenging to find out information about the property if you’re not able to access the property, but you still have the same obligations to disclose any defects you are aware of.

Read more about conflict of interest here.

In general, make sure you’ve got good support when dealing with a mortgagee sale – the nature of the process often requires good relationship management. Work closely with your supervisor, document all communication and instructions and take legal advice where you’re not sure.