Real estate, post level 4

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Ultimate Geek

#2455695 6-Apr-2020 13:05

Some interesting comments from real estate agents etc here:

http://www.tonyalexander.nz/resources/TV%20Covid-19%20No.5%20Supplement.pdf

Most vendors and buyers are taking a wait and see attitude though purely electronic sales continue to be made. Buyers are anticipating lower prices, but many have left the market amidst loss of KiwiSaver funds, jobs, and incomes. The biggest group to pull back is first home buyers. Vendors, unless potentially stressed, are also leaving the market. Small investors are deeply worried about rental income losses, larger ones less so. Well capitalised investors, some inactive for some time, are contacting agents anticipating bargain purchases in coming months. Some, not all, banks have pulled back on accepting new loan applications but it is not clear if this is due to lack of willingness to lend, or just a temporary staff capacity issue. Spec builders are very worried.

quickymart

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#2455750 6-Apr-2020 13:54

Batman:

quickymart:

As I don't have a mortgage, what happens when someone who has a mortagage loses their job and can't make the payments? Does the bank just reclaim the house and sell it, and the person who has been making said mortgage payments gets nothing?

in a mortgagee sale:

mortagee gets the balance of : sale price - amount owed - marketing fees. if the number is negative then the bank will try to get back what's owed from other securities. if the number is positive then they get money back.

be aware that in a mortgagee sale you are not buying the mortgagee's possessions. i've heard stories of buyers taking possession to find the kitchen missing, carpet missing, some form of derelict transformation takes place!

So if a property is worth say $150000 and $40000 of the mortgage has been paid, but the bank seizes it and sells it for $100000, what happens (a) a the $10000 difference and (b) in this scenario, does the bank wear the loss?

Otherwise if they sell it for $175000 (I'm using nice round numbers here) does the (former) property owner get a cheque for $25000 and loses the rest?

Handsomedan

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#2455752 6-Apr-2020 13:56

quickymart:

As I don't have a mortgage, what happens when someone who has a mortagage loses their job and can't make the payments? Does the bank just reclaim the house and sell it, and the person who has been making said mortgage payments gets nothing?

'I used to work in the area that "helped" those people.

Basically, you want to contact the bank the moment you know you're about to find it hard to pay your mortgage.

If you leave it too long, eventually you'll receive a number of notices and if enough of them are ignored (or if you become combative and are ultimately deemed too hard to help), your house will be sold from under you in a mortgagee sale and all costs recovered, including the amount owed under the mortgage, any other fees that apply to foreclosure and auction fees, commission for realtors etc...any excess (if any) will be passed back to you and your credit rating will be shot for a considerable time to come.

If the amount the house sells for is less than what is owed (as happened often when I was working in collections) you'll then be pursued for the remainder via summary judgement or similar and be hounded legally and ultimately could be bankrupted.

It takes a lot of doing nothing about your situation to get to that point, because the bank ultimately would rather put you on a payment holiday and earn interest on interest and get you back on the payment bandwagon for the next 20-odd years than go through all of the above.

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kingdragonfly

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#2456032 6-Apr-2020 16:31

quickymart: So if a property is worth say $150K and $40K of the mortgage has been paid, but the bank seizes it and sells it for $100K, what happens (a) a the $10K difference and (b) in this scenario, does the bank wear the loss?

Otherwise if they sell it for $175K (I'm using nice round numbers here) does the (former) property owner get a cheque for $25K and loses the rest?

I don't think anyone's mentioned it, but most (all?) banks will give a holiday for a year on a mortgage. I'm pretty sure this is not a government regulation, but just obviously encouraged to do so, lest they feel the full wrath of new regulations.

I know this first-hand, because I'm unemployed, and asked and got one from my bank.

As usually it sucks to be a renter, because while I'm accruing interest, at least I have a year "rent-free" in which to find a job.

I'm not a banker, but I've been through a few US bubble bursts.

Lucky for us, the foreclosures, which is a nightmarish for the home owner, are illegal in New Zealand.

Mate, it's nice to live here. We are lucky we have some protection

https://en.wikipedia.org/wiki/Foreclosure#Australia_and_New_Zealand

"In Australia and New Zealand, foreclosure has been prohibited by law in New Zealand for well over a century. Instead the mortgagee realises the security through sale, the exercise of the power of sale also being regulated by statute.

In both of these countries statutory reform has altered the manner in which real property dealings are conducted.

What is termed a "mortgage" is a legal interest that is registered against the fee simple title of the property.

Since in both countries, the Torrens title system of land registration is used, being registered as proprietor or as a mortgagee creates an indefeasible interest (unless the acquisition of the registration was by land transfer fraud).

The mortgagee therefore never holds the fee simple, and there is a statutory process for initiating and conducting a mortgagee sale in the event that the mortgagor defaults. In New Zealand, as in England, say, the land title database is now electronic so there are no paper 'title documents.'"

Handle9

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#2456059 6-Apr-2020 16:47

alasta:

It is really going to depend on the prevalence of forced sales over the coming months. If the market gets flooded by mortgagee sales then it's entirely possible that we could see price drops up to 20%, but I don't think it's a likely scenario.

Yes, there is a lot of pain out there, but a large chunk of those who've lost their jobs will be younger people on modest incomes who wouldn't have been property owners anyway. In recent times property ownership has been skewed towards older people with lots of equity so they'll just sit tight.

The big unknown is whether property investors are going to start selling up so that they can free up capital.

The banks will do everything they can to avoid mass mortgagee sales. Not because they are altruistic (far from it), but purely because mass sales would cause a collapse of the market and potentially cause people to choose to go bankrupt rather than pay a mortgage on an asset that was relatively worthless.

There will be quite a lot of forced sales but that's significantly different than a mortgagee sale.

quickymart

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#2456840 8-Apr-2020 08:47

Another thing I'm wondering about is where there will still be the same number of buyers looking at a property as there was pre-lockdown? eg, will there still be 55 people waiting outside to go through an open home, or will it be a case of if prices drop off, the number of buyers would drop off, or stay the same or (hopefully not) increase?

I miss the 90s, my Dad used to do real estate and took me to the odd open home he would run. Some days he would be there for two hours and not see another person (bar me), other times there would be maybe 3-4 waiting outside. I don't think it's anywhere near like that now.

alasta

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#2456950 8-Apr-2020 10:54

I imagine you will see a drop off in attendance at open homes in the aftermath of the lockdown because many buyers will be taking a wait and see approach.

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#2456954 8-Apr-2020 11:05

I'm guessing finance will probably be harder to get too :(

ANglEAUT

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#2457016 8-Apr-2020 12:23

quickymart: Another thing I'm wondering about is where there will still be the same number of buyers looking at a property as there was pre-lockdown? eg, will there still be 55 people waiting outside to go through an open home, ...

Maybe, the industry will update & get more digital?

More photos
VR fly through
House & land layout schematics
...
...

With those tolls, there will be less need to crowd around a door for a quick 20min inspection. As with any other digital sales, that will enable 24/7 shopping instead of 2x30min over the weekend. Hoping the VR will also enable simulating sun position for different seasons.

Please keep this GZ community vibrant by contributing in a constructive & respectful manner.

antonknee

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#2457293 8-Apr-2020 12:48

Selfishly (first home buyer in waiting) I'd like to prices drop significantly. Our little bubble and hobby of trading houses back and forth to each other for ever increases prices had to end somewhere, and perhaps this economic shock might be enough to pop it and take some heat out?

Practically, I would imagine that the industry will digitise. House and land layout diagrams seem quite common overseas (incl Australia, nearly always see a floorplan online) but less common here.

blackjack17

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#2457321 8-Apr-2020 13:41

kingdragonfly:
quickymart: So if a property is worth say $150K and $40K of the mortgage has been paid, but the bank seizes it and sells it for $100K, what happens (a) a the $10K difference and (b) in this scenario, does the bank wear the loss?

Otherwise if they sell it for $175K (I'm using nice round numbers here) does the (former) property owner get a cheque for $25K and loses the rest?

I don't think anyone's mentioned it, but most (all?) banks will give a holiday for a year on a mortgage. I'm pretty sure this is not a government regulation, but just obviously encouraged to do so, lest they feel the full wrath of new regulations.

I know this first-hand, because I'm unemployed, and asked and got one from my bank.

As usually it sucks to be a renter, because while I'm accruing interest, at least I have a year "rent-free" in which to find a job.

I'm not a banker, but I've been through a few US bubble bursts.

Lucky for us, the foreclosures, which is a nightmarish for the home owner, are illegal in New Zealand.

Mate, it's nice to live here. We are lucky we have some protection

https://en.wikipedia.org/wiki/Foreclosure#Australia_and_New_Zealand

"In Australia and New Zealand, foreclosure has been prohibited by law in New Zealand for well over a century. Instead the mortgagee realises the security through sale, the exercise of the power of sale also being regulated by statute.

In both of these countries statutory reform has altered the manner in which real property dealings are conducted.

What is termed a "mortgage" is a legal interest that is registered against the fee simple title of the property.

Since in both countries, the Torrens title system of land registration is used, being registered as proprietor or as a mortgagee creates an indefeasible interest (unless the acquisition of the registration was by land transfer fraud).

The mortgagee therefore never holds the fee simple, and there is a statutory process for initiating and conducting a mortgagee sale in the event that the mortgagor defaults. In New Zealand, as in England, say, the land title database is now electronic so there are no paper 'title documents.'"

Although in America if you take out $100,000 mortgage and your house value falls below this you can walk away and leave the house with the bank and not owe anything.

Under my understanding their mortgages are non-recourse debts.

https://en.wikipedia.org/wiki/Nonrecourse_debt

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elpenguino

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#2457324 8-Apr-2020 13:53

antonknee:

Selfishly (first home buyer in waiting) I'd like to prices drop significantly. Our little bubble and hobby of trading houses back and forth to each other for ever increases prices had to end somewhere, and perhaps this economic shock might be enough to pop it and take some heat out?

I think there will be a dip in house prices. The size of the dip will depend on how severe unemployment becomes. NZ hasn't had the larger 'corrections' that places like the UK have had in earlier years.

Unless the long term factors that make house purchases attractive change i.e. continued immigration vs insufficient increase in supply coupled with real estate investment's tax beneficial status, we'll see a rebound.

After all, there's nowt as good as bricks and mortar.

Since interest rates are so low , soon might be your best chance.

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NumPy

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#2457352 8-Apr-2020 14:23

kingdragonfly: I don't think anyone's mentioned it, but most (all?) banks will give a holiday for a year on a mortgage. I'm pretty sure this is not a government regulation, but just obviously encouraged to do so, lest they feel the full wrath of new regulations.

I know this first-hand, because I'm unemployed, and asked and got one from my bank.

But its not really a "holiday" is it? Its more like the bank saying its OK to skip the next 12 months of payments (but you will still pay back the missed interest, and we will add it to your mortgage).

A 6 month holiday adds about $15,000 to the cost on the loan for someone with a $500,000 mortgage at 4%, that's about an extra $70 a month once payments resume again. You should double those figures for a 12 months holiday.

In other words a mortgage holiday should be avoided at all costs. It would make more sense for the government to have allowed people to move Kiwi saver funds into their mortgages to get a payment holiday.

Handsomedan

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#2457474 8-Apr-2020 15:04

I'm OK with a price correction, or reduction in value, as long as it's across the board - If I sell, I'll be buying in the same market, so will happily pay less for an upgrade, if I am selling for less in a depressed market.

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Handsomedan

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#2457477 8-Apr-2020 15:06

blackjack17:

Although in America if you take out $100,000 mortgage and your house value falls below this you can walk away and leave the house with the bank and not owe anything.

Under my understanding their mortgages are non-recourse debts.

https://en.wikipedia.org/wiki/Nonrecourse_debt

Isn't that just the "sub-prime mortgage" market?

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