A McKean Ave property in Manurewa which sold for $863,000 during a mortgagee auction at Barfoot & Thompson. Photo / Supplied
Each property represents a story of hard luck and financial ruin. But for would-be buyers, the ramshackle homes are potential bargains. Auckland desk editor Lane Nichols spends a day at the auctions as five mortgagee properties are hocked off by banks.
A hum of nervous chatter settled as property investors and would-be homeowners jammed the small CBD auction room in the hope of picking up a cheap house.
Five mortgagee properties were going under the hammer on a Wednesday afternoon last month after their owners fell on hard times and were unable to make home loan repayments.
A sixth property was a forced High Court ratings sale taken by the Auckland Council to recoup hundreds of thousands of dollars in unpaid rates.
Barfoot & Thompson auctioneer Murray Smith looked dashing in a checked suit and sparkling polished shoes.
Real estate agents made small talk with prospective buyers or took last-minute instructions by phone from remote bidders.
The tension was palpable as Smith strode to the lectern to kick off proceedings.
He reminded the 50 or so attendees that all of the properties were subject to reserve prices. They were being sold subject to existing tenancies and there were no warrantees given for fixtures or chattels that were subject to securities.
Prospective buyers were deemed to have inspected the properties and were advised to seek independent advice if the homes featured monolithic cladding.
First off the block was a sad-looking, three-bedroom home in Māngere East touted as being located in a “popular street” and close to amenities.
Smith pleaded with the reticent crowd for an opening bid, suggesting $700,000 might suffice.
After an age, a man at the rear chimed in with a more modest $50,000 offer.
“No,” Smith replied.
Someone else then bid $600,000 and we were away. However, he appeared to be the only interested party.
Smith paused the auction for “negotiation”. Staff held whispered conversations with the man, then scurried to another room to seek instructions from the bank.
Thanks to prolonged prodding, the man eventually lifted his offer to $910,000, at which point Smith announced, “We’re on the market”.
After a hopeless search for another potential bidder, the hammer fell - selling for $30,000 above CV.
The next property was a 156sq m “brick beauty” in Manurewa, which Smith described as a “bit of a charmer indeed”.
It had resource consent for two new dwellings and was located on McKean Ave.
“Who is McKean to buy it?” Smith quipped. But after a couple of bids in the early $500,000s, the room again fell silent.
“Everyone’s trying as hard as they can today to not buy a house,” Smith observed.
But a frenetic bidding war then erupted as multiple interested parties traded about 50 quick-fire counter bids.
At one point, Smith took an agent’s phone to converse directly with a phone bidder.
“No, we’re not dealing with a private owner, we’re dealing with a bank,” Smith informed the potential buyer.
The price surged to $863,000 at which point an excited Smith – who sounded like he was calling the New Zealand Cup at Riccarton – warned he was about to sell.
“Done. Stumps. Like the cricket reference?” he told the crowd, many of whom were of Indian descent.
“Sold” – for nearly $100,000 below CV.
The third lot was a “fantastic” brick-and-tile home on a 502 sq m section in Otahuhu, within walking distance of the waterfront boulevard and town centre.
Bidding started at $500,000 but quickly climbed to $760,000, when Smith told the bidder, “It’s your lucky day, we’re on the market”.
The property went to another phone bidder for $767,000 – more than $100,000 below CV.
Next up was a 130sq m, three-bedroom “great family home” in Henderson. It had previously been listed with an asking price of $819,000 – $91,000 below its CV.
Bidding again started at $500,000. A woman with gigantic glasses that obscured half her face took the price up to $750,000 before Smith paused the auction and tried to work his magic.
But the woman’s interest had waned and there were no further bids.
“We are passing in,” Smith announced.
The curious case of 4/70 Raleigh Rd in Northcote was next off the blocks.
The Auckland Council went to the High Court to sell the run-down three-level townhouse after the property racked up $230,000 in unpaid rates.
The owner, Choi Wu, couldn’t be located and is believed to have travelled overseas.
Smith said the property was in “poor condition” and required a full renovation to bring it up to standard.
“The property is unsecured. We can’t guarantee anything in terms of the condition of the property. So you’re buying strictly on an ‘as is’ basis.”
After an opening bid of just $100,000, prospective buyers traded frantic bids over the next 30 minutes.
A man with “sweet as” emblazoned on his top took instructions from someone over the phone. A businessman who had missed out on an earlier property was also in the running. The other contender was a phone bidder.
“You can’t stop on a rounded number,” Smith told a potential buyer when bidding paused at about $450,000. “You’ll get smoked every time.”
The property went “on the market” at $575,000 before selling to the phone bidder for $610,000 – more than $400,000 below CV.
The final property was a 69sq m, two-bedroom apartment in New Lynn’s Merchant Quarter complex.
Smith warned the tiny apartment was not for the risk-averse.
There were outstanding body corp fees and weathertightness issues that had “not been remediated”.
Repair work to the building was “unscoped and unquantified”.
Despite these risks, a young man at the rear of the room offered a $50,000 bid before an older gentleman at the front chimed in with $60,000.
It emerged the younger man was the older man’s son. He told Smith, “I just wanted to get the ball rolling.”
The property - warts and all - went on the market at $105,000 before selling for just $136,000 to the older buyer - more than $100,000 below CV.
Two hours had gone since the auction began. If any of the distressed owners were in the room, they did not make a fuss and remained silent as their properties were lost forever.
The homes were no longer theirs. The banks had secured their investments and the buyers had landed their bargains.
“That concludes our Barfoot & Thompson auction,” a weary Smith told the thinning crowd.
“Have a nice day.”
Financial mentor David Verry is a former banker who now works with those facing financial hardship.
He told the Herald losing a home through a mortgagee sale would be “absolutely devastating” for the owners.
The distressing situation would be a huge psychological blow, which could drive some desperate people to consider suicide, he said.
“It would not be unusual for someone in that situation. It is awfully tragic.”
Verry said while some of his current clients were at risk of mortgagee sales, he expected mortgage stress to worsen as interest rates headed north.
The severity would depend on how quickly interest rates ramped up, “and more to the point, how far does it go”.
Those who had taken out large mortgages before the housing market peaked could be hardest hit, Verry said.
Many would have lost equity as prices dipped in recent years, or be in negative equity situations.
Homeowners could find themselves in financial trouble as a result of a relationship break-up, or other unforeseen events such as redundancy or illness.
Verry said mortgagee sales were very much a last resort for banks. He hoped the financial institutions would work closely with customers who were struggling to make repayments.
Lane Nichols is Auckland desk editor for the New Zealand Herald with more than 20 years’ experience in the industry.
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