Mortgagee Sales. Fire Sales. Everyone wants a good deal.
However, the questions are, do you know where to find them, are you prepared for it, are they excellent deal?
In this article, you will have answers to the above questions.
What are Mortgagee Sales (or Fire Sales)?
Mortgagee sales are property put onto the market for sale by the bank when the mortgagor is unable to fulfil his/her financial obligation.
Very often, the property is put up for an auction to get the best price possible for the property at the shortest possible time. However, that does not mean that the property is under “fire”, there’s a reserve price on the property to make sure that the banks can cover as much monetary loss as possible.
Apart from the auction, the banks may go into a private treaty to sell off the property.
You may ask, “Why don’t the bank hold the property until they could fetch a better price?” Well, they are in the money business, by holding onto the property, they lose out in the interest they could earn, and there are costs of maintaining a property.
Where can I find Mortgagee Sales?
Contrary to common belief, mortgagee sales are not privy to a small group of privileged investors.
Knight Frank, Colliers, Edmund Tie & Company and Jones Lang Lasalle have their list of mortgagee sales available at their website.
Alternatively, you can check out listing platform like PropertyGuru, STproperty, The Edge Property, and so forth for mortgagee sales.
Are mortgagee sales good deal?
To answer this question, let’s us take a look at the mortgagee sales for the month of March 2017.
| Property | Unit No. | Property Type | Type | Auctioner | Guide Price | Estimated Current Market Value | Difference in Value | Better than Market Value? | Last Purchase Price | Seller's Lost? | % Loss |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Carribbean @ Keppel | #01-117 | 3BR | Private Treaty | KF | 1,950,000 | 1,830,000 | -6.56 | No | 2,060,000 | Yes | 5.34 |
| Jool Suites | #04-03 | 2BR | Auction 22 Mar 2017 | KF | 920,000 | 795,000 | -15.72 | No | 1,908,816 | Yes | 51.8 |
| Wilkie 87 | #01-04 | 3BR | Auction 22 Mar 2017 | KF | 1,600,000 | 1,610,000 | 0.62 | Yes | 1,500,000 | No | -6.67 |
| Parc Elegance | #05-29 | 1BR PH | Private Treaty | KF | 950,000 | 1,080,000 | 12.04 | Yes | 955,000 | Yes | 0.52 |
| Parc Bleu | #02-09 | 1BR | Auction 22 Mar 2017 | KF | 650,000 | 650,000 | 0 | No | Bought Together with 02-12 at 1,449,709 | - | - |
| Parc Bleu | #02-12 | 2BR | Auction 22 Mar 2017 | KF | 890,000 | 987,000 | 9.83 | Yes | Bought Together with 02-09 at 1,449,709 | - | - |
| Fontaine Party | #05-03 | 3BR | Private Treaty | KF | 1,880,000 | 2,070,000 | 9.18 | Yes | 2,500,000 | Yes | 24.8 |
| Parc Vera | #11-22 | 2BR | Auction 23 Mar 2017 | JLL | 800,000 | 801,000 | 0.12 | No | 710,000 | No | -12.68 |
| #1 Loft | #06-20 | 1BR Duplex | Auction 23 Mar 2017 | JLL | 600,000 | 582,000 | -3.09 | No | 740,880 | Yes | 19.02 |
| Mandarin Gardens | #06-50 | 1BR | Auction 23 Mar 2017 | JLL | 720,000 | 671,000 | -7.3 | No | NA | - | - |
| Fontaine Parry | #05-03 | 3BR | Auction 23 Mar 2017 | JLL | 1,770,000 | 2,070,000 | 14.5 | Yes | 2,500,000 | Yes | 29.2 |
| Regency Park (Blk 9) | #10-03 | 3+1 | Auction 30 Mar 2017 | CL | 5,300,000 | 5,400,000 | 1.85 | Yes | 5,080,000 | No | -4.33 |
| Bella Casita | #11-04 | 1BR | Auction 30 Mar 2017 | CL | 700,000 | 780,000 | 10.26 | Yes | 807,000 | Yes | 13.26 |
| Vida | #14-03 | 2BR | Sold before Auction | CL | 1,655,000* | 1,640,000 | -0.91 | No | 2,272,500 | Yes | 27.17 |
| Marina Collection | #02-24 | 3 + 1 | Sold before Auction | ETCo | 3,000,000* | 2,990,000 | -0.33 | No | 5,244,400 | Yes | 42.8 |
| The Foresta @ Mount Faber | #05-27 | 3 + 1 2-Level Penthouse | Auction 29 Mar 2017 | ETCo | 2,280,000 | 1,830,000 | -24.6 | No | 2,308,800 | Yes | 1.25 |
| Volari | #12-03 | 4+1 Duplex Penthouse | Auction 29 Mar 2017 | ETCo | 6,450,000 | 7,900,000 | 18.35 | Yes | 7,330,400 | Yes | 12.01 |
| D'Chateu @ Shelford | #01-05 | 3+1 Duplex | Auction 29 Mar 2017 | ETCo | 2,000,000 | 2,540,000 | 21.26 | Yes | 2,900,000 | Yes | 31.03 |
| 122 Bishan Street 12 | #12-49 | HDB 4 Room | Private Treaty | KF | 550,000 | 542,000 | -1.48 | No | NA | - | - |
| 218 Ang Mo Kio Ave 1 | #13-929 | HDB 3 Room | Private Treaty | KF | 315,000 | 296,000 | -6.42 | No | NA | - | - |
| 753 Choa Chu Kang North 5 | #02-207 | HDB Executive Apartment | Private Treaty | KF | 510,000 | 533,000 | 4.32 | Yes | NA | - | - |
| 235 Bukit Batok East Avenue 5 | #04-19 | HDB 4 Room | Private Treaty | KF | 295,000 | 274,000 | -7.66 | No | NA | - | - |
| 239 Bukit Batok East Avenue 5 | #09-169 | HDB 4 Room | Private Treaty | KF | 310,000 | 287,000 | -8.01 | No | NA | - | - |
| 714 Woodlands Drive 70 | #02-174 | HDB 4 Room | Private Treaty | KF | 380,000 | 342,000 | -11.11 | No | NA | - | - |
| 126 Serangoon North Avenue 1 | #02-79 | HDB 4 Room | Private Treaty | KF | 335,000 | 331,000 | -1.21 | No | NA | - | - |
| 403 Fajar Road | #03-243 | HDB 4 Room | Private Treaty | KF | 330,000 | 305,000 | -8.2 | No | NA | - | - |
Legend: KF = Knight Frank, JLL = Jones Lang LaSalle, CL = Colliers, ETco = Edmund Tie & Co.
“*” denotes the transacted prices.
Note: Estimated Market Value is based on SRX’s X-Value. You can also use this free property valuation tool to check the estimated value of the property of interest.
Mortgagee Sales Price vs. Estimate Market Value
From the data that we have gathered, auction and private treaty, 15 out of 25 (i.e. 60%) mortgagee sales were priced higher than the estimated market value. If we were to remove HDB for comparison, 50% of the mortgagee sales were priced more than the estimated market value.
Based on a comparison of mortgagee sales guide price and estimated market value of the property, it goes to show that mortgagee sales are not always a good deal. There are equal chances that you may be paying more for a mortgagee sale. Plus, for auction, bidding may push up the prices of the property. On a side note, keep calm when in a bidding war, do not let your emotion clouds your decision.
Mortgagee Sales Price vs. Previous Owners’ Purchase Price
A mortgagee sales is very likely to be discounted from the previous owners’ purchase price.
For the 15 mortgagee sales listings (with the necessary data for analysis), 12 out of 15 mortgagee sales (80%) are discounted from the previous owners’ purchase price. Moreover, 9 out of the 12 mortgagee sales listings are marketed at more than 10% discount from their purchase price.
Not forgetting the newsworthy Marina Collection which was sold at 42.8% discount, a loss of SGD 2.24 million. Surprisingly, this is not a one-off event, another unit of the similar size was also hammered from SGD 4,869,800 to SGD 3,000,000.
So, do you think that the new buyers have gotten themselves a good deal at Marina Collection? Leave us your comments below; we would love to hear from you.
In our opinion, based on statistics, the new buyers have gotten themselves a fair value deal. On the other hand, the new buyers may have gotten themselves a good deal as the rest of the sellers at Marina Collection may not be willing to let go at this low price.
How to prepare yourself for a good deal?
Good deals are hard to come back and to grab the good deal that appears right before us; we need to be prepared for it.
Here are some tips to prepare yourself to grab that “fire sales”.
Financially Prepared
You are not the only one eyeing for a good deal, and when you spotted one, very likely someone else is also eyeing it.
Recently, we have made an announcement of a price cut at Forestville for the last four units, four buyers locked into a particular unit and three left disappointed. The buyer who got the unit was financially prepared. He has the cheque ready and has done his loan approval-in-principal (AIP) (while waiting for the right opportunity).
In case you are not aware of what is AIP. AIP is the loan that the bank’s promise to lend you when you purchase a property. The application is free and non-obligatory. You can visit any Bank branch to apply for AIP. Alternatively, if you require a more comprehensive assessment, taking into account, BSD, ABSD and other charges, you can use the Property Budget Calculator by Realila. It’s also free, non-obligatory and you can use the platform to apply the AIP online without the need to go down to the bank branch.
Do Your Homework
As we have illustrated earlier, mortgagee sales may not be a good deal.
You need to keep yourself updated with the latest property market updates, be aware of the property values in the particular area you are interested in, the rental yield, etc. So that when a good deal comes along, you can recognise it and grab it with confident. You do not want to end up missing a good deal because you need to spend time finding out if it is really good.
Well, you could start off by sign up to our mailing list to receive the latest property market updates, guides and tips to prepare yourself for the opportunity.
For auction listings, you can ask to view it before the auction day. With this viewing, you can factor in the renovation cost into your bidding price.
What about Fire Sales?
Literally, “Fire Sales” means the sale of goods at a heavily discounted price after the good were damaged by fire.
In our context, it would mean that the property is sold at a huge discount because the seller is in financial distress.
However, “Fire Sales” is now more of a marketing term. It is overused and may not imply that the property is really under “Fire”. It is wiser for you to do your homework to recognise if the “Fire Sales” is really a good deal.
Our Thoughts
Mortgagee Sales is an avenue to look for good deals. However, you need to bear in mind that not all mortgagee sales are good deals. In the current property market, with prices heading south in the open market, you can probably find an equally good property deal beyond mortgagee sales.
Also, with the recent plugging of the loopholes that allow buyers to avoid stamp duty by purchasing shares in the holding companies rather than buying the properties directly, property developers are left with few options to offload their unsold property. Until they figure out new ways to avoid ABSD, the developer has not many options but to reduce their selling price of their inventory to get them off the market, before the penalty is imposed onto them. In other words, you can expect better pricing from the developers in upcoming months.
As a buyer, you could start looking around for such deals. However, do not sit on the fence for too long as the supply of new homes in the next few years (projected by URA) is significantly lowered. Anyway, it’s painful to sit on the fence for too long.
