Facing a mortgagee sale can be a stressful situation. You may have not been able to stop the entire process from the time the lenders issued you with a demand letter and PLA Notice. But many lenders can allow you the option of putting the property on the market with a formal designation “Subject to Lender’s approval.”

Is this a good option when you are facing a mortgagee sale?

Read on and see how selling the property affects you.

How the Sale Works

When you have a mortgage, the lender retains charge over the title until the entire loan is settled according to the contract. Such a title can only be transferred by the lender. By selling the property to recover the debt or a mortgagee sale, the lender exercises its authority over the title.

However, mortgagee sales cost the lenders administratively and often attract bargain property hunters who can drive the sale price down. Also, the stigma of mortgagee sales can be embarrassing to the customer.

Lenders can give you the leeway to look for a potential buyer, and negotiate for a price without the “mortgagee sale” label hanging over your head. In such a case, once you have a deal with a potential buyer, you should take it back to the lender for approval. There’s no guarantee that the lender will agree to the deal but a successful sale would translate to the lender saving on administrative costs and you’ll avoid loads of embarrassment.

But that sounds like a fairy tale. The truth is, it’s hard to find a fair buyer when the bank is breathing down your neck. It may be better for you to get an emergency refinancing solution to buy time and some peace of mind.

There are many benefits to taking this route.

It Protects Your Credit

By the time a lender issues a Notice according to the Property Law Act (2007), your credit score must have reduced significantly. Repayment history and the nature of credit are significant components of scoring models. However, urgent refinancing helps you to restore your credit dignity and avoid a mortgagee sale.

A record of a mortgagee sale record on your credit report has a bigger impact on the credit score and would just torpedo your credit score to the bottom. Plus, there’s no guarantee that a mortgagee sale would fetch a good price and cover your entire loan and expenses. So you may end up bankrupt.

Emergency refinancing before you sell the property, on the other hand, gives you a chance to get back in the “credit game.”

It Gives You More Control

When a lender engages the process to mortgagee sale your property, the lender can unilaterally appoint a valuation expert, a marketing agent, and evaluate the offers. The home could also be sold via auction. The lender is not obliged to seek the best market rates. Also, when the lender gives you leeway to sell they can veto the deal.

This leaves the homeowner with few options as to how the property is sold, and at what price. In hot property markets such as Auckland, bargain property buyers look for such opportunities to cash-in.

On the other hand, urgent refinancing before you sell the property gives you more control. You can evaluate each offer against market rates.