Mortgagee sale

A mortgagee sale is the sale of a property by a lender exercising its power of sale after the borrower has defaulted on the loan.

The process

Default triggers a notice under the Property Law Act 2007, giving the borrower a period — at least 20 working days — to remedy the default. If it is not remedied, the lender may take possession and sell.

Any surplus above the debt and costs must be returned to the borrower. If there is a shortfall, the lender can pursue the borrower and any guarantors for the balance. Selling the house does not necessarily end the debt.

What buyers should know

Mortgagee sales are often perceived as bargains. They carry materially reduced protections:

• The vendor's usual warranties generally don't apply. The lender has often never been inside the property and warrants nothing about its condition or compliance.
• Chattels are frequently excluded or unspecified, and may have been removed.
• Vacant possession is not guaranteed — occupants may still be in the property, and removing them is your problem.
• The property may have been poorly maintained or deliberately damaged.
• Terms are usually non-negotiable and heavily favour the lender.

Common misunderstanding

They are not automatically cheap. Lenders must take reasonable care to obtain the best price reasonably obtainable, and are often criticised or challenged if they do not. Many mortgagee sales achieve market price.

Due diligence matters more, not less — while the usual recourse matters less. Budget for the unknown, and have a lawyer read the specific terms carefully.

Related terms

Last reviewed: 1 August 2026 · General information only, not legal advice.

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