Before a property is up for mortgagee sale a Property Law at Notice is served on the vendor being in default and a specified time is given to remedy the default. Once this time frame has lapsed and the default not paid the mortgagee will then sort out a marketing campaign so it does take a while for it to actually be put up for "Mortgagee Sale".
The poor vendor has either got no equity to refinance or no income to debt service to be able to refinance. They spend a lot of time stressing out to refinance and I am amazed how many finance brokers or finance companies ask for a fee up front to view an application and or the property, only to keep the money thank you very much but we can't help you. These financiers know the vendor will do anything to keep the property so use this as cash flow in between deals. I know of 48 instances in the last 12 months of this and some amounts were from $800 to $5,500 just to look at an application saying we have too many to applications to consider, pay us to look at it.
The financiers will offer enough to induce you to protect their position as they know 95% of the loan offers the poor vendor needs second tier lending just to make it work. There were no second tier lenders 6 months ago
Most vendors don't know it but they can sell privately during the "Mortgagee Sale" yes they only have to pay the debt on the title. As they probably can't refinance so wouldn't they be better to reverse the situation and the vendor sell privately and get what equity they can. Also they may save on Real Estate agents fees.
Or another situation is you as the vendor become the second mortgagee. How to do this?
If you are successful enough to get a sale, and if you have to, offer to leave in your equity or an amount .Make sure it is behind a first mortgage of 60 to 65% and behind a bank as first mortgagee. If you leave it there for 3 years lenders see the security in the lend as the client has 3 years to either refinance, sell or debt reduce.