Final answer:
Purchasing at a mortgagee auction involves risks such as hidden property damages and the lack of thorough due diligence, both of which can lead to unexpected costs and complications for the buyer.
Step-by-step explanation:
Two common risks associated with purchasing a property at a mortgagee auction include the following:
- Properties may come with hidden damages or problems that are not disclosed or apparent during the auction process, potentially leading to significant additional expenses for repairs and maintenance.
- There is often limited time to conduct thorough due diligence such as property inspections or reviews of legal documents, which increases the risk of encountering unexpected issues after the purchase.
The potential for these risks arises partly due to the nature of the sale, where properties are sold 'as-is' and without warranties.
This situation harks back to the era of the mortgage crisis and subprime loans, where less scrutiny was given during the loan process, resulting in problematic loans and defaulted properties ending up at auctions.