We have some good news this week about acquiring repossessed and distressed properties direct from banks.
A couple of weeks ago in Spanish Banks Delay Impact of Bad Debts, we found out that the level of bad debtors in Spain is so high that banks and building societies have choosen not to flag the loans as bad, nor repossess the assets or property concerned.
I've been wondering for quite a while now why the banks haven't made a concerted effort to dispose of these properties. After all, buyers seem to be waiting for the bargain properties to appear - surely these properties would be a good incentive to buy?
Lots of today's repossessed Spanish properties were over-valued when the banks were happy to lend in excess of 100% of the value of a property. This means that even when offered for sale to clear the bank debt, such properties are still over-priced.
Unfortunately for the Spanish banks,the repossession process in Spain is very slow - often taking in excess of 12 months. The owners of properties advertised today as 'repossessed', probably began defaulting on their mortgage payments 18 months ago.
The length and complexity of the repossession process adds significantly to the eventual sales price of the property. Repossession adds approximately 6% to the debt of an average property - a cost the buyer pays.
Consequently, pre-repossession properties are almost always more attractive to buyers because the time delay and expense of repossession are both avoided. In these cases, the bank or building society will negotiate a sales price with the current owner, and will hold off officially repossessing it until all reasonable efforts have been made to dispose of the property.
Now, CAM Bank, one of the larger Spanish institutions, has decided to make all their properties in danger of repossession available to the general public.
Currently, approximately 500 new properties each week fall into this category, and CAM Bank have set up a system to find buyers for these properties, without the time and expense of repossession - in the interest of the buyer, vendor and the bank.
They have properties all over mainland Spain and the islands - all available at the bank debt price. Additionally, CAM Bank will finance up to 80% of the property and offer a mortgage pre-approval process for buyers.
CAM Bank are inviting potential buyers to register with them for these properties. There is no commitment or obligation to buy but you do need to be actively interested in buying a Spanish property. You will need to know your maximum budget with at least 20% available as a deposit from you budget.
Don't forget that 'direct from the bank at debt value' does not automatically mean that the property is a bargain. Having said that, I welcome this initiative from CAM Bank. The Spanish property market needs some kind of a stimulus, and I think this could work well for the debtor, the bank and the buyer.
In other news this week, the RICS 2009 European Housing Review is definitely worth a read. It's a comprehensive and professional analysis of the major European property markets.
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