Spanish Property Insight › Forums › Spanish Property Forums › Spanish Real Estate Chatter › You have been told! – Buy now before prices rise. › Reply To: You have been told! – Buy now before prices rise.
Just to defend Steve6, in the cases of actual repossession by the courts (a repo is owned effectively by the court asn THEY take the property back in order to settle the debt) the banks want to get everything they can, so their extortionate penalty interest rates (look on your mortgage escrituras to see how much this is and hovers at just under 30%) and any other costs they can ask for get added to the original loan and it is this figure the court tries to obtain at the court auction. If they dont, any difference is indeed owed by the debtor and this can be chased for in the debtors home country.
The bank, however, has a lot of time before finally deciding to repossess (if they want to) and 3 options remain to them
1. Find a buyer themselves (this is the distressed part of the sale) The price tends to be all the mortgage, plus interest plus costs and is why the property tends to be higher than a private distressed sale where the owner tries to get shot of it before the outstanding gets too high, and in many cases ends up paying from their own pocket to get the deal through.
2. Accept the keys from the owner, they do this is there is plenty of equity in the property. They then actually own the property and try to sell it independently. No further costs are added as it is their choice to do so and the debtor rids totally of his debt. This is/has been happening a lot. Banks hang on to this stock, they may not be in such a bad financial way and see this as a mid term solution as they can drip sell the properties off over time and also actually do rent them out.
3. In the odd case of a bank in trouble where they have over extended themselves, the BOS will order them to deal with it. In this case they try to sell whatever it is at under the mortgage value outstanding, some cases this is good, most if the time its still higher that what the market will pay as they are chasing a falling market. Some banks may do this voluntarily to balance the books, but its seeming to be more developer bankrupt stock that this is happening to.
There will be more and more of these in time which will effectively drive prices down, but wont necessarily guarantee a sale.
Some buyers want the bargain but not where these lots are, some will buy these lots and sit on them.
Some financial guys are saying they reckon property will see a mini boom (not massive) as people look for where to place their money, frightened in case banks go under as they only get a certain amount back. At least with property you have something tangible and worth something!!