I've just been reading an incredible story. The only bizarre thing for me though is it puts figures to something that I already knew, ie in the vast majority of cases you should not buy real estate from banks.
Here is the question.
Two similar properties in the same block, same size and everything. One is available for sale for 110k and the other for 160k. One has just sold. Which one and why?
Now you all realise naturally that the answer's the 160k property because you expect peculiar stories from Spain of course. And guess what, you would be right. However the reasons I have discussed here before on this blog post. But here is the reasoning and the honest truth about why it's a bad move.
The 160k property is a property from the bank. It came with 100% finance and excellent terms just over the Euribor base rate for a while. The conditions for being granted the mortgage were little more than the client should have a heartbeat still.
The 110k property is actually on the markets. Even if you're a solvent consumer with a good credit report it is unlikely the bank will finance you because the property does not belong to them. In the rare cases that they do they are likely to offer 70% maximum LTV ratio meaning the buyer basically has to find extra money to buy the lower price property than they do for the higher price one. They will also charge well above the base rate, possibly Euribor plus 2.5% as an example, which could be OK when Euribor is low as it is currently but when it rises at last you are seriously shafted.
So why is the story extraordinary. Simply due to the price differential. The extra 50k is a ridiculous difference for what in effect is the same property. The worst aspect of this is the purchaser has been convinced by the bank that this is a fair deal but what happens tomorrow if they must sell for who knows what reason? Well they must put it on the market competing with the 110k property and they cannot because they owe the bank 160K, or rather the bank has placed them in negative equity immediately.
You see why you shouldn't get a bank repossession property in Spain unless you are smart first? It's not rocket science. The bank likely repossessed the property for roughly 120k and the rest of the money they want is costs and counsels ' fees. They probably lent 120k at the very top of the market and the mortgage holder lost their job. They then get a hold of the property again and don't wish to have a paper loss.
It is shameful.
About the Author:
Graham Hunt Is An Estate Agent in Valencia. He Writes On The Blog Homes For Sale In Spain About Everything to Do With Spain and Spanish Property
No comments:
Post a Comment