Most estates put up for sale by banks as part of foreclosuresare not selling at the first try as a result of buyers' lowinterest, and such auctions do not get too much promotion, so thatthey get to be offered again, but at 25% discounts.
In the case where a property is not sold at the first auction,lenders are allowed by law to cut the starting price by 25% fromthe initially estimated value and accept the best offer theyget.
Bank bailiffs say, though, that banks are not willing to sellthe estates at a petty price or below the value of the receivablethey have to recoup. "We're not selling for less than the value ofreceivables the bank needs to recoup. The bank I work for does notagree to have the property sold below 75% of the assessed price andthis seems normal to me under the current difficult economicconditions," says Valentin Dobre, a legal executor with AlphaBank.
These conditions imposed by banks are further delaying the debtrecovery process, and in some cases are rendering it even moredifficult as penalties and interests keep piling up in debtors'account, putting more pressure on him or her. There are cases,though, where once the collateral is auctioned, the debt is frozenat the level of that moment.
Most of the times, the shortage of buyers is caused by the factthat auctions are very quietly promoted and only a few banks,including Raiffeisen, Alpha Bank, Banca Romaneasca or Leumi, thatpublish offers on their own websites. At the same time, banksrarely resort to ads published in major newspapers.
The law says sale announcements should be published at the cityhalls of localities in the areas of which auctioned goods arelocated, but these situations are also rare.
The low demand for homes during this period completes theseshortcomings, putting more pressure on banks to cut the startingprices of auctions.
Overdue loan payments soared in the last part of 2008 and in thefirst few months of 2009, amid RON decline and the risingunemployment rate and number of bankruptcies. Bankers expect loanportfolios to deteriorate over the following months particularlyamid the rising number of people losing their jobs.
At this moment, banks of Romania have around 160,000 mortgagesin their portfolios, accounting for almost 2% in the number ofhouses and apartments nationwide.
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