A new report that ADICAE has produced (The consumer organisation protecting people from abuse by banks) reported in Global Edge here, shows what banks are doing to overvalue the properties they have in stock and then try to sell them by offering 100% mortgages over a period of up to 50 years while not offering mortgages to people on properties that are not in their portfolio, ie the general market.
In order to understand why I keep saying that the vast majority of the bank repossession properties in Spain are overpriced you need to know the background of how repossession works in Spain. I have written extensively about this in the past but just to remind you. The law changed recently to 60% but let's talk about 50% here.
The bank repossesses a property and nobody buys it at auction. They then adjudicate it to themselves at 50% of last valuation. The debtor is left with the rest of the debt, the other 50% still on their heads, plus costs and lawyer fees.
The bank then adds on two parts, one for the extra 50% owed and the other for the costs, and lawyers fees, around 30% and put the property on sale on the general market. Therefore they usually place a price for sale on their property which is usually a lot higher than properties always on the general market where people will often sell for mortgage value.
The bank is having its cake and eating it. Or rather it would be if they were actually selling their repossessed stock. However at current rates of sale the bank stock will take over a decade to sell. Therefore the banks are refusing to finance anybody, even highly attractive clients with large incomes . In some areas clients wanting to buy properties on the open market are even offered similar properties in the same area by banks with 100% finance whereas they will not give a Euro to the property on the open market.
This is simply put, cheating and long term it is extremely dangerous for people buying them (Unless you seriously negotiate the price down)
However as a client wanting to buy why would you buy the overpriced bank property even if they finance you? In the end you overpay and are locked into a property that is immediately in negative equity as soon as you buy it because the bank has given you 100% of an overpriced house!
Related Stuff
1) Spanish Government Cuts VAT on New Build Homes
2) Spanish Estate Agency A Day In The Life
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