Satisfying the creditor's claims at the expense of the debtor's property is one of the main ways to quickly collect a debt without waiting for long installment payments from income, which most debtors seek to understate or hide from bailiffs. In addition to the opportunity to quickly sell property, auctions can significantly increase its estimated value, thanks to an auction - sales not at the declared value, but at the buyer’s offer price.
Read the article about how apartments put up for auction by bailiffs are sold.
Why is the apartment up for auction?
The reason why an apartment can be put up for auction to pay off a debt is always the same - insufficient funds to satisfy the demands of creditors. A court decision to seize is a prerequisite for the sale of real estate by a bailiff at auction. On their own initiative, they do not have the right to seize residential real estate.
Debts can arise due to:
- unpaid loan from a bank or microfinance organization;
- accumulation of debts for utilities;
- debts on alimony obligations;
- failure to pay mortgage payments.
Who, according to the law in the Russian Federation, has the right to conduct auctions of confiscated property
The auctions of seized property are not carried out by the bailiff service itself. Authority for the organization is transferred either to the Federal Property Management Agency or any similar private organization.
If we are talking about large transactions, such as real estate or business (factories can be sold for overdue loans), then the Federal Property Management Agency is more often involved in this.
Private firms organize the sale of smaller lots, such as cars, household appliances, etc. Such auctions take place within a short period of time.
Lots are delivered to the organizers with a stated price. The assessment is carried out by special organizations appointed by the judge. The value of real estate and other assets differs from the market price. It is always less than usual offers.
Please note that the starting price of the lot is set below the price specified in the writ of execution of the court decision.
Who is this purchase suitable for?
There are opposing opinions among realtors. Most professional participants in the real estate market consider seized apartments as a bad investment. However, most of them are disingenuous. The reason lies in the fact that the realtor does not directly participate in the auction. Consequently, his share of participation can be limited to advisory assistance only. It follows from this that it is more profitable to recommend to the client the purchase of an apartment on the primary market, or directly from the owner, bypassing auctions.
Stories that apartments with a “bad history” can cause trouble for the buyer are actually unfounded. Just 5 years ago, checking the history of an apartment was quite difficult. Currently, such verification takes no more than 1–3 days. It is enough to order from Rosreestr or an accredited company a detailed extract from the Unified State Register containing consolidated information from the Unified State Register and Unified State Register, and the buyer will be completely freed from risks.
In addition to self-checking, the auction organizer is obliged to warn buyers that the apartment has an encumbrance. This is determined by bailiffs when preparing documentation for the auction. If after the purchase it turns out that the auctioneer hid such information from the buyer, damages can be recovered from him through the court. Therefore, buying a “collateralized” apartment, the starting price of which is usually lower than similar offers from realtors, is a profitable investment.
Much more often, mortgaged apartments simply do not reach the auction stage. This occurs when the lender is the bank that provided the mortgage. If it is impossible to repay the mortgage loan, he sells the mortgaged apartment to an affiliated company specializing in the purchase of secondary housing. The company renovates the apartment and resells it for a significant profit.
Apartments with large debts on utility bills are problematic. The current practice of going to court to protect the rights of a bona fide purchaser rarely gives a positive result. This is due to the rule established in civil law - “real estate inherits the debts of the previous owner.” Thus, when purchasing an apartment at auction that was put up by bailiffs at a deliberately reduced price, you must be prepared for the fact that, in addition to the cost, you will have to pay many years of debt for housing and communal services. And its cost can be equal to the cost of an apartment.
Hotline for citizen consultations: 8-804-333-70-30
Pros and cons of purchasing seized real estate
The price of confiscated property is approximately 60-70% of the market price, which often attracts citizens who want to save money on purchasing an apartment. This is perhaps the biggest advantage when purchasing such real estate.
The main disadvantages of buying seized housing include:
- inability to inspect the apartment being purchased. When purchasing a collateral property, the buyer can only get a rough idea of the purchase. He is provided with information about the floor, area and number of premises (rooms). The buyer cannot go into the apartment itself to see the quality of repairs, wiring or plumbing; neither the bank nor the FSSP employees provide this service. However, the objects of mortgages are usually apartments in new buildings, which means the communications in them are relatively new;
- conflicts with former owners. Some owners who have lost their property due to debts do not agree with the decisions of the courts. They can take out their anger on the new owners, demand the return of “their” property, do dirty tricks (for example, knocking at night) or make threats. In addition, the law does not prohibit the debtor from appealing a court decision to a higher court. If the decision is positive for the former owner, the buyer will be drawn into litigation;
- inability to obtain a loan to purchase such a home. Without taking into account the deposit paid in advance, the money for which the housing was purchased must be transferred within a short time;
- Difficulties in registering proprietary rights. Removing the encumbrance from the purchased apartment usually falls on the shoulders of the new owner. This procedure may require time and financial costs.
If the buyer is not afraid of the prospect of buying a “pig in a poke”, and he agrees to some restrictions and problems that may accompany the acquisition of a seized home, the next step is to search for suitable real estate.
How to check such real estate
An apartment inspection can be carried out on your own quickly and inexpensively by contacting Rosreestr (by submitting an application to the MFC), or by filling out an application for inspection at a commercial organization specializing in the preparation of extracts from the Unified State Register of Real Estate. The cost of such a service varies from 200 to 300 rubles.
PICTURE 1
Sample statement
Extract from the unified state register of rights to real estate
The check should continue to exclude residents who have the right to live in the apartment, in addition to the owner. First of all, they check whether persons who refused privatization and acquired the right of lifelong residence are registered there. Then they look to see if there is a minor child registered in it who does not have another place to live permanently, and lastly, they make sure that a rental agreement with lifelong maintenance has not been concluded in relation to the property.
To check whether the apartment has any debts for housing and communal services, you should study the auction documentation, which should contain the court decision. It must indicate for what debts the property was seized. If it is not possible to get acquainted with the auction documentation, contact the accounting department of the management company (or TSN. Until 2014 - HOA). Information may be provided on a commercial basis. In any case, its cost is not comparable with the losses that may arise if the apartment is purchased with encumbrances.
Procedure and participation
To become a full-fledged participant in the events, you need to do several things in advance:
- On the website of the bailiff service, the property of interest is selected.
- An agreement is concluded directly with the person who sells it.
- The established deposit amount is paid.
IMPORTANT !!! The individual who wins the auction does not receive back the amount paid; it is included in the purchase price. The remaining participants will receive their deposited funds back (Part 5 of Article 448 of the Civil Code of the Russian Federation).
After making the payment, you need to provide a list of documents:
- application for participation on a special form;
- proof of payment of the deposit - a receipt with bank marks;
- passport or other documentation confirming identity;
- a list of all documents provided, recording the date and time of application;
- a sealed envelope indicating the amount they are willing to pay for the auction item.
Subsequently, a specialized commission checks the possibility of each applicant to participate and has the right to refuse him this. The most common reason for refusal is the inconsistency or absence of one or another document. All information is indicated in the protocol. If the applicant is admitted to the auction, then he becomes a participant in the event.
A specific day, place and time for the procedure is selected. All individuals are duly notified and required to attend. The person whose envelope contains the amount indicated above that of the others becomes the winner.
ATTENTION !!! On the same day, a protocol on the results of the auction is signed between the winning bidder and the organizer. It replaces the agreement and is considered an official document.
The main risk for the acquirer is the possibility of the event being declared invalid. Interested parties undertake to prove this fact through litigation. The key factor in the nullity of the procedure is the omission in the rules and conditions of the procedure.
Buyer's risks
Above, we have already described some of the risks that a buyer of a mortgaged apartment may face. What to do if at the verification stage it was not possible to find out the necessary details of the encumbrance?
If a minor is registered in the apartment
If it turns out that a minor is registered in the apartment, you should not give up and assume that he cannot be discharged until he reaches adulthood.
First of all, they find out the degree of relationship between the minor and the owner-debtor. It often happens that there are no direct family ties between them. For example, the father or mother of the child are cohabitants who are not in a registered marital relationship. In this case, the child does not acquire the right to permanent residence in the apartment and follows the fate of the parent.
It may happen that the parent of a child registered in an apartment owns residential property that meets the requirements for square footage and landscaping. In this case, it is considered that the child is provided with living space and there will be no obstacles to his discharge.
Last option. Many parents register real estate in the name of their minor children, although the latter, due to their minorities, live with them. A bankrupt parent or debtor who is the owner of a seized apartment can count on the fact that the apartment will not be seized and sold at auction because a minor is registered in it. It is enough to check whether the real estate is registered in the name of the minor. If it turns out that he is the owner of an apartment, house, or cottage, there are also no obstacles to checking out of the apartment being sold!
How to remove the arrest from an apartment?
Site Expert
Beloborodova Yulia
From 2004 to 2012 she worked as a bailiff. Specializes in the field of procedural, civil, financial, family and labor law.
Ask a Question
The decision to lift the arrest can only be made by the court that issued it. To do this, the debtor must obtain the consent of the creditor and justify the demand by the fact that the removal of the encumbrance in the form of arrest will allow the property to be sold quickly and more profitably, or to be mortgaged. Using the proceeds, pay off the creditor.
The second option when the debtor can apply to lift the arrest is early (before the auction) repayment of the debt. In this case, a payment document confirming the transfer of funds to the creditor’s account and the latter’s written consent to lift the arrest due to the absence of claims on the debt are provided as evidence.
The application is paid with a state fee and is considered in court. An appeal may be filed against the court's decision.
Purchasing methods
Buying an apartment from a bank is a very realistic way to purchase a home. Apartments sold directly by the banking institution themselves have a significant advantage - they are not subject to encumbrances.
The sale of a collateral by a credit institution means that its owner does not make payments on the mortgage, and the bank itself intends to resolve the debt issue on its own, without going to court.
In addition, when purchasing an apartment in this way, the buyer does not have to worry about the former owners. The sale takes place with their consent, which means there will be no attempts to return the property.
There are several options for purchasing such housing:
- the property is sold by the debtor independently - the sale takes place in agreement with the creditor. The bank provides the debtor with a specific period for selling the collateral real estate (standardly 3 months). In such cases, apartments are sold at market value, since the debtor wants not only to repay the debt, but also to make a profit. An exception may be a situation when the deadline for sale expires or if the buyer, citing the “problematic nature” of the apartment, begins to bargain;
- sale by realtors on behalf of the bank. The price of such a home depends on the price set by the real estate agency (usually 75-80% of the market price). For a credit institution, having collateral on its balance sheet is not profitable, since it needs to be paid for (for example, utility bills), so sales usually occur at a reduced price. The main task of the bank is to repay the debt;
- re-registration of mortgage. With this method, the property is not sold, but the loan itself is reissued. The bank or debtor finds a new borrower with higher creditworthiness. Employees of the organization re-register the agreement to a new person, who compensates the debtor for the contributions already paid and undertakes to pay the balance of the mortgage;
- sales through open bidding. The procedure can only be carried out after a court decision has been made to transfer the apartment into the possession of the creditor.
Features of bidding
The auctions are designed to respect the interests of the creditor and the FSSP, which is interested in reimbursement of the costs of organizing them. The will and interests of the debtor are taken into account last.
They can be carried out in absentia - by submitting applications to the electronic platform, the auction organizer, and in person, when interested people are present in the hall where the auction is held: bailiff, owner, potential buyers.
Electronic trading
They are carried out on electronic platforms, the list of which is approved by Government Order No. 1447-r, dated July 12, 2018. In this form, the sale of seized apartments is not practiced, since difficulties arise in verifying the purity of the transaction.
Articles:
How to buy real estate put up for sale by banks
What property can bailiffs seize for non-payment of a loan?
Inaccurate information about the property being sold
A significant proportion of disputes regarding bankruptcy auctions are related to the unreliability of information about the object of sale.
The notice of sale of the debtor's property must contain information about the composition of the property and its characteristics (Clause 10, Article 110 of Law No. 127-FZ). At the same time, an inaccurate description of the objects of sale may lead to a situation where potential buyers will not be provided with reliable information about the property, which may lead to a limitation of the circle of potential buyers (Resolution of the North Caucasus District Administration of May 29, 2018 No. A25-840/2013) .
