Bank Repossessed Properties – What to Watch Out for When Buying One

It’s hard to ignore the fact that bank repossessed properties are sometimes significantly cheaper than those sold at market prices. It can be an enticing opportunity to acquire such properties, as relatively affordable apartments or houses in good locations can be obtained. At least, that’s the theory. However, if it were this simple, everyone would buy properties this way. There are several details that add nuance to the situation. If you’re aware of these, studying this market might be worth it.

List of Bank Repossessed Properties

You can view the list of bank repossessed properties at real estate offices, by appointment. Here, you can familiarize yourself with the main parameters: the size of the property, its condition, number of rooms, layout, etc.

The downside is that this can be a bit of a “lottery”: in some cases, the property cannot be viewed in person, and there may be few photos of the interior. This is because these properties are usually sold under pressure, and often still occupied; the owner defaulted on their loan, and therefore the bank takes possession of the property, house, vacation home, etc.

The process thus differs somewhat from the traditional procedure. Often, it doesn’t look like the typical scenario where you browse a website, contact an agent, then decide after a personal viewing—though sometimes that’s not out of the question.

Auctions and Moratoriums

According to the Hungarian Court’s Enforcement Chamber website, there are currently around 313 properties up for auction. While this doesn’t sound like a lot, keep in mind that a loan payment moratorium has been in place since March 2020 for those affected by the coronavirus pandemic.

Although the moratorium was initially meant to apply only for 2020, through several extensions, it remains in effect until the summer of 2022 for those who wish to take advantage of it. This naturally means fewer bank-repossessed properties are available.

Bank Properties – What You Should Know About Them

The sale of bank properties can occur in three main ways:

1. The property is already owned by the bank. In this case, the good news is that the transaction will be straightforward, as the former owner no longer has any connection to the property. The downside is that these properties often require a lot of investment, as the former residents usually take everything they can move, and sometimes even intentionally damage the property. Costs may also arise from reconnecting utilities, and nowadays, these properties are not always as cheap compared to market prices.
2. The bank and the owner have agreed on the sale. Here, there are generally no major complications, as the owner usually understands their situation and knows that selling is their best option, so they don’t tend to block the process. This is a regular transaction, and typically, all debts, including utility arrears, can be settled with the payment. However, the downside is that the borrower may not cooperate and could even damage the property before moving out.
3. The borrower is the owner, and the bank is selling the claim. This is the worst option. The borrower is likely to be uncooperative, and here we are not purchasing the property itself but the claim. In this case, we won’t be able to view the property in person, and the responsibility of clearing the property will fall on us, which could involve years of litigation if the borrower doesn’t cooperate. This is the cheapest category but also the one with the most pitfalls.

Bank Repossessed Properties in Budapest

Of course, there are plenty of bank repossessed properties in Budapest, but it’s worth considering the previously mentioned points. Not every case offers properties significantly below market prices, and if it does, it’s likely that we are buying the claim and not the property itself, which comes with many additional problems to resolve before it truly becomes ours.

For this reason, experts recommend purchasing bank repossessed properties mainly if immediate use isn’t urgent, such as when the property is intended for investment and not for quick occupancy, and it’s not a problem if the property requires extensive renovation.

Real Estate Investment – Why Choose This Option?

Currently, real estate is considered one of the best investments, as property market prices have been rising sharply for years. This means that if we buy an apartment, it is likely to be worth significantly more within one or two years than the amount invested, so it’s clearly a good idea to invest in real estate.

While the value of the forint is steadily declining, and cash savings are being eroded by inflation, investments like bonds generally don’t yield enough returns to compensate for this, whereas real estate investment is clearly profitable.

Commercial Real Estate Investment

Real estate investment isn’t limited to residential houses and apartments: commercial properties are also worth considering in this context. These can include offices, warehouses, and retail spaces, which can also be acquired through defaulted debts and can bring long-term profits for their owners, especially if they are located in prime locations.

How to Start Real Estate Investment?

Naturally, you need some initial capital for this, but credit is not a bad option either in this case. Many people mistakenly think that loans can’t be obtained for bank-repossessed properties below market value, but this is not true. They can be refinanced if the new owner’s circumstances don’t exclude it.

It’s important to know that, with a few exceptions, real estate investment is generally not the type of investment that yields quick returns. So, if the goal is to become wealthy overnight, this might not be the right choice. However, over the long term, real estate is not only likely to maintain its value but also increase in value, so it’s definitely a sound investment.

Government Bond Investment or Real Estate?

Many people recently invested in government bonds due to the favorable returns, but with the current inflation rate, this no longer seems as profitable. The housing market, however, is still thriving, so if you have capital, it’s still worth considering real estate investment.

Baby Expectancy Investment: Government Bonds or Real Estate?

The baby expectancy loan, introduced in 2019 for free use, was taken by many for investment purposes. Most people invested it in government bonds or real estate—even those who already had a home of their own often opted for real estate.

The purchased property can be rented out, making it self-sustaining. And when it’s time for the baby to buy a home, it will likely be fully paid off, giving a significant boost to starting life.