BECAUSE OF THE BIG PRICE DROP, Banks are in no hurry to foreclose mortgages

The latest alarming rumor on the real estate market concerns the foreclosures of homes bought using mortgages. Foreclosure occurs when a person does not pay its installments for three months in a row, and the bank is forced to put the house up for sale.

The officials of the company "EuroMetropola" claim that, luckily for people who can"t make their payments anymore, the banks have other plans than the speculators on the real estate market, who just can"t wait to benefit from the bargains offered by foreclosures. Realtors of "EuroMetropola" claim that no bank will rush to auction off a property just because those who took up a mortgage loan did so while the market was at its peak.

If bank were to initiate foreclosure proceedings now, and they were to auction off the homes, they wouldn"t even recover half of their investment. "Eurometropola" consultants provided as an example, in a press release sent to our editors, a two-room apartment in Titan, which cost around 95000 thousand Euros at the end of November 2007, or approximately 330000 lei (price calculated at the 3.5 lei/Euro exchange rate valid at that time). Right now, the same apartment would sell for as low as 65000 Euros. However, when converted to lei, the price would be around 280000 lei, which makes the price decrease not seem so dramatic anymore. This aspect does not favor the banks, because most of the real estate loans were contracted in Euros.

Banks have become more cautious lately and they prefer renegotiating a funding contract, rather than throw themselves into a market whose price limits are muddied by speculations.

"EuroMetropola" agents also said that a real estate owner that holds a 5000 sqm plot in the center of the Bucharest most likely has other plots of land outside the city and he would never sell his most valuable real estate property, no matter how strapped for cash he were. Prices for plots of land with good locations have remained steady, in spite of the economic crisis, "Eurometropola" experts said.

So far, the economic crisis has brought about opportunities, by causing prices to drop for older and newer properties alike. The players on the market, regardless of whether they are developers as well as individuals, have come to understand that the dropping number of transactions and the credit freeze are protective measures, rather than a consequence of the disastrous depreciation of the leu. Owners of plots, homes or retail spaces, as well as the general population, are betting on the accumulation of a new liquidity supply, that the banks will then turn into loans.