Cristina Boarnă, executări.com: The banks have only sold 10-20% of the goods put up for sale

• It takes four or five auctions to find buyers for the buildings put up for sale

• The buildings that banks foreclose sell at 25% below their initial price, whereas the ones sold by the Tax Administration, sell for half their price

Romanian banks seem to be increasingly affected by the drop in the ability of their individual or corporate customers to pay back their loans.

The arrears of the population and of companies have increased 6.52% MOM in April, to 11.099 billion lei (2.68 billion Euros), with a weight of 5.51% of the total volume of loans.

Banks are eventually forced to resort to foreclosures, after coming to the conclusion that restructuring the loans does not guarantee they would get back the amounts they lent out.

However, most of the time, the foreclosure process is extremely tedious, requiring several auctions for the sale of an asset, with the starting price for the auction dropping each time.

Radu Graţian Gheţea, the chairman of CEC Bank and of the Romanian Banking Association, said last week that foreclosures aren"t a good solution for banks: "Nothing gets sold or at least very few auctions conclude successfully, because there is no demand". The official of the RBA gave the example of an asset worth 830,000 lei in the county of Timiş, for which the proceeds from its sale could not even cover the expenses with the bank bailiff.

Cristina Boarnă, the developer of the project "executări.com", explains for the readers of "Bursa" the difficulties that bailiffs face when trying to sell the assets foreclosed by the banks or by the Tax Administration.

He said: "Over the last 2 months, it"s mostly apartments and homes in the county capital cities that got sold. The properties put up for sale get sold on the fourth or fifth auction. On average, between 10 and 20% of the goods auctioned off this year found buyers."

The local departments of the Tax Administration are seeing an increase in the volume of arrears collected. Generally speaking, the assets they put up for sale sell faster".

Based on the discussions with the partners of "executări.com", the number of auctions has nearly doubled in the first six months of 2010, compared to H1 2009, said Cristina Boarnă, who added: "In 2009, the troubled loans were rescheduled, but in 2010, some of them reached foreclosure, because they could not be restructured again.

There are situations in which foreclosure cases which were initiated in 2008 or 2009, reached their final stage only now, due to the tedious procedures.

Just like last year, banks avoid auctioning off the assets of the debtors, doing their best to get their money back through other means. The only time they resort to this kind of procedure is when it is the only solution to recover what their debtors owe them".

Banks auction off properties at prices 25% below their initially appraised value, whereas prices for properties auctioned off by the Tax Administration start 50% below their initially appraised value. "Foreclosures are governed by the provision of the Code of Civil Procedure, in the case of banks, whereas the auctions held by the Tax Administration in the country follow the rules of the Tax Procedure Code", said Mrs. Boarnă.

For instance, a home with a ground floor+first floor+attic with a plot of land of 407 sqm, located in the second district of Bucharest, sells for 460,000 lei, after being initially appraised at 989,739 lei, whereas an 800 sqm plot of land located within the urban built area in the county of Galaţi, appraised at 26,530 lei +VAT, now sells for 13,265 lei + VAT.

For a 5-room home in Brăila, appraised at EUR 68,600, a bank sets the starting price for the auction at approximately EUR 51,450.

Cristina Boarnă said: "As further examples, a type of tractor sold off by the Public Finance Administration of Movileni, in the county of Olt, appraised at 16,120 lei +VAT, the starting price of the auction has been set at 8,060 lei + VAT. Equipment, machinery and vehicles are very sought after, because the ratio between their price and their level of wear and tear is often very good".

Some of the properties put up for sale on "executări.com" have also included two hotels in Băile Herculane, which sold for 25% of their appraised value. Another example is that of a holiday home with a ground floor + attic, with a plot of land of 750 sqm, located in the county of Sibiu, which was appraised at 484,000 lei, which was sold for 363,000 lei.

In most cases, the apartments put up for sale are located in old blocks. However, houses that get auctioned off are either new, or in various stages of construction.

• Cristina Boarnă: "The clothing industry is by far the most affected"

Judging by the types of assets auctioned off on "executări.com", the apparel industry seems to have been hit the hardest. Cristina Boarnă said: "A large number of workshops in the regions of Moldavia and Oltenia were foreclosed upon". The representative of "executări.com" said that many pieces of equipment and machinery in the garment industry have been put up for sale recently. She added: "A large share of the total number of businesses that went bankrupt are furniture makers and companies operating in agriculture: farms, pig and poultry breeders".