Thursday, December 1, 2022

Selling with a loss

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By Karola Grünenbaum

Have you ever heard of the expression “Banks give you an umbrella when the sun is shining and when it rains they are taking it away.”? You must have heard of it. For me it brings a bitter smile on my face, because I know it is true. I have lived through it by experience – I had numerous clients over my 16 years of experience as real estate agent, who went through this rainy period in their lives. And each time it is very dramatic on a personal level. As a professional I stay cool and say and do the right things at the right time. However, in my heart I know that compassion is only a patch on a deep financial wound.

Although, I must admit that there is some good news concerning the residential housing market. The property prices finally stabilized! These are magic words in everybody’s ears who own properties.  Residential property prices were down with just 0.5% in January 2014, compared with a year earlier. Exactly this is showing that property prices have now stabilized, says the CBS (The National Statistics Office) last week. Month on month, there was a slight rise of 0.4%. However, one of every five homes that are sold, are being sold with a loss. This has been a serious development and it might give you better insights in the saying “When it rains – it pours!”.  In those cases the owners have received a lot less than what they have paid for.  This has been published beginning of February 2014 by the NOS based on research of the ground-book (Kadaster).  The result of the research was as such, 17.913 residences were sold for less than they were bought for. That is 40% less than in 2012. The damage is quiet big. 20% of all properties which were sold with a loss, the damage was bigger than € 40.000. Usually people who are selling their properties are involved in a divorce and sometimes the damage is even over € 100.000, leaving the parties with a huge debt.

Not everybody is so lucky that they can go to a real estate agent and agree on a price and conditions to sell their home.  There are plenty of people how HAVE TO sell their residences. In 2013 this has risen by 27% compared to 2012. According to the Foundation of Housing (Stichting Waarborgfonds Eigen Woning) the direct increase was caused by the price drop, the growth of unemployment and the number of divorces. The average loss per home ran in 2013 up by 11% until about € 38.877.

To give you a clear picture on forced homes sales over the past 5 years:

2009 = 763 homes

2010 = 1.336 homes

2011 = 2.005 homes

2012 = 3.552 homes and in

2013 = 4.522 homes.

The banks really don’t like to sell homes off through an auction and that has 2 selfish reasons. One is that they are suffering from image-loss. Yes, you heard me – image-loss! We are not talking about the image of the poor sod who is just about to loose his home, his base, his safety heaven – we are really talking about The image of the bank. And then of course is the financial point, which will be written off in the books as a loss. The second reason is that an auction provides a higher loss (much more over €20.000) than a private sale through a real estate agent.

Despite the fact that the housing market is recovering this year, even more people will have to face a forced sell of their properties. The expected numbers will raise in 2014 from 5.000 to 55.000 according to Mr. Karel Schiffer, Director of the Foundation Guarantee Fund Own Properties (Stichting Waarborfonds Eigen Woning; WEW). He also stated “We hope that the recovery in the housing market continues, however, we are still taking into account that this year the prices might drop further. It is a very exciting year.” Personally, I think Mr K. Schiffer is taking a canon to shoot a mosquito. This can go into all directions. There is a big difference between 5.000 and 5.500.

My conclusion, the proof of the pudding is in the eating.



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