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Is it possible for a bank to prevent you from selling your apartment at a logical price?


milky 13 | 1,657
2 Apr 2013 #1
Met a guy last night who bought an apartment in Swiss francs 5 years ago for 300,000 zloty. He now wants to sell it for 200,000 because he is in the sh1t due to the present exchange rate. However, the bank were he got the mortgage will not allow him to drop the price from 300,000 zl. So he is caught between a rock and a hard place. This might explain why the bubble is deflating so slowly. Is it possible for a bank to prevent you from selling at a logical price?
jon357 71 | 20,799
2 Apr 2013 #2
If they have a charge on the property they can prevent a sale.

Explains a lot though, doesn't it?
Marek11111 9 | 816
2 Apr 2013 #3
it is the story of banks having assets on their books worth x amount but in reality is worth much less but as far as bank is concern is worth x and that shows they have more assets then liabilities so the bank is solvent and the executives can get bigger compensation but the reality is that the financial system is on verge of collapse and yes bank can dictate the amount of money you can list the apartment for, special if you do a short sale.
Harry
2 Apr 2013 #4
Why would the bank let him sell it for less than he owes them?!
jon357 71 | 20,799
2 Apr 2013 #5
Exactly. If he had the funds to make up the difference, he'd have deposited it already, wouldn't he.
Marek11111 9 | 816
2 Apr 2013 #6
Why would the bank let him sell it for less than he owes them?!

obviously he put no money down or got the interest only loan and is obligated to bank for 300k.
AmerTchr 4 | 201
2 Apr 2013 #7
it is the story of banks having assets on their books worth x amount but in reality is worth much less but as far as bank is concern is worth x and that shows they have more assets then liabilities so the bank is solvent and the executives can get bigger compensation but the reality is that the financial system is on verge of collapse and yes bank can dictate the amount of money you can list the apartment for, special if you do a short sale.

Not quite.

Assuming the bank/mortgagee holds a lien on the property (almost universal unless you purchased the property on a purely personal guarantee), they probably can't stop you from trying to sell your property for a price. They CAN stop the sale from being completed until and unless you re-negotiate the terms or are prepared to pay off the mortgage per your contract on completion of the sale.

Before you giggle too much at how stupid that is, you need to back up a step or two.

There are alternatives here for both the bank and the man.

1. The man can sell his apartment simply by going to the bank and declaring his intention to sell it at market price and pay the difference which will pay off the mortgage as originally allowed for as an early payoff in the mortgage agreement/contract. If I was the banker, I would require him to put the expected difference in an escrow account pending the sale. Any offers he gets would require either depositing more money into the forfeiture account or getting the banks agreement to accept a loss. The bank will make the sale conditional on being the recipient of the proceeds then close the escrow account by withdrawing the balance to pay off the loan, refunding any credit for additional payments during the sale process.

2. The man and the bank can attempt to re-negotiate the loan for lower value or (bank's second choice) give the bank all of the proceeds from the sale and then carry the balance as a personal loan, possibly providing other forms of security or payment(s) in kind.

3. If the bank was silly enough to NOT have the man personally liable for the loan but only has security through a lien or chattel arrangement, then the man can say okay and give them the property. Then walk away and never look back.

People do this sort of thing every day. Sometimes both parties agree to it, sometimes one party is forced by the other and sometimes both parties are forced by contract conditions, or triggers, to do so.
OP milky 13 | 1,657
2 Apr 2013 #8
Explains a lot though, doesn't it?

it sure does.

Why would the bank let him sell it for less than he owes them?!

Well, the amount he pays monthly has doubled as he got in francs.As i said he is in the sh1t.
I wonder is this happening all over, banks holding it back and creating the stagnation.
Marek11111 9 | 816
2 Apr 2013 #9
1. The man can sell his apartment simply by going to the bank and declaring his intention to sell it at market price and pay the difference which will pay off the mortgage as originally

if that is the case bank would not stand in way as they would get all the money lend to borrower.

2. The man and the bank can attempt to re-negotiate the loan for lower value or (bank's second choice)

that means bank will lose assets on the books so it it no started for the any bank.

3. If the bank was silly enough to NOT have the man personally liable for the loan but only has security through a lien or chattel arrangement, then the man can say okay and give them the property. Then walk away and never look back

that is probably what needs to happen but bank can take the person to court, the property will be in foreclosure for years, bank will sit on it till the price will rise to 300k.

as i said banks will not take a lose willingly it has to be force.
AmerTchr 4 | 201
2 Apr 2013 #10
the property will be in foreclosure for years, bank will sit on it till the price will rise to 300k.
as i said banks will not take a lose willingly it has to be force.

This (renegotiation and acceptance of loss) happens everyday in the US and I am pretty sure it is the same here as well. Banks take losses everyday. The only "force" either party is subject to on renegotiation (other than pre-agrred triggers) is the realities of the marketplace unless you have some crazy regulation otherwise.

Foreclosure can go on for years but the man is no longer paying the note.
jon357 71 | 20,799
2 Apr 2013 #11
Well, the amount he pays monthly has doubled as he got in francs.As i said he is in the sh1t.

Getting a mortgage in a currency you don't earn is extremely foolish. Pure gambling. As I remember, when the zloty fell against the euro and the CHF, the Financial Times described the Polish mortgage crisis as an act of collective stupidity, which it was.

It affects the market even today.
jwojcie 2 | 763
3 Apr 2013 #12
Foreclosure can go on for years but the man is no longer paying the note.

Please note that in Poland there is no "walk away" option as it is in some USA states. As long as a debtor is solvent there is really not much incentive for the bank to renegotiate. What is more, depending on the agreement it is possible that debtor cann't repay his debt earlier without an additional fee. Besides taking into account current CHF rates it seems that it is absolutely unprofitable for a debtor to repay his debt sooner. So on the one hand you have a Bank unwilling to renegotiate, on the other unprofitable CHF rates... in that situation debtor is stuck with a property.

Just for the record, most of mortgages in Poland are in PLN, though FCY mortgages have significant share.
AmerTchr 4 | 201
3 Apr 2013 #13
You guys have a lot to learn about what banks will and will not be willing to do.

How do you think banks fail? They are in business to make money, not provide public services (wait until you discover credit unions). When the market reaches sufficiently widespread turmoil, the banks have just as much incentive to negotiate away from disaster as the individual.

Yes, "walk away" has a price unless you were lucky enough to have someone/institution not require a personal guarantee. You'll take a hit on your credit, possibly have assets seized, perhaps sustain a judgment on future earnings or, face a bankruptcy. This is mentioned above.

If you are solvent, then of course you should pay your bills and get through it if possible. If you are wanting out for some reason (go back and read the OP) then pay your exit costs according to the contract you signed and move on. The bank did nothing wrong as long as the contract was legal.

The point you aren't getting is that when YOU decide to stop paying because of perceived circumstances (value of property, exchange rate fluctuations, loss of income, financial crisis (personal or societal), etc. there are going to be consequences. That is what the guy in the OP wants to avoid but has to face up to eventually. The consequences may be great or small depending on the banks competence and his motivation/eagerness/necessity/whatever to get out from under the mortgage.

Many people, even a few bankers now and then, think there is no renegotiation. Call their bluff.

When you deposit a million zl in the bank they like you, when you owe them a million and they are facing a substantial loss, then they're even nicer.

There's no such thing as a free lunch. - Milton Friedman
jwojcie 2 | 763
3 Apr 2013 #14
Thanks for the lecture preacher... but the point is that the guy in the OP is stuck with the property and you are making false analogies between Polish and USA banking systems... Yet just another difference is personal bankruptcy which is almost not existent in Poland - it is in the law for some time, but it is very hard legal process - which can be described shortly as: you have to be rich to bankrupt in Poland... In order to "call their bluff" the OP guy would have to go on a dole, till then they will shear him like a sheep.
AmerTchr 4 | 201
3 Apr 2013 #15
Maybe next time he'll think twice before signing a mortgage agreement.....?

Maybe not.

Just had a quick talk with my accountant and I'm actually impressed by the quick overview of bankruptcy in Poland. It does take place for both businesses and individuals and calls for strict accounting as to assets and liabilities

You guys are lucky to have a strict system that views non-payment of contractual obligations seriously. That should make your retail banking system stronger than some of the western ones which lost sight of reality by over-extending and -valuing of various assets (including integrity) securing loans.

Well done Poland!
Harry
3 Apr 2013 #16
You guys have a lot to learn about what banks will and will not be willing to do.

You seem to forget that the Polish and US legal systems are not identical.
AmerTchr 4 | 201
3 Apr 2013 #17
No, I have a pretty clear understanding of that.

You sign a contract and don't fulfill it, you pay a price.


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