Distressed property and bank repossessions

Zoie Hawker of Fine & Country Carvoeiro looks at the reality of distressed property and bank repossessions on the Algarve real estate market

Over the last few years the most common request most estate agents in the Algarve have received from potential buyers is for distressed properties or bank repossessions. And no wonder, everyone is looking for a bargain and the truth is that there are vendors who need rather than wish to sell and likewise there are plenty of properties on the market that have been repossessed by the banks. I have quite some experience with such properties having worked as an estate in the Algarve since well before the beginning of the economic downturn and the truth is that most of the bank repossessions on the market do not represent particularly good value for money. More often than not, the time lapse between the property being repossessed and finally finding its way to the books of local estate agents results in villas falling into a serious state of disrepair.

I remember a particular case of a large property that was on the market for a good few years and appeared to represent outstanding value for money. That was until potential buyers turned up to view the house to find that it had been stripped of everything right down to doors, windows and bathroom fittings. It was nothing more than a large shell with an overgrown garden and the price being asked by the bank, which did not even come close to covering their exposure on the loan, was simply too high considering the investment needed to restore the property.

The problem with many bank repossessions is that the banks in many cases would rather leave the properties on their books at inflated prices than suffer a big “hair cut”. There are some exceptions, but in most cases it is far easier to negotiate with an individual vendor than with a large financial institution.

The best deals on the market in reality are, more often than not, resale properties owned by people selling for personal reasons and not necessarily in a distressed situation. I have seen many cases where vendors are forced to try and sell their properties to avoid the bank foreclosing on them but have seen very few such situations result in a sale. The fact is that many estate agents use distressed properties and bank repossessions to lure in potential buyers and then sell them something else.

At Fine & Country we have a policy of selecting only quality properties for our portfolio. There are bargains to be had amongst them, and indeed some older properties that are in need of work. But we are not in the business of wasting our client’s time showing them properties that we know will not be of real interest.

The best way to find a bargain is to let your estate agent help you identify a property that meets your requirements and decide how much you would like to pay. Ask your agent if the offer is reasonable enough to put forward, in most cases we have a good idea as to how low our vendors are willing to go and in the interest of both buyer and seller, our aim is to secure a mutually satisfactory deal.