What are Mortgage Auctions and what are their benefits?

Mortgage Auctions

Many of us have seen in real estate portals or on social networks properties at prices below the market and that are offered as “mortgage auctions” or “transfer of rights” but few of us know about the subject, we explain in a simple way what they consist of They are properties that were acquired through a mortgage loan and when a person stops paying their loan, the financial institution by law can claim the property and put it up for auction to recover the debt, this is what is known as a mortgage auction. Foreclosed properties can decrease in price by as much as 60% of their true market value and retain, or even increase, their equity.

Acquiring a property in Mortgage Auction is an economical option to create or increase an equity.

The cost of a property at auction will always be less than its market price, that is, its commercial value, which is precisely the characteristic that makes the sale of these properties a more attractive option for buyers, either as an investment. to later sell the property at its commercial value and thus obtain a significant percentage of profit, put it on rent and generate income, obtain excellent investment returns or simply to acquire a home at a more accessible price.

The amount, of course, will depend on the characteristics, location and conditions of the property, however, said price can be 30 or up to 60 percent less than the value they could have in the market since this is set by means of a judicial appraisal.

One of the advantages of buying real estate at a foreclosure and a great benefit is undoubtedly that of obtaining your house at a price and that therefore may be at a greater scope according to your possibilities, or that it can mean a significant capital saving that you can use for a remodeling or expansion of your home.

Some points to consider when acquiring a property through a foreclosure are:

  • You must have the total amount of the property price, since it must be paid in cash, no type of credit is accepted.
  • You must cover all applicable taxes.
  • You must wait for the operations to be completed to be able to take possession of the property, according to the procedural stage in which the trials are found, it can vary from 6 months to more than 1 year.
  • You cannot visit the house before purchasing it, you can only know it through photographs or plans.
  • The success of these operations will depend on a judicial resolution.
  • If there are payments that are not up to date such as property, water or other services, it will be you who will have to take care of the debt.
  • Buying a house at foreclosure is a time consuming process, therefore, you must be very patient and not take risks.

Below we explain in detail what a contract for the assignment of mortgage credit rights consists of

It is the document by which a person or real estate institution that has a loan in their favor, called the assignee creditor, transfers the right to collect that loan to a third person, called the assigning creditor. Once this document is signed, the transferring creditor acquires the right to collect the credit that the transferring creditor has in favor. It is important to know that the purpose of this transfer of rights is to buy a property, it must be notarized before a notary public.

Within the contract there are three participants:

  1. The Assignor: It is the person who will be the creditor of the right to collect the loan in order to obtain immediate liquidity.
  2. The Debtor or Borrower: This is the natural or legal person who must comply with the payment of the loan. It is not usually part of the contract for the assignment of credit rights, however, it is important to notify you when the assignment is made, who will be the new creditor and the object or property that will be left as collateral, since until you are notified, does not assume the obligation with the new creditor.
  3. The Assignee: This is the person or real estate institution that will assign the credit collection rights to the person who needs it.

To assign the rights of a loan, the requirement that must be met is the signing of the loan assignment contract. However, it is necessary to inform the debtor about the assignment.

In order for the property to be viable to be acquired by transfer of rights, it must have a simple loan contract with mortgage guarantee, this contract is the document by which a person receives an amount of money (mortgage loan) that will be used for the Acquisition of a house or apartment and the same house or apartment acquired will serve as a guarantee to pay the credit in case of not complying with the payment obligations on the part of the transferor.

We highly recommend going to experts in the field when acquiring a property through a mortgage auction, since the purchase and sale of a real estate through this process requires a review of many aspects to ensure that your investment is viable.

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