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The foreclosure room can't be auctioned either. In the past two years, Xu Hanlin, a lawyer at the Criminal Defense Center of Sichuan Mingju Law Firm, has witnessed the process of the foreclosure market from hot to cold, and the relationship between supply and demand reversed overnight. She has been in contact with and handled many cases related to foreclosure houses, and also bought a foreclosure house in 2021.
Behind the increasing number of foreclosure houses are countless owners facing supply cuts: Internet people in their twenties, almost with zero down payment on the car, almost facing foreclosure after losing their jobs. The foreman of the contractor who broke the capital chain was owed millions of project payments, and was compensated 10 sets of "unfinished houses" in the suburbs of Guizhou, and he could not be auctioned off at the legal auction. A family of six, because they guaranteed their relatives, their only house was auctioned off and had to rent a house.
The banks that originally had a tough attitude have also changed, and instead of forcibly repossessing the house and not being able to auction it out, it is better to grace the amount and term of loan repayment and "protect" the house with the owner. Third-party institutions under the banner of "housing protection" make profits through gray means, mudding the waters even more.
The following is Xu Hanlin's own statement:
Text | Xie Ziyi
Edit | Zhang relaxed
Operations | Kojiro
The skyrocketing number of foreclosure houses
As a mirror of the real estate market, foreclosure houses used to be sought-after.
Some people are willing to buy foreclosure houses at a premium of hundreds of thousands or millions, just to bypass the purchase restriction policy. There are also people who find foreclosure houses that are cheaper than second-hand houses by picking up leaks at low prices. The foreclosure house was once speculated to "purchase restrictions".
About 3 years ago, I fell in love with a house that I particularly liked. It was a garden house by the Jinjiang River, with a huge roof and a terrace, belonging to a long-established real estate company, which was equivalent to a welfare house for employees. I always remember that when I was in the elevator with an agent, the people next to me looked at me very wrongly. As a result, a couple in their sixties and seventies, wielding hoes and shovels at the door, expelled everyone who came to see the house.
It was clear that the old couple did not want to lose their house. Seeing that the old man was so resistant, I gave up. But there are a lot of buyers for a quality house like this. In the end, the house was still auctioned away by others, 2.8 million, which is basically about the same as the market price. The house must have been vacated eventually, but it is not known how it was done.
Every time I think of that couple, I feel a little helpless. The house was auctioned because their son was in business and took the house as a guarantee. In this case, the owner of the property is unable to repay the debt, and the creditor applies to the court to auction the property in his name to recover the debt.
I am good at criminal business in the economic field, and I have also rotated in the court as a judge's assistant, and I have been exposed to and handled many cases related to foreclosure houses, and I also bought a foreclosure house in 2021. In the past few years, I have witnessed the change of the foreclosure market from hot to cold, and the entire real estate environment has changed from boom to bubble bursting.
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When I first came into contact with foreclosures, I mainly engaged in criminal cases in the economic field, such as official duty crimes and economic crimes, which involved the disposal of huge amounts of assets, including many real estate to be executed. Later, more owners of foreclosure houses belonged to ordinary people whose economic situation had deteriorated. Unable to repay their mortgage or having no other assets to pay off their debts, their homes face foreclosure.
I have seen many owners whose houses have been auctioned off, and some of them have shown the courage to gamble and lose, while many of them have felt unwilling to understand that their hard-working houses are going to be auctioned off to others. Especially for some older people, they may only have this suite, and in the face of the results of the foreclosure, they will feel that the justice is unfair. There are more extreme ones, who will choose to refuse to move out on the grounds of physical problems or other reasons, and stay in the house without leaving.
During my rotation in the courts, I was exposed to some foreclosure case consultations. What impressed me the most was a family of six, the husband was an accountant and the wife was a clerk, but the wife lost her job and their house was about to fall out of mortgage. At the same time, they also made a guarantee to their relatives, and the house was mortgaged twice, and the other party failed to do business, owing more than one million yuan, and took their real estate as a mortgage. In this way, they owed money to the two banks, and they could only pay off the debt by auctioning off the house.
The wife, with a haggard face, came to the court to plead with me, saying that they only had one house and that the loan was about to be paid off. They didn't expect that just helping their relatives would end up in a situation where they didn't even have a house. I comforted her and told them they wouldn't be homeless. In the end, the suite was sold for 600,000. In addition to the money to be repaid to the bank, the court also applied for a rental subsidy for them, setting aside the family's rental rent for eight years.
In the transaction of foreclosure house, the court is an official disposer in the middle, and in the early stage of litigation, the court will review the case according to the lawsuit, make a judgment or ruling, and when it comes to the enforcement stage, it is responsible for the auction procedure. The court will generally cooperate with some professional platforms, such as the pricing of the house, will find Taobao and JD.com's appraisal agencies to make an appraisal value report, will evaluate the location and the degree of newness, and also refer to the market price in the same area and the actual situation of the house. After the completion of the transaction, the vacating of the house is the responsibility of the Executive Directorate of the Court.
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There are more and more foreclosure houses. I saw a data of foreclosure houses in cities across the country from January to May this year, and the number of foreclosure houses in Chengdu was 9,580, ranking second in the country. In Chengdu, the average discount rate of foreclosure houses this year is 73.45%, the transaction rate is only 26.32%, and the unsold rate has also reached 73.68%. This means that the market for foreclosure houses is already very sluggish.
As the number of foreclosures has skyrocketed, the demand for lawyers has increased, and the way things are handled has changed. The law firm has business cooperation with some local banks, and usually accepts the bank's agent, that is, to help the bank sue the defaulter. On the other hand, lawyers have also received a large number of inquiries, and the owners are hoping to obtain a "pre-housing" countermeasure. Banks will also feel that the repossessed foreclosure houses are not easy to sell, and they are more inclined to the owners to continue to repay their debts.
This is an interesting change, because in the past, when the banks were tough, our dedicated team would process thousands of complaints against landlords in batches a month. Now, if the bank wants to withdraw the cash as soon as possible, it will also put down its posture and hope that the owner will not cut off the payment, and begin to negotiate and mediate in a softer way. Generally speaking, if the customer has the sincerity and ability to repay, the bank has a policy to reduce the interest.
But I still witnessed a lot of "lying flat" confessions. When housing prices are hot, everyone has a mentality of chasing high, willing to keep their houses and keep valuable assets. Now that the real estate is in a recession, some people just put it up and think that nothing matters. Because I can't repay the money anyway, and even if the house is auctioned, it's not enough to repay the bank loan.
Struggling confessors
Just before 2022, the heat of Chengdu's property market was still very high, and many people with stable incomes and good expectations for the future were willing to increase leverage to buy houses. However, the market changes. They suddenly find that the value of their property has shrunk, and some people are facing financial difficulties and cannot even afford to repay their loans.
Probably after the epidemic, the wave of supply cuts began. If you classify this group of people whose houses are facing foreclosure, most of them are still people who have failed to do business and are unemployed. Others vouched for their relatives and friends, because other people's businesses failed and they were implicated. There are also some people who use high leverage to speculate in real estate investment, and as a result, tear down the east wall to make up the west wall, turn it upside down, break the cash flow, and smash the house on their hands.
Perhaps, Chengdu is also a microcosm of other cities in the country. Netizens ridiculed that they had to make 500 phone calls before they were allowed to leave, which was to say that many people were doing telesales.
Wages in Chengdu are not high, the local job market is not so prosperous, coupled with declining incomes and increasing unemployment, it seems that everyone's life has suddenly become difficult.
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There are many people in the Internet industry, the chip industry, or those who do education and training, they used to have relatively high salaries, and they bought very good houses in their early years, but because of their sudden unemployment, it was difficult to find a matching job, and the heavy mortgage overwhelmed them. In the absence of other savings, once the loan suspension exceeds the time limit, the bank will initiate the foreclosure process.
I have a friend in his twenties, who entered the enviable Internet "big factory" after graduating from graduate school, with an annual salary of more than 300,000 yuan. He picked a good 130-square-meter second-hand house in the south of Chengdu, about 3 million. At that time, I also increased leverage a lot, and when I first bought it, I used a very low down payment and a monthly payment of more than 10,005. was quite confident, but as a result, the company changed, he was laid off, and the young people didn't have so much money to plan, and the mortgage couldn't be repaid.
He was so anxious that he almost gave up the house. If you owe so much money, you either borrow from relatives and friends, or you continue to borrow from the bank. Later, he still felt that credit was more important, and there was still room for the house to retain its value, so he borrowed new money to repay the old, and then borrowed money from other banks to repay the loan, and lasted for a while in this way. After a few months, he found a new job.
People like this who are well-educated and have decent jobs are actually relatively resistant to pressure, and they will not fall into a very bad situation. But in fact, a large number of the defendants sued by the bank will not respond to the lawsuit and will not come to the trial. Because they really can't pay back the money, and they can't afford to hire a lawyer. They have no names, no faces. I didn't have the opportunity to meet them, I didn't have the opportunity to learn about their lives. I think this is the most common phenomenon, the more people at the bottom, the more they are not seen, and once they encounter difficulties, they have no power to fight back.
House prices have fallen, and sometimes, even the foreclosure of the house is not enough to repay the bank loan. A house that has been auctioned off is not a particularly high-quality asset, the valuation of the first auction is a 20% discount, and in the second auction, the price is 6% off, and if the auction is unsuccessful twice, it will be sold at a 5% discount. How many people can afford such a low discount?
Once upon a time, every family considered buying a house, and everyone believed that the house was a sure deal. Now, that belief has been shattered.
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Real estate as a whole is collapsing, and even how many people's savings have been lost. I have a client in Guangdong who spent more than 1 million yuan to buy a sojourn house in Tianfu New District, Meishan. Meishan Tianfu New Area is one of the two major Tianfu New Area planned in Sichuan Province, alongside Chengdu Tianfu New Area, which attracted the attention of many investors at that time. The land price itself is very cheap, real estate developers are running to develop, all kinds of marketing and publicity are particularly vigorous, many outsiders get off the plane, they are picked up by car and sent to see the house, and the house price was once speculated to 120,000 square meters.
That place is actually Renshou County, Meishan City, which is next to the southern extension of Tianfu Avenue in Chengdu. This straight avenue is the longest urban axis in Asia, running from Tianfu Square in Chengdu to Meishan. Its selling point is that it is very close to Xinglong Lake in Chengdu and has convenient transportation, but many outsiders only know that they live in Meishan Tianfu New District, and it takes one and a half hours to drive to the main city of Chengdu. Although Xinglong Lake is known as the "center of the future" of Chengdu, most of the time, people who live there do not often go there.
Now, the local houses have fallen to 4,000 to 6,000 square meters, and they basically can't be sold. Even search for foreclosure houses there, houses of 60-80 square meters, and the starting price is as low as more than ten or two hundred thousand.
Just like Japan's economic bubble, from the crazy buying of houses to the current loneliness, it does not mean that there is any mistake in the decision to buy a house, but that all the risks are borne by individuals. Ordinary people are the worst if they cut off their mortgages. Our country has not yet promoted the personal bankruptcy system, even if you don't want a house, the debt is your own. The interests of creditors are protected, and money owed is to be repaid. If you borrow money to buy a house, no matter how much the house price is discounted, you have to pay back how much money you have to pay back to the bank. After the house is sold, if you still owe it to the bank, you may be able to enforce other properties.
When I was rotating at the court, I had an aunt in her fifties who had been riding the green train from Inner Mongolia for more than a day, and when she arrived, she cried directly at the window. She is a retired teacher who owes some debts because of her business and has become a dishonest person subject to execution. The aunt held a bunch of materials and said that her WeChat, Alipay, and social security cards were all frozen, making it difficult to seek medical treatment. It is difficult to move an inch when she becomes a "lai", and she hopes to ask for money from those business partners, leaving enough basic living expenses and transportation expenses. Later, her application for grace was granted.
Society should establish more effective risk-sharing mechanisms to protect individuals from systemic risks. At the very least, those who are truly honest and trustworthy and willing to work hard and work hard can have the opportunity to make a comeback and eliminate those debts. A good sign is that Shenzhen has been piloting the personal bankruptcy system for three years. I believe that slowly, the whole country will also be cautiously promoted.
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Now banks are actually inclined to "guarantee housing" for those who have cut off their payments. Between the creditor and the debtor, everything can be sat down and discussed. I have a relative who used to be a contractor, because he had a tumor and spent two or three million to see a doctor, but he was really poor because of his illness. Unfortunately, the developer still owed him millions of dollars for the project, but the developer had no money, so he gave him 10 sets of step houses in the remote suburbs of Xingyi City, Guizhou Province.
This kind of house is equivalent to cement waste, which is not only unfinished, but also cannot be transferred, and cannot even be auctioned off. The market value of a house of more than 100 square meters is calculated at 600,000 yuan, and the French auction is more than 400,000 yuan, and it was sold at the second auction. The ownership of this kind of house is a bit problematic, and it is difficult to sell no matter how cheap it is.
In such a predicament, he did the project, and he also owed the bank an operating loan, so he could not repay the money. So his only home will also be auctioned. When I went to talk to the bank's clerk, the bank was willing to waive all the interest on him and only repay the principal, taking into account his special situation, and they gave a minimum of one or two thousand per month.
The bank's debts can be repaid slowly, and the medical expenses cannot be stopped, but as long as there is a little money, it is still necessary to continue to live. If it still can't be repaid in the future, that house will still not be able to avoid the fate of being executed.
"Housing security" agencies use gray means to make profits
In the beginning, foreclosure houses were not so well-known. The information disclosed on the Internet is still relatively closed, and in reality, only departments with investigative resources, such as the staff of public security, courts, and procuratorates, have access to the information of the foreclosure room. So generally speaking, it is those who have funds and happen to have some government connections, who can use foreclosure houses to do some business of buying low and selling high.
In 2016, Chengdu started the housing purchase restriction policy, which was the era of soaring housing prices. It was also from that time that the foreclosure house, which was not on the restricted purchase list, ushered in its spring.
A house is more than just a living space, it is also associated with a series of benefits, such as residency qualifications and educational resources. When people buy foreclosure houses, they can quickly obtain real estate in Chengdu, and obtain hidden values such as hukou and children's schooling. And the advantage of foreclosure is that at the moment of auctioning, the property right of the house already belongs to you, and you can get the real estate certificate quickly.
In order to circumvent the purchase restrictions, there were always people who were willing to spend more money, which also led to a serious premium for foreclosure houses at that time. I have a friend who spent 10 million yuan to buy a foreclosure house as a wedding house, and we both jokingly called it a "10 million mansion". In fact, the house was sold at a premium of about 20%. There are some Internet celebrity real estate projects in Chengdu that have also broken through the price limit through legal auction and sold their houses at high prices.
In order to sell the house, some people did not hesitate to use false lawsuits, such as pretending to owe money and not paying it back, turning their house into a foreclosure house, and then asking relatives and friends to raise the price, selling it at a price 30% or 50% higher than the market, and seeking a premium of hundreds of thousands or millions.
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This is also a headache for the courts. It is estimated that based on these considerations, on March 22, 2021, the foreclosure houses in Chengdu also added purchase restrictions.
Interestingly, when the foreclosure house was hot, some auxiliary auction agencies were derived to serve buyers, and their most "valuable" service was to vacate the house, and I heard that they would directly send 5 big men to other people's homes to persuade those who did not leave in a very social way. The auxiliary auction agency used to make a lot of money, and after the foreclosure house added the purchase restriction, their publicity point changed from the previous "no purchase restriction" to "low price".
And now, the supply and demand of foreclosure houses have changed a lot. On the "seller's" side, there are also special third-party agencies, that is, some legal consulting companies that help with debt planning. Under the banner of helping the owner to secure the house, they will do some business that we lawyers can't even imagine.
For example, negotiating with the bank to repay the debt is to use some means to harass the bank and report the lending company that cooperates with the bank. Because some microfinance companies themselves have problems with lending, and banks do not want to cause trouble, and their internal policies also want to withdraw funds, they will make some concessions. I've also heard of some of the more excessive methods of keeping housing, which is to invite AIDS patients to live in them. In fact, if you really want to spread the disease, you will also face criminal liability.
In the field of foreclosure, the addition of third parties and fourth parties such as auxiliary auction agencies and legal consulting companies will complicate the situation and muddy the waters even more. In the final analysis, they all use the information gap to make money, and since there is an information gap, there must be ways to create information barriers or coaxing.
Those who are facing a disconnection could have negotiated with the bank on their own to discuss how to reduce the interest or extend the repayment time. But the fact that the legal consulting firm sees these pain points, pretends that it has a special relationship and ability, and promises to negotiate successfully, is deeply rooted in the hearts of the parties. But in fact, they just use the same means of harassing the bank to reduce the interest, and then take a certain amount of money from the owner.
A person who buys a foreclosure property
The water in this line is too deep. Lawyers generally don't easily touch the foreclosure room, let alone ordinary people.
Some houses that are not completely broken will involve difficult negotiations with the original owner. After all, for us, buying a house is to live in, but for people, if they lose all hope, they have to rely on you, this is very troublesome. There are some houses that only after they buy them that they know that the title is defective. I've had cases where I've been in arrears for 10 years.
I bought the foreclosure house in 2021. At that time, I had just graduated from graduate school, and I originally gave priority to the government's talent housing, but at that time, I was covering the market, and the developer felt that the later I opened, the more I would grab. I was in a hurry, so I started to pick a foreclosure house.
The buying process is laborious, long and full of surprises. I have probably chased more than 30 sets of foreclosure houses, and there will be many people bidding with me in the middle, and everyone is in the mentality of picking up bargains. I remember that several very attractive houses I looked at were eventually withdrawn, because there are still people willing to keep the particularly high-quality properties.
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When bidding, everyone has a bottom line price in mind. But this thing is like gambling, and it can be a bit of a top when a lot of people are bidding to grab a house. Until the last minute, you don't know if anyone will continue to raise the price. A house with a starting price of 20 or 300,000 yuan, on the contrary, because of its low price, causes a kind of robbery. If someone is irrational and keeps raising the price, it is possible to finally auction 800,000 or 1 million.
In the end, more than 20 people signed up for the apartment I bought, and in the end, only three people competed together. We all use the smallest unit, 5000 yuan at a time, so to increase the price. I guess there is a big brother opposite, and he added 10,000 at once, and I felt that he was a little impulsive, and his gambling sex came up. To be honest, he added 10,000, not 100,000, this price will not scare me, but it will raise the price, and everyone will not get benefits.
My strategy is to add at the lowest price every time. And the way I raised the price may make the other party angry, all stepping on the last seconds of the countdown. They thought I was going to give up, but before the countdown was over, I was in hot pursuit. In that auction, the next few bids, the price of that house had reached my critical point, almost reaching a 90% discount. If I continue to raise the price, I may not be able to hold on.
Fortunately, after my last 5,000 price increase, the other two people behind the screen gave up.
The house was actually photographed by me. That day, I happened to be at a friend's house, and it was still difficult to be sure in my heart, as if I was about to have a connection with that strange place, I sent a message to my family to tell them that the house had been bought, but I still felt a little trance. More than one million, this is the largest amount of money I have ever spent on Taobao.
▲ Get the real estate certificate. Photo / Courtesy of the interviewee
The house was bought after the purchase of the foreclosure house was restricted, and in the end, it was still two or three hundred thousand lower than the market price, and the discount rate was about 89%. But as soon as I bought a house, I went to Panzhihua School of Administration. That year, the house price was already a little unstable, in fact, I could wait for a while before buying a house. So now that I think about it, I still have a little regret, and I vaguely feel that if I buy a little later, can I save more money?
It's hard to say whether the foreclosure house is worth the bottom or not. Until now, I will also go to the Home of the foreclosure house to brush it, I see the current foreclosure house in Chengdu, the discount is almost 7% off. Some houses in old neighborhoods are even discounted by 5%. Even so, foreclosure is a deserted situation. A few days ago, I swiped a 68-square-meter house located at the entrance of the double subway, which was originally more than one million, but now it is discounted to 600,000. This kind of house, which used to be very sought-after, is now sold out.
The value of the house, this thing is invisible and intangible. Perhaps, there is no rigid need to buy a house, housing is. Later, I returned to Chengdu because of a change in work. Owning my own property does give me a special sense of belonging in the city.
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Who knows. In the past few years, there have been many unfinished buildings in Chengdu that have been auctioned off because developers owe money to banks, so they have mortgaged their owners' houses. Now, the government has implemented the policy of guaranteeing the delivery of the house, and finally promoted the bankruptcy and reorganization of the house. Those who have a house can live in their own houses, those who have broken their mortgages also have the opportunity to negotiate to repay their debts, and those who want to buy a house still have time to wait and consider. Letting the market calm down is probably a good thing.
In fact, when it comes to foreclosure houses, seeing so many people who are deeply in debt, people who have lost their jobs, and people who are afraid to buy a house, it feels like everyone is trapped here. It would be a shame if everyone stopped and became cringe, and the wealth of society did not increase in value in the process. The market still needs to be liquid, which requires the linkage of the whole society.
(Excerpted from WeChat public account Daily People)