Risks of bankruptcy trading: what do you need to know about it?

What can you buy at auction?

Almost any property that can be owned by legal entities and individuals. Most often, legal entities go through bankruptcy proceedings, and ordinary people have to work with banks and bailiffs who sell property according to their own procedure.

At bankruptcy auctions you can find

• office furniture, office equipment
• production equipment and machinery for agriculture
• apartments, commercial premises and land plots
• cars and trucks
• special equipment

Collection of an apartment for debts

The old law is still in effect. It will function until a new one or amendments to the old one are adopted. Part 1 Art. 446 of the Housing Code of the Russian Federation notes that collection of an apartment for debts is prohibited, provided that the family has one and is not under a mortgage. There is also no right to seize a plot of land with the only property built for residence.

The law described above is considered fair. But there are frequent cases when a debtor abuses the norm. It doesn't pay loans. At the same time he lives in luxury. For example: a family with one child lives in a luxury house with its own tennis court and swimming pool. My father does not officially work and has no other property. At the same time, he does not send alimony to two children from his first marriage, about 6-7 years old. Having taken out a car on credit, he does not pay the amounts agreed upon with the bank. Bailiffs do not have the right to insist on the sale of their luxury home or part of the land to repay the loan or pay alimony.

But it is possible to collect debts from an apartment that is under mortgage. The premises can be taken away immediately and this will be a legal action of the bailiffs.

Pitfalls of bankruptcy auctions

Before purchasing property, you need to find out its legal purity. Are there any encumbrances on it?

For example, an apartment put up for auction may be inhabited by former employees of bankrupt companies who, under no circumstances, want to leave their place of residence. You can also often stumble upon rent arrears of several thousand.

There are cases when a child is registered in an apartment purchased at an auction and cannot be evicted.

If you still have problems with an already purchased lot, then you should contact the police with a complaint about unauthorized entry into your house, for example. But there is no general algorithm for action in such situations.

According to lawyers and experts in this field, it is best to act according to the law “On Enforcement Proceedings” (clause 12, chapter 5, article 30). According to it, residents have five days to voluntarily vacate someone else's property.

In any case, there will be frozen lots, so to protect yourself as much as possible - start with small amounts, participate in auctions in which all documents are in order, the lots are available for viewing - there are also many of these

When can they pick up housing?

The most dangerous thing for indebted citizens is the seizure of housing (physical). In this case, a protocol is drawn up and witnesses are required. The premises may be sealed. After collection of debts, the apartment is transferred for evaluation and sale. There are certain exceptions regarding the seizure of property. They are presented by Art. 446 Code of Civil Procedure of Russia. This:

1. Presence of mortgage debt (housing serves as collateral). In this case, the lender takes the premises on the basis of the agreement. He doesn't need a court decision. First, a procedure is carried out to seize property. The amount owed cannot be less than 5% of the market price. Also, the violation of the deadline must be less than a quarter.
2. Arrest, confiscation due to malicious failure to fulfill obligations of all real estate objects of the debtor (alimony holder). The process is carried out according to the law. The bailiff carries out a preliminary procedure to compare the amount owed and the price of housing.
3. Debt of money to housing and communal services for utility bills. The loss of a single apartment (arrest) due to debt is possible when the monetary debt is equated to the cost of the residential premises. The defaulter can be evicted according to a court decision (this is permissible for non-privatized property). The premises are transferred to the municipality.

An example of a hidden lot at a bankruptcy auction

For example, quite recently I came across an apartment in New Moscow, which was being sold at a public offer for the assignment of the right to claim under a DDU agreement. At the same time, the house was already completed and the residents received the keys.

The only reason why this apartment was not seen in the Moscow region is that the debtor was in another city and the lot was included in the search in another region. The apartment itself was sold at about 30-40% below the market.

When you know such nuances, finding similar lots is not difficult.

Main myth - The coolest lots at auction are bought by relatives and friends of arbitration managers

Anyone can become a participant in the auction. There is an opinion that the most liquid lots are bought by managers or their acquaintances for next to nothing. But this is not so, the auction is organized according to a fairly transparent scheme. And if a participant suspects the arbitration manager’s dishonesty, then he can file a complaint against him. If any illegal manipulations are detected, the bankruptcy trustee may face serious problems.

Auctions are held at certified venues, often with a closed bid submission form . This means that until the end of the next stage, none of the participants in the procedure, including the arbitration manager, will see the proposals.

If the submission form is open, then all participants see proposals from their competitors, which also makes it impossible to manipulate the results.

Preparing for the auction

The procedure for preparing for bidding. At this stage, the bankruptcy manager declares bankruptcy of a legal entity or individual and puts the property up for auction. Relevant messages are published in local and federal media (newspapers, magazines). In addition, the same message must be published on the Unified Federal Portal of the Register of Bankruptcy Information.

After this, the bankruptcy trustee determines the cost of the object and auctions are scheduled for its sale.

All information about the bidding and the start of accepting applications appears on the bankruptcy information portal, in the authorized media, as well as on electronic trading platforms where the bidding will be held.

Refusal to participate in the auction

A significant violation of the procedure for conducting the auction may serve as a basis for declaring the auction invalid. In practice, there are situations when the auction organizer unlawfully refused admission to participate in the auction for the sale of the debtor’s property.

In this case, the court may recognize the auction as conducted with violations, and the actions of the auction organizer, who limited the circle of potential buyers, influencing the results of the auction, as unlawful.

The court has the right to determine the actual winner of the auction (resolution of the Far Eastern District Court dated November 11, 2019 No. A16-1799/2016).

Three stages of bankruptcy auction

Preparations are complete. Now let's look at the stages of the bankruptcy auction itself.

The first step of trading is to go up. The cost of the lot is approximately 5-10% of the starting price. Often it corresponds to its market value.

At this stage of the auction, property is purchased extremely rarely. Almost 85% of such trades are considered invalid.

Stage two. After the failed first stage, the lot is put up for auction again. At the same time, the price of the object is reduced by 20-30%. But again, trading is going up. If there is no winner at this stage, the debtor’s property is put up for sale through a public offer.

This is where the fun begins for the investor.

The third and final stage of the bankruptcy auction. If in the first two stages there was an increase in price, then on the contrary, the price of the lot falls over a certain period of time, and several times. If the property is not purchased within a week or even a day, then the value of the property will fall by 5-10%. And there may be several such periods, from five to ten.

The procedure for reducing the value of the object is determined by the bankruptcy trustee. Information on the procedure for reducing the price can be found in the description of the public offer.

Who conducts the public auction

It is important for the buyer to know who is selling the property; its value and the size of the discount depend on this. Real estate can be sold by creditor banks, the Federal Bailiff Service, and municipal authorities.

FSSP

FSSP is the Federal Bailiff Service. Bailiffs sell real estate that has been collected as a result of enforcement proceedings during bankruptcy proceedings. These may be collateral apartments or other housing of the bankrupt (if it is not the only one). The object of sale may be other real estate: a summer house, a plot of land, a garage. The financial manager evaluates the property, then it is sold through public auction.

Banks

If a borrower fails to repay a mortgage or other loan secured by real estate, the bank has the right to sue and recover the collateral through the FSSP. The property is then put up for auction and an auction is held to sell it. The starting selling price is determined by the appraisal company.

Credit organizations can sell collateral without a court decision. To do this, the following conditions must be simultaneously met:

• real estate serves as collateral for the loan;
• the borrower repeatedly violates the requirements of the loan agreement;
• the borrower agrees to sell the property.

In this case, the property is sold without an auction. The cost is determined by agreement between the buyer and seller in consultation with the lender.

Municipal authorities

Authorities can organize auctions for the sale of municipal property, including real estate that is subject to privatization, was transferred to the municipality by court decision or under social programs.

Example

On the Mossotsgarantiya website you can purchase an apartment at a reduced price, which is sold through the Capital Department. When concluding a life annuity, pensioners receive an increase in their pension, and their apartment is sold at auction after death. Since pensioners' apartments usually require good repairs, they are put up for sale at a good discount from the market price.

How is the winner determined at the last stage of the auction?

More recently, the winner could be the participant who applied first. But this method did not justify itself, because many automatic systems (auction robots) appeared. As soon as the next stage of cost reduction opened, the robot immediately submitted an application for the participant. It was only necessary to adjust it to the price range.

But due to recent changes in legislation, the organizer himself chooses the criteria for determining the winner. Either according to the old system “who is first”, or in a new way (who offered the highest price).

To avoid any misunderstandings later, you need to clarify with the organizers from the very beginning how the winner will be determined. During the bankruptcy auction, keep track of all changes to avoid unpleasant surprises.

If you don’t want to waste precious time monitoring the auction, then you can hire a person who has already participated several times and knows all the intricacies. But, of course, you have to pay for his services, sometimes a lot of money.

How to purchase an apartment or other real estate at public auction

You can buy real estate at public auction through an auction or through bank websites.

On the auction

Notices of auctions and competitions for the sale of property by official bodies are published in city media, on the websites of municipal administrations, and on Internet aggregator sites.

Official Internet sites where you can find sales notices:

• Official website of the Russian Federation for posting information for bidding
• Rosimushchestvo
• FSSP website

Websites where current offers from auction organizers are collected:

• ROSELTORG
• ETP RAD
• RUTORGI

The notice contains the parameters of the object, the initial cost, the date, place and time of the auction, the form for submitting applications, and the list of documents required for submitting the application. The buyer searches for information about future auctions independently.

Today, all auctions are conducted electronically through specialized Internet platforms. To participate in an electronic auction, you must first go through several stages:

1. Purchase an EDS certificate. Electronic digital signatures are ordered from Certification Centers. The list of accredited centers is posted on the Bank of Russia website. To obtain an electronic signature, you will need documents: passport, INN, SNILS, legal entities additionally provide an extract from the Unified State Register of Legal Entities, a certificate of registration, powers of attorney for authorized persons. Production time is two days. The cost of an electronic signature is from 1200 rubles. in year.
2. Be accredited on the Electronic Trading Platform. Information about the electronic platform where the auction will take place is placed in the notice for the auction. The following documents will be required: application, passport, TIN, SNILS. Legal entities provide statutory documents and a current extract from the Unified State Register of Legal Entities. Registration period is up to five days if all necessary documents are available. The registration procedure at federal sites is free. If you seek help from specialized companies that help with accreditation, obtaining an electronic signature and can represent your interests at auctions, the service will cost from 3 thousand rubles.
3. To be admitted to the auction, the participant must make a deposit. Its amount is indicated in the notice - usually up to 5% of the initial value of the property. The transfer is made from the card to the account specified in the auction documentation. If the bidder wins the auction, the deposit will be debited to the seller as an advance. If you lose, it will be returned to the participant.

Procedure for purchasing real estate at auction:

• you find a suitable property in the advertisements or on the websites listed above;
• go to the electronic platform specified in the notice and go through the accreditation procedure;
• select a lot, pay a deposit and submit an application for participation, attaching the necessary documents;
• documents are verified (up to five days), after which you will be sent a notification about admission (or non-admission) to the auction;
• upon receipt of admission, bidders may pre-inspect the property if this is provided in the notice of the auction;
• no later than three days after the participants are identified, auctions are held;
• if you are ready to buy real estate at the initial cost, declare this;
• if there are several buyers, bidding begins to increase the price.

If you are the winner, you will receive a protocol by email indicating the priority right to purchase this property at the price approved at the auction, with the date and place of concluding the real estate purchase and sale agreement.

If the winner changes his mind about buying an apartment, the deposit paid will not be returned to him, and the property will be offered to the participant who took second place. The date and place of conclusion of the contract can be changed by agreement with the seller.

In cases where there is no buyer for the property, the auction is declared invalid. The starting price for the property is reduced by 10–15%, a new notice is submitted and a re-auction is held. If the property is not sold, an auction is held to reduce the price. This procedure applies to all auctions, regardless of the organizer.

Example

1. An apartment worth 5 million rubles is up for auction. The auction was declared invalid as no bids were received.
2. The cost of the apartment is reduced by 10%, and it is listed for 4.5 million rubles. If there are bidders at this auction, they increase the price by the auction step. The winner is the participant who offers the highest price.
3. If the auction is again declared invalid, the apartment is put up for sale through a public offer. The auction organizer sets the price of the property at 4.5 million rubles, participants submit proposals at what price they are willing to buy the property: 3 million rubles, 3.5 million rubles, 2.8 million rubles. The winner is the participant who offered 3.5 million rubles.

Participants who understand the stages of bankruptcy auctions have a great chance of acquiring assets at the best price.

Directly through banks

If the debtor voluntarily agreed to sell the mortgaged apartment (or other real estate), and the declared price suits the buyer, the parties can agree to purchase the property directly, without participating in an auction. In this case, the bank does not sue the borrower and bankruptcy proceedings are not initiated. It is important for the creditor that the debtor repays the loan by any means.

A list of collateral with the characteristics of the objects and the method of sale, which banks sell, is available on their official websites, for example, Sberbank, VTB, UralSib Bank.

The initial price is set at the average market value of real estate in a given region. But it can be reduced by agreement between the buyer and seller if this suits the lender.

For example, the VTB website contains information about the sale of an apartment in Moscow:

The ad contains the address of the property, its area, and the number of rooms. You can contact the seller and negotiate a price by phone or email.

You can purchase an apartment using your own funds or take out a mortgage from a bank (the same bank or any other).

If the borrower is against the sale, the bank files a lawsuit and the property is sold at auction according to the general procedure.

This method of buying an apartment is simpler, but it is less profitable, since sellers rarely give a good discount from the market price.

What can you do with the acquired property?

If the item is in excellent condition, then you can keep it. Thus, improving your financial condition. For example, real estate can be rented out and receive cash flow from it. In addition, you can pawn it and get money out for the next auction.

After purchasing the property, you can sell it in its original condition for a better price and make good money. But it’s worth assessing liquidity before participating, not after!

If this is an apartment, then you can either make cosmetic repairs and resell it, or rent it out. By the way, the last option is very profitable.

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