Minutes after 12:00 hours on March 25, the auction of a total of eight packages of properties began in the offices of JLL Auctions, with which financial institutions seek to monetize properties that people could not pay and, thus, have resources to continue offering their services.
“We started with auctions where the majority of our assets were foreclosed properties. Today, the auction contains, more or less, half of properties foreclosed from financial institutions, and half are totally regular properties, from portfolios; they are individual properties ”, explained in an interview Héctor Klerian, deputy general director of JLL Mexico, before the offers for these assets were announced.
“A bank auction is when a bank gives a mortgage loan – it means that there is a property involved – and the borrower did not pay the loan and the bank sued for the guarantee, which in this case is the property,” explained Samuel Montañez , academic from the Faculty of Business at the Universidad Panamericana (UP).
In this auction, the fourth one carried out by JLL together with Moratus under the coordination of Dorantes, 8 offers were received, seven electronic and one physical –in a sealed envelope-, seven for packages and one for three properties of a package. that in the latter the traditional procedure was not carried out, but the offer was presented to the owner for his consideration.
The reference prices ranged between 816,000 pesos and more than 18.5 million pesos (mdp). The offers presented, read before the notary public Javier Robles, ranged from 450,000 pesos to almost 3 million pesos.
“There were seven maximum bids. I think four or five are going to be sold ”, estimated Héctor Klerian.
Between the reference price – the commercial value of the property – and the offer of the participants in the auction, there is the base sale price, which is the minimum cost of sale, explained Klerian.
“That minimum sale value is a number that the sellers give to the notary and that is known at the time of opening the offers. That gives a lot of transparency to the process because I don’t know what the minimum sale value is, the owners give us that ”, said the deputy general director of JLL Mexico.
Sometimes, depending on whether it is an irregular property or not, that is, it has legal pending or payment of rights, it is possible that they are sold with discounts ranging from 20% to 50%.
However, it is not an alternative for all types of investors, “preferably for specialized investors, from medium upwards, with expertise in solving real estate pending,” said Javier Dorantes, managing partner of his company Moratus, a firm specialized in the monetization of assets (auctions), and master in Government and Public Policies of the UP.
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There are two types of auction: hammer, where participants are offering different amounts until they have a winner. And a sealed envelope, where you can only make one offer per package; participating for several packages if they wish, but with a single offer in each one, and the amounts are not known until the call is closed.
The closed envelope auctions, noted Dorantes and Klerian, pay for transparency, equity of participation and fair and clear rules of the game, since no participant knows what the others are offering, the base price or the minimum sale price.
recommendations
Before participating in an auction it is necessary, Dorantes and Montañez agreed, and taking into account that these are high amounts and terms that can range from 6 or 8 months to two years, or more, take into account the following recommendations to minimize investment risk.
1. Advice number 1, said the experts consulted, is that a bank auction is not for those who are looking to buy a house to live in, but for professionals in the real estate sector, with experience in the market.
2. Team of lawyers and notary: they are the ones who represent the buyer; They estimate how much property is owed, the appraisal, among other pending that may be in the real estate.
“Do not enter without professional supervision. There are offices specialized in auctions ”, recommended Javier Dorantes. “The notary and your lawyer will help you make the first analysis of how the property is: taxes or duties that are owed –water, property-; They will also tell you if the property is free of liens and, therefore, the lawsuit is not going to get stuck “, added Montañez
3. Time: It is a process that can last from 6 months to two years, or more, agreed Samuel Montañez and Javier Dorantes.
“You are going to rent, you want to sell, but to sell you may have to remodel and do various things. So we are talking about that you will not have liquidity for years; or if you are going to rent, it will take years to recoup the investment, ”said Samuel Montañez.
4. Risk: Auctions are not considered high-risk operations, however, it must be taken into account that it may delay being able to sell a property.
The properties are offered in packages. “It can happen that, once a package is reviewed, you say: I have already reviewed (this package) and it was done badly in one case and well in 15 cases. What they do is make their offer, taking that loss into account; when you minimize risks together, ”said Dorantes, who coordinates the group made up of Moratus and JLL Subastas to carry out auctions.
In the event that the judicial process has not been carried out correctly, the authority may rule in favor of the borrower and the investor would lose said property. Hence, specialists recommend that the process be initiated by a large bank or financial institution.
5. Additional expenses: It is necessary to take into account that a new deed has to be generated or it is necessary to take possession because it is not resolved or granted. Therefore, in addition to the hundreds of thousands of pesos or millions of pesos for the purchase of real estate, these additional expenses have to be considered
Market innovation
In the wake of the crisis caused by the coronavirus, new ways have been sought to keep business moving, and the real estate market is no exception.
“Today, in these auctions, an individual bidder can come forward and make an offer for a regular property that he can title and occupy very soon. You can also continue to offer for properties that have a significant discount, in which specialized groups are looking to buy these portfolios, ”Klerian highlighted, noting that both types of properties are displayed on the JLL Subastas page.
“Today the Mexican real estate market is in a moment of transition or analysis due to many things: the pandemic, the economic conditions in Mexico and the world. So, sellers are looking for creative schemes, so we are doing these new methodologies, trying to get what the market is asking for ”, he added.
