Is it risky to buy a mortgaged property in Bulgaria?

Mortgaged property in BulgariaIt is possible to buy a mortgaged property in Bulgaria. This is exactly what many people do per a very simple reason – the seller can provide a deep discount. One can pay for the mortgaged property in 2 ways: with cash or using a credit. To avoid any possible risks, the lawyer advises to visit the bank which keeps the mortgage with the seller, to check all the details and to sign the preliminary contract.

Visit to the bank

Before concluding the deal, the potential buyer along with the seller needs to go the bank where the property is mortgaged. The issues which must be clarified are: if there are any restrictions for the sale, does the seller makes all the payments in time, are there any penalties or fines, what amount have already been paid.

If the owner doe fails to make payments in time, it is necessary to find out what interest is charged on a daily basis.

A preliminary contract

Before concluding the deal it is necessary to sign a preliminary contract – it is a document where an exact legal description of the property will be provided. Also it should state that the property to be bought is under a mortgage based on the law and that it is registered in the State register.

The preliminary contract should also include an information about the Notary Act which is a document confirming the ownership of the property in Bulgaria.

In the contract it also should be confirmed that there are no more credits linked with this property, neither there are limitations to the benefits of the third people.

The preliminary contract describes the the terms of the sales contract and a date of the deal. It should include all the details and nuances. After being signed, it must be registered in the Notary register.

The process is not complete yet. Based on the preliminary contract the seller must provide a guarantee letter with an amount of the credit received for buying the property. It might be useful to get a certificate from the bank indicating that for what amount a credit was issued to the seller.

As for the seller, he will have to confirm that upon selling the mortgaged property, he will do everything to cover the credit.

The preliminary contract should include the description of the sales procedure. It should look approximately like this: “An amount equal to N (the amount should be indicated) will be paid via the bank (the name of the bank should be indicated). The amount (to be written in letters) will be transferred to the bank account (the corresponding information should be indicated). The payment will be made in connection with the credit obligations of the seller.”

If all these important moments are not reflected in the contract (including description of the sales process), there is a possibility that the seller Если не отразить все важные моменты в договоре (включая описание «купли-продажи), то велика вероятность того, что buyer will have to pay for buying the property twice. Having prepared the document in the right way, you will avoid this risk.

If the creditor is a bank, the contract should include all the amounts connected the the credit separately: the principal amount of the credit, the credit interest and bank taxes.

Also in the preliminary contract it should be mentioned that a part of the amount should be paid to the creditor’s bank account an that the money will be transferred to this account until the credit is completely paid for. The account should also be used for paying any additional costs and fees connected with paying for the credit.

In case the creditor is a physical or a legal entity, the seller must provide the declaration about paying the credit amount in full as soon as the deal is completed.

The seller is responsible for collecting and preparing all the documents necessary for the deal.

Is is risky to buy a mortgaged property in Bulgaria

Is is risky to buy a mortgaged property in Bulgaria

Why is it more profitable to buy a mortgaged  property in Bulgaria from a bank?

Buying a mortgaged property from the bank is a more profitable decision than buying a property credited by some physical or a legal entity. One of the main reasons is that when you buy a mortgaged property from the bank, you do not need to take of the documents – the bank employees will prepare everything in the right way.

The deal will be absolutely clean. The bank carefully checks all the possible claims from the third parties (including inheritors).

The advantage of this deal is that the banks often offer very profitable prices. The reason is that they can not sell the property at a price which is a higher than the mortgage value. The value of the mortgaged property before the credit is issued is usually 50% lower than the regular market price. For example, the apartment costs 100 000 Leva, the mortgaged value would be 50 – 80 000 Leva. This very value would be indicated in the bank balance sheet and the bank would use it for the sale.


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