We are watching the auction scene closely and will update the information here as and when necessary. In the mean time if you have any questions please contact us.
Property Auctions
It had to happen. Latvian banks have been re-possessing property for a while now.
Initially they were holding and selling privately but as the rate of
re-possessions has increased they needed to find a faster way to recover their cash, so property auctions Latvian style have become established.
As with any auction armed with the right information and due diligence there are amazing bargains to be had.
An owner may have 'inherited' an apartment after the soviet occupation at no cash cost and then may have mortgaged it to the bank for 20 years to buy a new car, have a holiday, subsidise his childrens schooling and now in 2009 lost his job in the economic crisis in Latvia. His apartment may be valued at 50k Euros or more and the bank owed 20K Euros. It may sell at auction for 30k Euros. The bank recovers their money and the owner receives about 6k Euros after costs. Unfortunately there are many such scenarios.
Auction Guide
On the left is a portion of the first page of a seven page auction guide. This lists all property auctions planned to be held over the following three months.
This particular page shows apartments mostly located in Riga, brief details & location. Also the location and date of the auction and the person responsible for further information. It also indicates if the property has been at auction previously and not sold, along with a guide price and where possible a recent valuation amount.
In our opinion the market value of this apartment in 2009 is at least 35k Lats
This listing is for a 50 m2 pre-war (brick) apartment on Slokas iela, Riga. It is the first auction for this apartment and it was held at the end of January on Caka iela Riga. The guide price was 17,200 Lats
This apartment was sold on the day for 21,500 Lats
Although we were not able to view this particular apartment internally, if it had needed a full refurb., this could have been carried out for around 7k Lats.
That would be a total investment including all costs and refurb. (if required) of under 30k Lats (approx 42,600 Euros).
In these troubled economic times we are confident the achievable rent would be at least 180 Lats/month making a gross yield of 7.2%. The rental market is currently depressed and we are confident of increased rentals in the future which will greatly improve the yield on a property like this.
Auction Procedure
There are two possible procedures. One an entrance fee - you need to register and buy a bidders 'ticket' to be admitted. This can vary in price from around 20 to 100 Lats depending on the prestige, number of lots and location of the auction. Countryside and land auctions are usually held this way. You need a 10% deposit of cleared funds for any lot bought, to be paid immediately. This usually means cash!
The second procedure is more usual in Riga and more daunting! You must deposit cleared funds to cover 10% of the valuation put on the property you intend to bid on. This can be cash, or a bank letter of credit held by the auction house and returned after the auction to unsuccessful bidders. This must be arranged before you are allowed into the auction! At least this way you know every bidder is genuine and serious.
In either case a successful bidder will sign a pre - purchase agreement agreeing to pay the balance within 30 days with loss of deposit if this is not fulfilled.
The Pitfalls of Buying at Auction
There are of course dangers to buying at auction, probably more in Latvia than the UK!
There is no substitute for thorough due dilligence when buying any property anywhere. As a prospective buyer, you must ensure the seller has the right to sell and the property really is vacant. There are simple procedures to follow to ensure these points. We can of course help if buying this way is of interest.
Using the auction information in another way
Buying at a property auction in Latvia can be a little un-nerving and not always necessary to get a bargain! Usually the bank or government is selling the property to recover debt. The property has not been 're-posessed' as in the UK and legal ownership has not passed to the bank. The system allows the owner to pay his debt before the auction and have the property withdrawn (sometimes at the last moment!). In some cases it is possible to find and talk to the owner of a property to be auctioned and come to an agreement allowing him to pay his debt (if this is less than a realistic purchase price) and coming out of the situation with a little cash, thereby saving the auction company's percentage.
Please note that the information on this website is not regulated financial advice, which recommends any specific course of action.
Property values can of course decrease as well as increase. No express or implied income claims are made on this website. Riga Property Services HVS take all reasonable efforts to ensure the information published on this website and communicated elsewhere, written or verbal is accurate, current and complete in every respect at the date of publication or communication. However no warranties, guarantees or representations are made or implied as to it’s accuracy.
