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- Payment expectations: home sellers began to issue installments themselves for the secondary
Payment expectations: home sellers began to issue installments themselves for the secondary
Sellers of apartments on the secondary market have begun to massively provide installment payments for buyers, realtors told Izvestia. The share of such transactions has reached 10%, and their number has doubled or tripled. Thus, sellers can earn up to 25% of the cost of the apartment in addition. The trend is related to the difficulties of purchasing housing with a standard mortgage, experts say. However, in such a scheme there are significant risks for both the seller and the buyer — in order to avoid them, it is necessary to specify all the conditions in the contract of sale. For more information about the installment market for secondary payments, see the Izvestia article.
How to sell an apartment in installments
In a number of Russian cities, about 7-10% of objects on the secondary market are sold using installments from the owners of the objects, experts told Izvestia. At the same time, from 40 to 50% of owners are ready to provide such a payment method.
Installments are a form of payment in which the buyer pays the value of the property in installments over a specified period, explained Valery Tumin, Director of the Russian and CIS Markets at fam Properties. Unlike mortgages, ownership of housing usually passes to the buyer only after full payment, and during the installment period, the object may remain owned by the developer or seller.
In most cases, such offers are less profitable for the buyer than paying for cash immediately, said Marat Vorobyev, founder of Vorobev realty Group. For the seller, such a scheme is an opportunity to sell an apartment faster at a higher price than in a regular transaction, and for the buyer it is a chance to purchase housing without a mortgage, especially if he has problems confirming income or a bad credit history.
Recently, many sellers have started offering installments in response to high mortgage rates, Valery Tumin added.
— The trend is confirmed. This method makes housing more affordable for buyers," the expert said.
On average, installment sales allow you to earn up to 25% more for apartments than with a one-time payment, Regina Dydalina, executive director of the federal company Floors, told Izvestia.
"The prolonged period of high key interest rates has led to the fact that real estate sellers have become more likely to offer installments when selling their apartments, both free of charge and with interest accrual for its provision," she said. — Such a sales tool has become particularly interesting for those who sell investment apartments, as well as for buyers who are at the stage of selling their real estate, but already want to move to new housing.
For comparison, with a mortgage of 4 million rubles for a period of 3 years, at a rate of 28%, the monthly payment is 165.5 thousand rubles, and the overpayment for the entire term of the loan is 1,956 million rubles. If the seller is ready to provide installments for the same amount and term, at 15% per annum, then the monthly payment will amount to 138.6 thousand rubles, and the overpayment will not exceed one million rubles.
"The popularity of installments is not only due to the high mortgage rate," the expert added. — Some sellers are willing to provide installments for more than a year in order to reduce their tax base in the current period in order to avoid paying taxes at an increased rate. They receive part of the amount in the first year of the transaction, and the other part in subsequent years, and thus the annual income remains at an acceptable level for the seller.
However, there are still few people willing to accept such conditions, says Alexander Chernokulsky, director of Zhilfond. The majority of transactions in the secondary market are related to relocations: people exchange housing to leave with their children, or buy a more spacious apartment for a family, the expert noted.
— There really is such a trend, but I would not say that this is a massive phenomenon. There were installment deals on the secondary market before, before the protective key rate, which now encourages people who need housing to look for various complex schemes," he noted.
Similar calculations also happen in transactions involving maternity capital or various types of certificates, which are now quite a lot on the market, added Yulia Dymova, director of the Est-a-Tet Department of Secondary Real Estate.
— Installment transactions are also found when buying real estate by flippers (one of the types of investment and ownership of real estate in the short term), but in this case, a preliminary purchase and sale agreement is concluded, and the PREP itself is executed only if the buyer has the full amount to pay, - the expert explained.
What are the risks of an installment plan for housing
The main part of sales in the secondary market is occupied by so-called alternative transactions, said Irina Zyryanova, Vice President of the Russian Guild of Realtors (RGR). That is, when one object is sold in order to acquire another. In such chains of transactions, installments will most likely not be applied, since then the new facility will also need to be paid in installments.
There are risks in such a deal for both sides, Marat Vorobyov added. For a buyer, if he is not sure of his financial situation in the future of one or two years, there is a danger of being fined and losing his home. And for the seller, who risks not receiving payment for the apartment.
"Therefore, both sides should carefully consider the documents on the transaction, contacting lawyers and realtors who will help minimize risks and protect the interests of both sides," the expert noted.
Such transactions are quite vulnerable for the seller, because you need to protect yourself from the buyer if he fails to meet his obligations or turns out to be simply unscrupulous, emphasized Alexander Chernokulsky.
— What, for example, will stop him from reselling the object and fleeing with the money to an unknown destination? — the expert suggested. — It will be a big problem to collect debts from such a buyer. To safely conduct an installment payment transaction, you need subtle work and legal support throughout the entire length — from the transaction to the full settlement. And if the buyer still does not pay in full, it will be necessary to initiate a slow procedure for the sale of collateral.
The risks lie directly in the fact that in case of non-fulfillment by the buyer or seller, all issues will be resolved only in court, Yulia Dymova said. An out-of-court procedure for resolving such issues is impossible in 95% of cases.
Olga Piskayeva, the Vice-president of the Russian Geographical Society, agreed with her.
— If you correctly draw up a purchase and sale agreement with clear dates and encumbrances, then this is a working payment method, - the expert added. — But there is a danger for both the buyer and the seller. If the buyer loses his ability to pay? Should the seller or buyer die? How will the issue of heirs be resolved? Only by the court.
The question remains, which measures of responsibility from the court's point of view will be permissible and proportionate, Irina Zyryanova said.
— What will be the amount of the fine or the percentage for delay, whether sellers will be tied to the key rate or practice will develop some other mechanism, — she noted.
However, installment transactions are quite legal and are regulated by Russian civil law, Vadim Tumin recalled. It is important that the contract clearly states all the conditions, such as the price of the property, the payment schedule and the consequences for violating the terms. At the same time, the property remains as collateral with the seller until full payment.
According to him, installments cannot completely replace a mortgage. This is rather a short-term solution that is not suitable for all customers. Mortgages remain a more profitable option for long-term financing of housing purchases, especially taking into account various government programs and more favorable conditions for long-term loans.
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