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Private individuals can make online bid at foreclosure auctions

In the near future, private individuals will be able to make online bids for homes at foreclosure auctions. 

That will reduce the risk of homes being sold at a price below or far below the market value, and it offers private individuals greater opportunities at auctions. This is laid down in a bill submitted by Minister Opstelten to the Dutch Lower House.

It is mostly dealers that control the market and that often keep the price low. Banks suffer losses and the former home owners are left with a residual debt, because the proceeds of the auction are not enough to pay off the mortgage in full. The Minister wants to change that.

The civil-law notary determines via which website buyers can make bids. Online auctions must be secure, accessible and reliable. It should be impossible for bidders to manipulate the procedure, and back-ups must prevent any auction data from getting lost. Moreover, interested parties should be able to see at a glance what homes are about to be sold in a foreclosure auction. It is not until someone wants to put in a bid that they are obliged to register. After that the bids are entered.

Online bidders can follow the auction in the auction room. The system precisely records the bids made, the identity of the bidders and the time at which they are made. In the auction room, the online bids are also visible. An online auction can take place simultaneously with an auction in the auction room, but may also take place separately.

The civil-law notary checks via an internet application whether the bidding process runs orderly, and whether or not everybody who wants to make a bid has equal opportunities. The preparations for an online auction do not differ much from those for physical auctions, such as the information provision to debtors and buyers and the simultaneous announcement of the auction.

To improve the position of private buyers, it will be made easier to view a home before the auction. Presently, buyers often do not know what the condition of the property is until they have acquired it. In the future, the home owner or the lessee will have to cooperate in viewings as soon as the bank decides that it is going to foreclose.

Another obstacle is uncertainty about whether or not the property on offer at an auction is occupied by tenants. That puts off private buyers. Therefore, it should be clear before the auction whether or not it is a tenant-occupied home, and if so, after which period the tenants will have to vacate the property. The bank will be responsible for this. Under the new rules, a tenant will have a maximum period of three months to vacate the property, instead of the maximum one-year period that currently applies.

At present, any damage to the property after the auction sale but before the registration with the land registry is the risk of the private buyer. Very few are prepared to take that risk. Property dealers do so more readily, because they can set off any loss made on one property against the price of other properties they acquire or own. Buyers at an auction will be better protected, because they will not bear the risk until after the registration, on the condition that they can demonstrate when the damage was caused. This could be done with e.g. the help of photographs taken during the viewing.

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