The auctions, they say, should be organised on a larger scale and be made more accessible to individual buyers. Analysts foresee that the recession will increase the number of foreclosure auctions, and recent research reportedly suggests that prices at foreclosure auctions are substantially lower than on the free market.

When a homeowner is no longer able to meet his financial obligations, the bank/mortgagee can decide to sell the mortgaged property at public auction, also known as a ‘foreclosure sale’.

Many forced sellers are understandably reluctant to leave their homes and often do not cooperate with the sale - for instance by refusing viewings. Sellers are not obliged to cooperate, even though it is obviously in their interest to get the highest possible price: the higher the selling price, the lower the residual debt.

The fact that there are no viewings means that prospective buyers must make bids without having seen the house inside – and few individual buyers are willing to risk buying a pig in a poke…

What’s more, with auction sales the buyer is required to hand over an immediate bank guarantee of 10%, there is no escape clause if the buyer fails to obtain finance and delivery must take place within one month after the auction. In the present conditions, it is virtually impossible for banks to help individual buyers meet these onerous financial obligations. In fact, in the current situation it is often not even possible to get a valuation report on the purchased property.

As these same banks also often lose out if the selling price at auction is too low and the previous owner is not able to repay the residual debt, it is obvious why banks are so keen to change the auction set-up in order to get a better price. It’s an interesting move and we will be watching their plans very closely.