Bank Owned Properties
Bank owned properties to issue valuable movable or immovable property as collateral testifies to the seriousness of the borrower’s intentions and the high level of his reliability. According to the data of the American Bank, about 63% of the main commercial banks are issued loans to enterprises and individuals on various terms. This indicator testifies to the significant impact of the lending activities of financial institutions on their level of profitability. Collateral is one of the few instruments that allows you to issue loans on relatively safe terms.
Sale of collateral by banks
In addition to providing a guarantee of the funds’ return, a number of other, equally important functions are assigned to the collateralized property:
- stimulation of the loan return issued by the bank;
- provision of a real opportunity to return funds by using certain mechanisms for imposing foreclosure on collateral;
- acts as a deterrent to the growth of credit debt initiated by the debtor from other creditors.
- allows you to quickly adjust reserves in the event of a delay;
- helps to minimize the risks of early withdrawal of assets by the borrower.
Sale of pledged property of banks
The most pressing problem of working with collateral is the determination of the objective appraised value of movable and immovable property, which is used as security. The main difficulties arise due to the lack of a mechanism for an assessment procedure in the legislation, in accordance with specific pre-defined norms. The necessary requirement is written down in the Federal standards governing the appraisal activities of accredited specialized companies. For a credit institution, an appraisal of collateral is the only basis for calculating the amount and terms of a loan. For the borrower, appraisal is a way of objectively expressing the value of the property belonging to him, therefore, both parties are interested in carrying out the procedure.
Valuation of collateral in a bank
Most banks use a system for calculating the collateral value that has been worked out for many years. The final result is calculated as the amount that is actually received after the sale of the asset minus the costs of selling and collecting the collateral.
Professional experts carry out the assessment procedure in stages:
- First, the market value of the object at the current moment is determined. For this, a careful analysis of existing proposals is carried out with reference to a specific region and certain characteristics of the object.
- After receiving the initial amount, it is adjusted by making a forecast regarding the price change for the possible date of the property sale.