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Abandoning Your Morals or Just The Property?

Some of those buying Bulgarian property are facing unpleasant choices. Indeed some purchasers are even walking away from the contracts they have signed and property they have bought. As talks of coming out of recession start, there are still many in serious financial difficulties as the crisis unravels on their personal circumstances. This includes off plan buyers of Bulgarian property where completion is due and now cannot raise the mortgage needed, buyers whose Bulgarian developers have delayed projects and holiday home owners keen to sell who can no longer sustain their mortgage repayments or personal financial situation back home.

You may be, or may become, one of the number who want to walk away from your  property or the contract. How do you feel about abondoning your moral obligations and can you walk away from your debts? Every situation is different and we recommend all readers take professional independent advice before making any decisions. If you find yourself in financial difficulties, the most important thing to do is get advice straight away and don't ignore the situation. We take a look at the possibilities and the potential implications.

The Bulgarian property boom

The availability of cheap finance encouraged the huge acquisition of overseas property, particularly as a holiday home investment. At the top of the market there were only 20% of overseas buyers using their own money to finance the purchase. In some instances deposits were paid on credit cards! Remortgaging back home, mortgages to 100% and amazing 'guaranteed rental returns' were common place.

The crisis

With the bursting of the global property bubble, many can no longer continue with their purchase and others are unable to sell in order to get out, leading some to just walk away from their contract or property.

Walking away from the property

So, you hand the keys over to the bank. Is that the end of it? Lenders are able to come after you for their money by obtaining a judgement in Bulgaria or pursuing a European Enforcement Order for Payment. Recover does not necessarily have to be expensive for them. No doubt they will weight up the pros and cons of chasing you but if you have decent income and equity back home, then it is possible they may decide to pursue.

Walking away from the contract

In the main, if you trawl any of the forums, it seems as if, sadly, most people never took independent financial advice and did not have a lawyer acting in their own interests. Some developers must have been rubbing their hands in glee when the majority happily used the lawyer they recommended, allowing contracts to be biased in their favour.

Delays in completion of projects is encouraging some buyers to try and pull out of their preliminary contracts. Even on completed developments, some are trying to walk away at the last minute. In many cases this is simply because prices now are less than they were, meaning the property is worth less than the original price agreed or they may be unable to raise a mortgage.

Buyers in this situation should be aware that they may not only lose their deposit but could be in for a worse financial situation, depending upon the clauses in their contract. It is essential if you wish to walk away, that you obtain independent legal advice and find out exactly what your contract says.

Posters on many forums seem to freely give the advice that buyers will only lose their deposit, even if they walk away when there are no building delays. However, with a preliminary contract, you have signed to complete on the property transaction. If you fail to complete, this may lead to the developer looking to you for the amount agreed in the contract.

Moral issue

Whilst it may stack up financially to walk away from the property, is it right to do so? If you've signed a preliminary contract or signed for mortgage repayments, there is the moral thinking that you should honour your agreement.

It is true to say, that if a developer is experiencing financial difficulties to complete a project and a large number of off-plan buyers walk away, those that remain with the developer are likely to be in a worse situation. This may lead to prices decreasing further, leaving your fellow man in a harder situation than before.

Are you walking away because you are unable to continue, or is it simply just because you don't want to go on? Most buyers were happily convinced that prices would always go up, take a huge profit and, of course, never would have dreamt of giving any part of this profit to the bank. Yet, it seems as if, now, because prices have gone down these same buyers are quite happy for the banks to take the loss, yet those losses are being covered by you, the taxpayer. Again, too many foreclosures stacked up on the banks' books can also lead to prices taking a further downward trend, affecting others who are also experiencing hardship.

Morally, walking away is the choice remaining only when there is no other.



- Get independent legal advice immediately
- Consider the implications if your developer or lender may decide to pursue to recover their monies
- Be aware that your credit rating could suffer if you are pursued
- Talk to the developer

- Talk to your lender
- If you can sit on the property and wait, then do so but be prepared to wait for up to three years

The only upside to the current situation is that the idea of property as a pure investment to make a quick stack of money has disappeared.