A newly built apartment in Godeok New Town in Pyeongtaek, Gyeonggi Province, recently went up for public sale for 10 million won. The recent market price for this apartment is about 480 million won. The reason the minimum bid for this property is far cheaper than the market price is that the owner filed for personal bankruptcy and the bankruptcy estate put it up for public sale. Although the minimum bid is 10 million won, the final sale price for this property is expected to be determined by adding the 416.42 million won senior mortgage set by the bank to the bid price.
Recently, more apartments are coming to the public sale market through bankruptcy estates. As the economy worsens, debtors pushed to the brink are filing for personal bankruptcy, and properties are being sold off in the process of settling debt.
According to Onbid, the public sale platform of Korea Asset Management Corporation (KAMCO), on the 25th, bankruptcy estate apartment sale notices have recently been posted. A KAMCO official said, "Onbid is an open platform, and bankruptcy estate sale items are also being listed."
According to the judiciary's monthly statistics, there were 33,752 personal bankruptcy filings from January to October this year, up 0.6% from the previous year (33,550). With the effects of high interest rates, high inflation, and a strong dollar persisting, more people are filing for personal bankruptcy, and properties such as apartments sold through bankruptcy estates are expected to increase further.
For listings coming to market due to bankruptcy, bid prices tend to be lower than typical court or public auction items. Bid prices for bankruptcy listings are set below appraised value because the asset liquidation proceeds quickly to repay debt early, and there are often actual occupants or complicated title relationships.
An apartment in Manan District, Anyang, Gyeonggi Province, also had its minimum bid set at 10 million won in a sale run by the bankruptcy estate. If the apartment is won, the buyer must assume the debt tied to the senior mortgage and the tenant's jeonse deposit debt.
An apartment in Guro District, Seoul, also entered the public sale market at 650 million won, slightly below the market price due to bankruptcy. This apartment is jointly owned by three or more people due to inheritance. Upon winning, the buyer must resolve the complicated debt relationships intertwined with the co-owners.
A real estate expert said, "Bankruptcy public sales often require court approval and frequently have complicated title relationships."
Not only bankruptcy public sales but also forced-sale properties marked with a "red sticker" are on the rise. Properties (buildings, land, collective buildings) whose ownership was transferred by a court decision to commence a compulsory auction totaled 21,327 from January to November this year. This already exceeds the total number of properties subject to compulsory auction commencement last year (21,174).
Properties put up for voluntary auction by financial institutions because debts were not repaid are also surging. A voluntary auction is when a creditor, such as a financial institution, sends collateralized property to auction because the debtor cannot repay money.
From January to November this year, there were 11,118 applications in the greater Seoul area for registration of decisions to commence voluntary auctions of collective buildings. That is an increase of nearly 30% compared with 8,572 during the same period last year. It surpassed 10,000 for the first time since 2016 (11,753).