In a context of slowdown in the real estate market, sellers who will have to repay their bridging loan in the coming months tell franceinfo of their difficulties in finding a buyer, despite their successive price drops.
Claire* was far from imagining that selling her house in Lyon would be such a source of anxiety. In the spring of 2022, when she decided to move to Isère to be closer to her family, this former employee in the pharmaceutical industry subscribed to a property loan of 118,000 euros over ten years as well as a bridging loan of 340,000 euros. A cash advance which allows him to finance his new home and move in, without waiting to have a buyer for the old one.
At the time, while the real estate market is still dynamicClaire, 45 years old, does not see “no reason” that his house, with a 100 m2 garden and located in “a sector in demand” of the capital of Gaul, “does not sell”. His property is first put up for sale at 620,000 euros, a price within the range of the estimates made. A year and a half after taking out his bridging loan,at the house of this mother of two children is now priced at 449,000 euros, well below the lowest estimate. But nothing works. Less than six months before her loan expires, she has still not found a buyer. “JHe no longer has a quiet night. I wake up every day remembering that the house still hasn’t been sold and that I’m in total trouble, she worries. I regret going through the bridging loan.”
This type of credit works like a “giant discovery” granted by the bank for a period of 12 to 24 months, “in order to allow you to quickly position yourself on the property you wish to purchase”, summarizes Cécile Roquelaure, director of studies for the broker Empruntis. This option is particularly popular with households who have a “heart stroke” for accommodation, explains the expert, or in the event of a change in personal or professional life which requires a rapid move. The amount loaned varies between 60% and 80% of the estimate of the property for sale, depending on the real estate brokerage company. Until the home is sold, the borrower only pays interest.
“The banker said to himself that it would definitely sell”
But in the context of market tightening, selling is no longer an easy task. The rise in interest rates, which now hover around 4%, and the tightening of conditions for access to real estate loans are slowing down buyers. The number of real estate transactions fell by almost 20% between September 2022 and September 2023, according to the Superior Council of Notaries. “The market downturn was violent”recognizes Cécile Roquelaure.
Claire believes she is paying the price for this change in circumstances. “The really blocking point is the banks”, she judges. The 40-year-old recently received an offer at the price, but the buyers had to withdraw due to lack of financing. Others offered him offers 50,000 euros lower than his price and accompanied by a suspensive condition – a clause allowing them to cancel the transaction in the event of difficulty selling their home. “I can’t afford to accept this condition, it will waste my time again.”alarms Claire, who must have sold her house by May.
“Buyers are kings: they allow themselves to negotiate on everything because they know that they are now in a position of strength.”
Claire, owner of a house for sale in Lyonat franceinfo
Muriel also did not think she would face so much difficulty in giving up her 90 m2 apartment on the outskirts of Paris. Like many Ile-de-France residents, she left the capital with her partner after the confinements. “We were tired of being in an apartment and the Covid crisis showed us that teleworking worked well,” tells this intermittent performer. Thanks to a bridging loan taken out in May 2022, the couple bought a house in Ardèche. A solution recommended by their banker and real estate agents who show up “very confident” on their ability to sell quickly, in a context where purchases were still boosted by credit rates around 1%. “The banker said to himself that an apartment in the Paris region would inevitably sell,” she remembers.
“A good bridging loan is a correctly valued asset”
Despite “five or six price drops”and a property priced more than 100,000 euros below its initial value, the couple only had “very few visits”. “Agencies tell us that they are only selling small spaces at the moment. As soon as we are on more than 60 m2, it is complicated because the buyers do not have the necessary budget or they have loan refusals, explains Muriel. If the real estate agents had not been so confident, I would not have opted for a bridging loan.”
Despite the current context, Cécile Roquelaure nevertheless believes that taking out a bridging loan can be interesting, provided “to be well accompanied”and of “value your property well”. “You absolutely must study the market by looking at what has been sold recently in the sector, to see if your property is up to standard and if it is at the right price.”advises the expert. “A good bridging loan is a correctly valued asset”she insists.
“A bridging loan is not there to guarantee you 12 or 24 months to sell. If the sale is not completed within the first six months, there is a price problem.”
Cécile Roquelaure, director of studies for the broker Empruntisat franceinfo
An overvalued property whose sale drags on forever is what happened to Elsa*. This thirty-year-old, who moved overseas to take advantage of a professional opportunity, has been looking for a buyer since the summer of 2022 for her house in Alsace. A “Ancient” 17th century residence “completely renovated” by this interior designer and her husband. “Ochanged the volumes, redid the insulation, used beautiful materials, to make it a designer and charming house”praises Elsa.
Sale price too high and drop too late
“The agencies did not arrive to agree on a price: we had estimates between 480,000 euros and 650,000 euros”, she remembers. The couple finally settled on a sale price of 595,000 euros. A tax “above the town market”concedes Elsa, but which according to her reflects the atypical character of their property and the numerous renovation works. “With hindsight, our first mistake was to list too high a price, because we allowed ourselves to be flattered by the high estimates, she analyzes. The second mistake was that we didn’t lower the price quickly enough, even though the real estate agent encouraged us to do so.”
Since the fall, their property has been up for sale for 439,000 euros. More than 155,000 euros less than the initial sale price. Ten months before the expiry of its bridging loan, due to a lack of buyers, Elsa is considering conceding a further price reduction in the coming weeks. “We also had to ask ourselves the question of abandoning everything and coming back to live in Alsace”she blurted. An option that they have ruled out for the moment. “Psychologically, it’s hard. We rebuilt our professional and personal lives elsewhere, our daughter changed schools, we really established ourselves”she laments.
Muriel, who will have to repay her bridging loan of 240,000 euros in May, is also starting to list her options. “At the beginning of 2024, we will make a decision”, she assures. For now, she plans to transform her bridging loan into a traditional real estate loan and rent out her apartment to repay the monthly payments. “What is a shame is that two years ago, we would have borrowed at 1%. Whereas now, we will borrow at more than 4%,” she says, bitter. “It’s a solution, but it still has to be financeable”tempers the expert Cécile Roquelaure.
More cautious banks
If you have difficulty selling, the specialist recommends making an appointment with the bank quickly. “If you have signed a one-year bridging loan, you can negotiate its extension” up to two years. A solution which is however not “not painless” because “any bridging loan that continues to run costs you interest.” “When you have reached the end of the extension process, it is in the bank’s interest and yours to find solutions, even if there are not many possible options,” recognizes Cécile Roquelaure.
“If I didn’t sell in May, the bank told me we would go into litigation.”
Claire, owner of a house for sale in Lyonat franceinfo
To avoid these situations, banks are increasingly vigilant in granting a bridging loan, according to the director of studies at Empruntis. They look more at whether the project is “well put together” And “tighten the amount of financing to provide a margin of safety” additional. “Certain establishments only grant bridging loans if the borrowers already have a sales agreement” with a buyer.
The borrowers contacted say for their part that they feel “deprived” And “very alone” faced with their inability to sell. “I did things right and yet I feel guilty for not being able to repay my loan”deplores Claire, who calls on the government to take measures to help “the small owners in (his) situation”. On December 4, the Ministry of the Economy and the Bank of France announced relaxations of rules governing real estate credit. Simple “technical adjustments”Who do not touch “fundamentals” current borrowing conditions, admits the governor of the Bank of France.
* The first names have been changed at the request of the interested parties.