Houses and apartments from bank acquisitions in Spain

Houses and apartments from bank acquisitions in Spain

23rd December 2019 Off By Spain

Have you heard of properties in Spain that you can buy for proverbial pennies? This certainly applies to Spanish houses or flats put up at bank auctions. Check how real estate auctions are taking place in Spain, and whether buying them pays off.

The economic crisis in Spain has strongly affected the country’s real estate market. It all began with a great mortgage boom in the years 1994 – 2007, when the Spaniards took out mortgage loans. In the 1990s, the number of building permits issued increased rapidly, and at the same time the fall in mortgage loan interest rates increased in a very short time. The construction sector has become a very important driving force of the economy, and the favorable economic situation encouraged Spaniards and banks to make bold decisions. In the years 2002–2005, annual increases in property prices exceeded even 10%, which means enormously high increases in area prices.

Unfortunately, after years of boom, the construction sector collapsed. In the years 2008–2009, Spain was facing an economic crisis. The real estate market collapsed, which caused the prices of flats and houses bought for loans to fall sharply. The following years are attempts to save an indebted country that is struggling with autonomous conflicts, unemployment, bank debt problems and political instability.

During the boom, the Spaniards purchased houses and apartments as part of mortgage loans spread over 50 years. Faced with an increase in interest rates, loan installments began to increase. The economic crisis was manifested in a very high level of unemployment. At the same time, the prices of newly acquired apartments dropped sharply, which made their sale unprofitable. Problems with loan repayments led to high debt. Banks began to occupy indebted properties in Spain and list them at bank auctions. In such conditions, you could buy real estate for 70%, 50%, and sometimes even for 40% of the original value.

Several hundred thousand evictions were carried out in Spain during the crisis! Banks picked up several hundred apartments a day from indebted owners. To recover at least some of the money, banks put up a very large number of properties at auction, but the market was saturated, so it was necessary to set low starting prices. Currently, the Spanish property market is stronger than in the main years of the crisis. The period of almost “mass” acquisitions of real estate has already ended. However, there are still offers of properties put up for auction. And thus, you still have the opportunity to buy a property at a much lower price than the market price of the property.

What is the real estate banking auction in Spain?

Bank auctions are open, which means that anyone can join. Unless specific restrictions are set for a particular auction, it is sufficient to meet the general conditions:

The buyer must be an adult and have full legal capacity.
The buyer must have the financial capacity to buy real estate or at least creditworthiness – banks in Spain subsequently offer very attractive terms of real estate lending (sometimes 100%, but most often 60-70% of the loan value).

Most often, you will have to pay a deposit before bidding. If you win the auction, you will be required to pay the rest of the funds within the time limit. If you win the auction but you do not pay the sum due within the time limit then you will lose the deposit. If you don’t win the auction, you will receive a refund of the deposit. You must be ready to make a quick decision when you decide to buy real estate from auctions. Attractive real estate auctions sell on the trunk.

Is it worth buying a property from a bank auction?

Of course, the biggest advantage of real estate listed in bank auctions is the chance to get a low purchase price. We often talk here about purchase prices well below their market value and competitive real estate prices. Before we can clearly state that this is the best way to buy cheap real estate, it is worth answering key questions:

Is the purchase of real estate always a low price?
What are the risks associated with buying a debt property?

Properties for sale in Costa Blanca

Not every house put up for a bank auction is put far below market value. Starting prices for luxury properties or those located in very attractive locations are usually displayed slightly below their market value, and there are still willing to buy. The lowest prices apply to real estate that will not find buyers on the open real estate market – these are not very attractive apartments and houses.

The truth is that even in years of crisis, not all real estate has lost much of its value. Real estate located in attractive locations maintained their value even during the crisis. The largest price reductions affected real estate located in poorer districts, real estate in poor technical condition – devastated or intended for renovation, as well as those with an unclear formal situation. And it is these types of real estate that we find mainly at bank auctions. Real prices can encourage … but not always a house for peanuts turns out to be a life investment. We know many cases of people who bought real estate from auctions on their own, and in the following years were forced to incur huge costs for renovation or the deadline to obtain full right to dispose of the property was delayed in time due to previously not completed formalities.

It is also worth answering the question whether the starting price at an attractive level of 70% of the property value from the boom period 2000-2007 corresponds to the current value of the property and its utility values? Or maybe a big price reduction is a marketing procedure of a bank that wants to get rid of real estate quickly?

Unless in the case of poor technical condition or unattractive location, the property purchased by us will require additional costs or will lose in value, and this will entail “only” a lower rate of return on investment (as long as it is possible to recover the money invested) . However, the most difficult are situations with unclear legal status of the property and the debts of the previous owner. In such cases, we have to reckon with long months of fixing the case in the appropriate offices. And this requires excellent knowledge of consumer rights and real estate market regulations. It will often not be possible without the help of a Spanish lawyer, which will significantly increase the investment costs. Therefore, before proceeding with the bidding, you should go to the appropriate court and obtain the property file to know its formal status. Let’s not forget the Spanish style of work and the bureaucracy prevailing in this country. So why, instead of enjoying the beautiful beaches and tourist attractions of Spain, do we want to take such a heavy load?

It is also worth mentioning that the auctions have a different nature. For example, you can hit a property auction without being granted the right to use it. This means that the winner of the auction becomes the owner of the property, but cannot use it because it is occupied by tenants. If you want to avoid this situation, choose auctions marked as “COMPLETA” auctions.

Also remember that the eviction process itself is time consuming. Under Spanish law, evictions can last up to 8 months. The situation can be further complicated if the property was rented and the owner of the property was not the only resident registered there.

We would be lying saying that bank auctions are not a source of great opportunities! We know the Spanish real estate market perfectly well and we know how many properties could be bought at a bargain price. Currently, however, bank auctions are not the main source of acquisition of real estate. And such a purchase carries a huge risk. If you do not want to take it on yourself, contact us and we will advise you on the purchase of an attractive property within the budget you specify. We will help in completing all formalities so that you can invest your capital well and make your dream of your own home in Spain come true.