The worldwide financial crisis of 2008 led to thousands of properties in Spain being repossessed by Spanish banks. Owners were forced to hand back their keys as property prices dropped through the floor and the economic situation in their home country meant that a second mortgage was unmanageable.
As a result, when the financial clouds cleared, there were a substantial number of these repossessions available and there are still some on the market. The attractive pricing of bank-owned properties makes this route to buying a Spanish property appear to be a no-brainer, but while there are advantages, there are also some disadvantages you should be aware of.
The advantages of buying a repossessed property in Spain
Because you are buying directly from the bank, it is likely you will be offered a lower mortgage rate and possibly a 100% mortgage.
If you have a good relationship with your Spanish bank manager you may be able to get your bid sent directly to head office and if your bank knows you are looking for a repossession, you are more likely to get advance notice about ones that are about to be seized by the bank and haven’t yet been advertised.
The disadvantages of buying a repossessed property in Spain
Repossessed properties may be in poor condition, having been empty for a while and they may have debts attached to them. Therefore, don’t enter into a purchase like this without getting independent legal advice. You lawyer will investigate if there are debts and make sure they are cleared before the property is registered in a new owner’s name. In Spain, debts pass from one owner to the next, so it pays to be very careful.
The price may be well under your budget, but it is advisable to take a surveyor with you to inspect the apartment as you may find that the electrics, gas and water have been cut off and that various fixtures and fittings have been broken. You will need to cost out repairs and the price of reconnection to the utilities and use this figure to negotiate a fair price. It is also best to ask a surveyor to look at any structural problems that might exist and get a costing to correct this as well.
The bank may have set timescales for the completion of a purchase and this is something you and your lawyer will need to be aware of and sure that you can meet the bank’s deadline. You will also need your lawyer to look into the tax implications of the purchase as Spanish purchase tax is based on the lowest official property value, not the purchase price. In the case of repossession, the tax could turn out to be higher than expected.
Remember, just because the price is fantastic it doesn’t always mean that it’s a bargain.