With the world economy in tatters and the Spanish property market albeit destroyed, many see Spanish bank repossession property as the obvious “best value for money” choice for the “cash in pocket” investment buyer.
Lets think about that – because it is plainly not the case, a home owner defaults on a Spanish mortgage, the bank may have loaned at 70% of the supposed value of the property. Property values have rolled back 6 years or so, therefore the outstanding debt that the banks want to recover could well be equal to the full “today’s market value” of the property and the bank may well also add a 25% margin on top to cover their overheads.
I think it is worth saying that if you are being offered a bank repossession property, you should not just automatically assume that it must be the best value available.
Consider property being offered by the owners themselves, either via an agent or direct. They may well be in a distressed situation but have not yet got as far as being repossessed.
They can perhaps see it on the horizon but want to get out whilst they can and with their financial integrity still in place.
These folk might well be offering their properties for sale at little more than enough to clear the mortgage and that could easily be the 2002 price and possible the 2002 price less x amount.
A Spanish so called bank repossession could in fact be when the owners have given up and have opted to hand back the keys. It never went as far as a court order to repossess but the banks wants to recoup all of the outstanding debts and their charges.
However, if the bank has pursued a repossession via the courts this is possibly where the real bargains are – in the auction rooms.
Consider the difficulties that we as “for the most part” will have, not being good Spanish speakers.
1. Finding out where and when the auctions are being held.
2. Being savvy enough to be able to compete with Spanish Nationals and the Professionals.
3. It can take well over 12 months before these properties even get to the auctions rooms.
(You should always seek the services of an English speaking solicitor to act on your behalf when considering purchasing any property.)
No related posts.
Hello,
I read your article with interest. We offer clients exactly the service you are talking about, buying from courts. I wondered if you could promote my site?
Thanks
I am sorry to say that this is unfortunately not good advice. The price at auction is set according to the original loan value and is usually much higher than the debt owed. Nobody goes to auctions now as you need to deposit 30% upfront before bidding and nobody has liquidity.
Buying from a bank after auction and repo is usually a lot cheaper because the bank needs liquidity and will therefore usually accept lower prices. Recently a fund I work with bought at 60% of original debt and I have seen things as low as 12% of supposed values.
Owners cannot hand back the keys. They need to sign a Dación en Pago before a notary with the bank’s consent, this is unusual but happens. Banks will only do it if the value of the loan is below and usually well below 80% of the valuation. If an owner returns the keys without the bank’s consent then the bank continue with the repo process and the debt spirals due to the stipulations in the deeds. At auction the price is higher as previously stipulated but if you can get into the bank through a good contact then you can get it at the price of the mortgage debt without any extra costs. The banks really just want to recoup their initial outlay not the extra costs.
Regards
Graham
http://www.valenciacomment.blogspot.com
Thanks Graham, that insight is something that I had not considered. I am always hoping that my clients can get out with a low price but dignity intact. I cannot recommend buyers to wait for repossession properties that banks might sell just for some liquidity when they would then continue to chase my clients for the outstanding debt after they have already lost everything.
[...] Full article [...]
This is an interesting article and comment from Graham Hunt.
What’s the current situation regarding buying at auction. Is it best to try and deal direct with a bank?
If you can get access to a Banks list of properties then compare like with like assuming you can get similar properties priced by an agent. See who is offering the best value, it could be that the bank is adding too much but things may differ bank to bank and property to property. As far as buying at auction is concerned and if you know when and where the banks might be holding an auction do beware unless you are familiar with the language and the fees and taxes involved. Always use an independant lawyer and do not sign until the paperwork is checked to be in order.
Bank of England head honcho Mervyn King gets a K (OBE) but, one wonders, why? I mean, where was he during the credit crunch and what did he do then or has he done since? He got a salary while he was there, didn’t he? The world and its dog knows there’s a grand mal crunch on the way soon because the people supposedly in charge (like him, for instance) resolutely refused point blank to address any of the real problems involved, so what’s he getting his K for? Not leaving the tribe all the way maybe, remembering he said of all the banking systems possible the one we have is the worst? Was this his reward for keeping shtum about more contentious issues?