Buying a bank repossessed property in Spain

As with most economic downturns there are always winners and losers. When it comes to real estate in Spain, those who experienced financial uncertainty during the economic downturn were often faced with the prospect of losing their homes. Ironically, and despite claims of financial mismanagement, it was the banking sector that was able to make a series of gains through property repossessions during the Eurozone crisis.

So what does this mean for the Spanish real estate sector? Well, it would now appear that banks have a substantial stake in the property market. Those banks are also keen to sell on those properties to recoup recession-era losses. Bank repossessed properties have become an attractive purchase prospect for those seeking to invest in a property in Spain.  

Find out more about Spanish property law.

What should I consider before buying a bank repossessed property in Spain?

If you are seeking to purchase a bank respossesion in Spain, in many instances it will be the bank as a vendor you will be dealing with as a potential purchaser.  As such, it is important to be in full knowledge of the legal and financial implications of investing in Spanish property, so as not to be in a position of unequal bargaining power against a banking vendor.

Any quick online search will throw up relatively inexpensive bank repossessions listed for sale on websites hosted by Spain’s leading banks, which have been specifically created to be easy to use and translated into English to entice foreign investors.

Although, some Spanish banks are offering potential buyers generous financing terms for property in Spain, it is always wise to progress with caution.

The old adage ‘buyer beware’ should always be at the forefront of any person’s mind who is thinking about investing in a private or business property, whether you are a non-EU national, EU-national, or Spanish resident.

Many of the ‘cheaper’ properties on the banks’ books aren’t just the product of a struggling market in the wake of the recession. During the housing boom in Spain pre-2007 huge numbers of developments sprang up along the Spanish coasts, many of which were built extremely quickly.  A significant number of these properties are now in the hands of banks and being sold as bargain bank repossessions in Spain.  A rash purchasing decision now could lead to serious financial consequences in the future.

Those who have read the scare stories of ‘land grabs’ and demolition of unfit properties will be all too aware of the perils of ill thought out purchases.

As with all property purchases in Spain it is essential to seek independent legal advice to guide you through the pitfalls of Spanish property law and financial obligations so that you are informed and able to make the right decisions for you, your family and your business.

Find out more about buying property in Spain after Brexit.

The dos and donts of buying a bank repossessed property in Spain

Don’t assume that you can navigate Spain’s complex national and regional property laws on your own.  The internet may be a great way to start window-shopping for your ideal property, but you will need professional reassurances from surveyors and legal advisors that the purchases you are making are sound. Many property agents in Spain may tell you that it will be quicker and cheaper for you to realise your dream property by circumventing additional checks, but it could also see you rushing into an unsuitable and unnecessary purchase.

Do seek independent legal advice when buying a property in Spain. In the UK it is effectively a prerequisite for any real estate transaction to contact someone who is knowledgeable and authorised to carry out a conveyance; buying property in Spain should be no different, especially if it helps to safeguard your initial financial investment.

Do ask your legal adviser to ensure that any debt associated with the property is cleared and any charges removed from the property register prior to the property being registered in your name.  This includes debts in relation to community fees and utility supplies.  This is a fundamental step that ought to be taken by any legal adviser with any experience in property anywhere in the world, but you ought to be aware of it.

Don’t assume you will be able to move straight into the property. Although many bank-repossessed properties are in brand new developments, many have had the electricity and water supply removed. Your legal adviser should confirm whether this is the case with your property and should advise you on arranging for the supply to be reconnected.  

Don’t assume that because the property has been repossessed you can always negotiate a very low price with the bank.  Although values have dropped and the banks are holding many properties on their books, they will very rarely be willing to sell significantly below the market price. 

What further considerations need to be taken when buying a bank repossessed property in Spain?

It should always be borne in mind that although you may be getting a bargain on the purchase price of a repossessed property from a bank, you still need to take into account Spain’s existing property tax laws, as purchase tax may be payable on a value higher than the purchase price of the property. Failing to do so could have serious implications, both during the purchase and any subsequent sale of the property.

Again seeking independent legal advice in relation to the purchase of any property in Spain will be paramount to making the most of your investment and your future.  

For more information in relation to the costs of owning a property in Spain please take a look at our pages on Taxation in Spain.  If you intend to use the property as a holiday let, you should be aware of the rules relating to rentals in Spain.  Please take a look at our pages on Renting out your property in Spain

If you are considering purchasing a bank repossessed property in Spain and you have any questions, please do be in contact with us. You can contact us by email at info@solicitorsinspain.com, by telephone on 020 3478 1420 or by submitting your query using our contact form

Last updated: 7 January 2021

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