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EXPLAINED: What to know before buying a property at auction in Spain

There are real bargains available when buying a property at auction in Spain, but you need to be pretty savvy in order to make a success of it. Here are nine important points to keep in mind if you're considering buying a house this way.

Published: 24 November 2021 17:07 CET
Updated: 2 November 2023 08:35 CET
Buying a property at auction in Spain
Things you need to know about buying a property at auction in Spain. Photo: OLIVIER CHASSIGNOLE / AFP

In Spain, when people or businesses are no longer able to pay their mortgages or debt, the bank will usually repossess their properties and then sell them at subastas or auctions.

For some people the practice is ethically debatable, for others it’s just another example of what constitutes a competitive property market.

While buying a property at auction can be risky and you need to know what you’re doing, it can also be a good way to grab a bargain.

Here are some crucial points you need to know about buying a property at auction in Spain to decide if it’s right for you.

Keep in mind, in order to buy a property at auction in Spain you must be of legal age and have the capacity to enter into a legal transaction.

You must also have the financial capacity to purchase the property or to be able to get a mortgage or loan to do so.

1) Generally, prices are well below market value

One of the main advantages of buying a property at auction is the chance to grab a bargain and buy a property at a low price. According to real estate giant Idealista, you can expect to get around a 15 to 20 percent discount.

Keep in mind that you will not always get a property below market value however, particularly not when it comes to luxury properties. You also need to think about how much it will cost you to renovate too, as many of these properties are not in good condition.

2) You need to put down a deposit

Usually, you are required to put down a deposit before you make a bid on a house. According to real estate agency Rentalias, this is typically around five percent of the starting price of the property, however many just ask for a flat fee of €3,000.

If you win the bid, you will have to pay the rest of the money within a certain time frame, usually around 15 days. However, if you do not pay the rest of the money by the deadline, you will lose the deposit.

3) There are some safeguards 

Even though buying a property at auction can be risky, there are several safeguards in place. You can ask to inspect the legal documents for a property ahead of time (around 10 days prior), so you know what you’re bidding for. You can also arrange to visit the property before the auction.

In order to feel secure in your bid, you should have a full survey done on the property. If there are any major problems that were not disclosed during the auction or in the paperwork, your deposit can be refunded. Remember to always get a legal expert to help and advise you.

4) You need to consider the condition of the property

The best bargains are on apartments and houses that need renovating, but you may not realise the extent of the work that has to be done or have the budget for it. Make sure ahead of time that you know what you’re getting into and how much work the property will require.

5) Be aware of how the property is being sold

Houses are sold at auctions in different ways, some are sold with tenants already in them, meaning you can’t use the property for yourself. If you want to live in the property and make sure there are no tenants, you must choose properties marked as ‘Completa’. If not you may have to go through the complicated procedure of evicting them. 

6) You need to know what the legal situation of the property is

Many of the properties sold at auction have complex legal issues because of the previous owner and their debts and may have several mortgages attached to them. While the mortgage should be wiped before the property is sold, if it has several, this can not be guaranteed. You should request a certificado de cargas to find out how much debt there is if it’s not included in the information. 

The property will usually also have community fee debts that haven’t been paid. Typically as a new owner, you can expect to pay the last three years of community fees, plus the current one. It can sometimes take a long time and a lot of money spent on lawyers to fix these legal issues.

7) All is not lost if the property doesn’t sell

If the property doesn’t sell at auction or you didn’t feel confident enough to make a bid at the time, you can always make a bid afterward and you could still be in with a chance.

8) Know where to look for auctions

There are several places you can look for housing auctions. Sometimes real estate agencies will have a few apartments up for auction, but the majority of course are sold by the banks. The main place to look is the government’s state auctions website Portal de Subastas here. New properties are posted on here each Tuesday morning at 9am when you set the filter to show properties. 

READ ALSO: How does Spain’s new website to find cheap homes up for auction work?

9) You will need to secure a mortgage very quickly

If you need to get a mortgage for the property, you will have to do so very quickly because you usually have a short time in which to pay the rest of the money. This can be incredibly difficult to get done so fast, if not impossible. Although pre-approved mortgages do exist in Spain, most people don’t do it this way and have to find a way of raising a large amount of cash in a short time. 

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PROPERTY

Q&A: What to do if you buy a property built illegally in Spain

Buying an illegally built property in Spain is fairly common but can have several consequences down the line. Here's what you need to know, how to make it legal, whether you can sell it, and the benefits of doing so.

Published: 25 April 2024 09:35 CEST
Q&A: What to do if you buy a property built illegally in Spain

Unfortunately, over the years, many properties have been built illegally in Spain, not adhering to local rules and regulations. Foreigners who don’t know the legislation can easily fall into the trap of buying one of these properties, only to find out later down the line.

Maybe it’s when they come to sell or perhaps it’s when they want to do works or improvements on the property.

There are several reasons a home could have been built illegally in Spain. Firstly, it could have been built on the wrong type of land. This is it could have been built on suelo rústico, rural land where residential properties are prohibited, also called no urbanizable. 

READ ALSO:

It could have also been built too near the coast. This is down to the Ley de Costas or Coastal Law, which was brought into force in December 1989 in order to protect the costas from overdevelopment and high rises spoiling the landscape. 

The law defines different areas of the beach and dictates which is public land, owned by the state and which parts can be owned privately and built on.

If you buy or own a house in one of these non-buildable zones, there are many problems you could face down the line, often sooner rather than later. This is because there are several rules you have to abide by concerning works, reforms and extensions. In some cases, they may not be allowed at all and everything must be approved first by the local government by providing a detailed project.

Because of coastal erosion, this issue is getting worse as some shoreside homes that were once built outside of these areas are finding that they’re now illegal.

READ ALSO: 

The house may have also had extensions made to it that were built without a license, meaning that the extra parts are illegal.

Q: How do I know if my home is legal or not?

A: Unfortunately it can be difficult to know if your property is legal or not. You could have bought and signed for it with a notary and it could be inscribed on the Property Registry, but this still doesn’t mean it was built to the correct specification and on the right land.

The only way to truly tell is to find out if your home ever had a Licencia de Primera Ocupación or First Occupation license, also referred to as a Cédula de Habitabilidad or Certificate of Habitability. This means that according to the authorities, it is suitable to live in and has the correct licenses.

READ ALSO: How to get Spain’s certificate of liveability for properties

Q: What happens if my property doesn’t have a habitability certificate?

A: If your property has never had a Certificate of Habitability, you must regularise the legal situation. First you’ll need to start a legalisation file (expediente de legalización) and contact the town hall. Depending on the seriousness of the case (ie. where exactly it was built, if there’s any structural danger, whether the entire property is illegal or just an extension) the cost of making an illegal property legal can be considerable. As such, each case must be studied individually with the help of an expert to determine whether it is even feasible or worth the investment.

The next step is to bring in an architect and check whether the property complies with all the building regulations. If it does, you simply need present the expediente de legalización to your local town hall, who will confirm whether or not the property adheres to building regulations and can be made legal.

If it doesn’t, you’ll need to consider whether it will comply with the regulations after some renovations. If that’s the case, you’ll need to draw up a renovations project document (proyecto de reforma) outlining the proposed changes and how they will adhere to building regulations. It must be presented to the town hall along with your expediente de legalización.

According to law firm Acal, the legalisation process can be broken down into steps as follows:

  • Contact the town hall.
  • Begin with the expediente de legalización when the town hall confirm whether or not the property can be made legal.
  • Pay the corresponding fees and taxes (in this case it will be IBI) depending on your municipality and region.
  • If you need to make renovations, obtain the proyecto de reforma and hire an architect.
  • Obtain a building permit from the town hall.
  • Once completed, register the property in the Land Registry.

READ ALSO: What is Spain’s IBI tax and how do I pay it?

Q: Do I really need to make my property legal?

A: Yes, because it will benefit you in the long run. It doesn’t matter what the previous owner told you when you were originally buying the property, owning a property that isn’t fully legal (or legal at all) can create problems and even lead to fines worth up to 20 percent of the property’s value in extreme cases.

By going through the legalisation process and making the relevant renovations, if necessary, you gain a legal property for all purposes and with all the benefits that entails.

You will not have problems setting up, paying, or cancelling electricity, water or gas utility services. You won’t have to undertake reforms and renovation work unofficially, avoiding the eyes of the authorities. Instead you’ll be able to register your property in the Land Registry, which will make things much easier when you decide to sell it or pass it on.

In terms of selling it, perhaps that is the biggest benefit of legalising your illegal property: by registering it properly, you will be able to benefit from its full value when selling it. When a property is illegal, the appraised value will probably be no more than 40-45 percent of its real value at best.

The renovations needed to get your property in shape to meet the building regulations could be costly, but will they cost you half of the total value of your property? 

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