Buying a bank repossessed property in Spain
We explore, what are the advantages and the disadvantages of buying a bank repossessed property in Spain? Investing in a bank repossessed property in Spain can be an attractive prospect due to its affordability compared to the market average.
However, is the initial cost savings worth the potential challenges? In this article, we explore the advantages and disadvantages of purchasing such properties, shedding light on key considerations for prospective buyers.
Advantages
- Cost-Effective Option: Bank repossessed properties are generally priced lower than the market average, offering buyers good value for their money.
- Financing Benefits: Buyers seeking finance can benefit from favourable conditions, such as higher loan-to-value ratios and extended repayment terms, making these properties an attractive option for those needing financial assistance.
- Investment Opportunities: Renovation enthusiasts may find these properties to be ideal for refurbishment projects, potentially leading to increased property value and a profitable resale in the future.
Disadvantages
- Incomplete Documentation: Repossessed properties may lack essential documents or permits, require renovation, or need utility connections.
- Limited Legal Safeguards: Banks typically sell these properties “as-is,” without taking measures to update the Land Registry or obtain necessary licenses.
- Outstanding Debts: Town hall rates and community fees may be outstanding, with limited information available.
Now, in order to mitigate the risks associated with the disadvantages and avoid unwanted situations, we outline our key considerations below.
Legal checks
When dealing with any purchase, our standard procedure involves conducting comprehensive legal checks including land searches, town hall rates, licenses, community meeting minutes, utility receipts, inventory, and certificates of no planning breaches. In most cases of bank repossession, however, some of these documents might not be available.
Similar to any other property transaction, we verify that all necessary licenses are in place, ensuring the registered surface area aligns with the actual dimensions. Should discrepancies arise, we promptly inform the buyer. However, it’s important to know that the banks won’t take any actions to update the Land Registry, and won’t obtain the necessary licenses either. The house is bought in its current state.
Additionally, we check if the town hall rates and community fees are up to date, but when we cannot get any information at all, we stipulate in the Deeds that the seller will be held responsible for any debts prior to the purchase. However, both the Town Hall and the Community of Owners could claim any payment due from both the previous owner and the new one.
Survey
One of our recommendations is to carry out an independent survey before committing to the property purchase. This detailed property examination can unveil necessary repairs or utility connection requirements, allowing for accurate budgeting beyond the initial purchase price. Although some of these houses are acquired to renovate in full, some are in quite good condition and might be ready to move in by the look of it. However, it’s important to check all the possibly defects which might not be visible or apparent.
Money Laundering Protocols
When buying any house in Spain, adherence to money laundering prevention protocols is mandatory. Anyone involved in the transaction must conduct thorough checks to ensure that the money comes from a legitimate source, that is, banks, lawyers, Notaries, etc. and in the case of bank repossession the banks even have a specialised department to undertake these checks. Not only will they request bank statements showing the funds, along with payslips and tax returns, but will also request all the necessary documents to prove the traceability of the money. For example, if you are using a currency exchange company, they will request proof of all the transfers to and from such company, showing account numbers and account holders.
While obtaining these documents is generally straightforward, readiness to provide them is crucial. It is advisable to minimize fund movements, ideally consolidating transfers from the original account to the final account, typically a Spanish account.
Mortgage
In contrast to the aforementioned points, if you need financing for your house, buying a bank repossessed one will result in better financing conditions. Typically, financing caps at 60% to 70%. Repossessed property may secure more generous terms, including a higher loan-to-value ratio and an extended repayment period. This, of course, will depend on the personal and economic situation of each person.
Get a Lawyer
Irrespective of renovation plans, financing needs, or cash purchase intentions, securing legal representation is crucial. A qualified Lawyer will conduct the legal checks and avoid unexpected surprises after the purchase.
In conclusion, while bank repossessed properties in Spain offer enticing benefits, thorough due diligence is imperative. From legal checks to independent surveys and financial considerations. A well-informed approach ensures a successful investment, whether for renovation or immediate occupancy. Engaging legal representation becomes a paramount step in safeguarding your interests and ensuring a seamless property acquisition process.
My Lawyer in Spain is dedicated to providing comprehensive legal support to ensure your Spanish property acquisition is a smooth and enjoyable experience. Take the first step towards your Spanish adventure and contact us today.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Please consult with a qualified legal professional for personalised guidance on your specific situation.
