Dos and Don'ts When Buying a Bank-Owned Property in Spain

Buying a Bank-Owned Property in Spain - Dos & Don'ts

Sara Janion, Manager Director, of Worldwide Lawyers – a UK based service connecting clients with legal professionals across the world – offers her advice on the dos and don’ts of buying a repossessed property in Spain.

The property market in Spain was significantly affected by the global financial crisis of 2008, and despite the fact that the initial impact has long passed, there are still thousands of repossessed properties available in Spain. 

Undoubtedly, buying a bank repossessed property in Spain can be an attractive prospect. With a number of bank-owned properties in Spain available at rock bottom prices, it’s possible to secure yourself a bargain. However, it’s important to make sure that you know the advantages and disadvantages before proceeding with a bank-owned property purchase in Spain, to safeguard your finances and protect you and your family’s future. 

In addition to knock-down property prices, when buying a property in Spain directly from the bank it’s also often possible to get lower mortgage interest rates and potentially secure finance for up to 100 per cent of the property value. On the flip side though, Spanish repossession properties may have outstanding debts attached to them and can be in very poor condition.

Seeking independent legal advice regarding the purchase of any property in Spain is crucial, but in the case of Spanish property repossessions there can be additional considerations and complications that should be checked by your Spanish lawyer.   

DO seek independent legal advice when buying a bank-owned property in Spain. Your Spanish solicitor will carry out a due diligence check, ensuring that all debts associated with the property are cleared before registering the property in your name. This should also include any charges in relation to community fees and utility supplies. 

DON'T assume that you will be able to fathom Spain’s complex property laws without advice from surveyors and legal advisors. There are both national and regional laws to contend with. While cutting corners might make your property purchase quicker and cheaper short-term, circumventing the necessary checks could result in you purchasing a property with ‘baggage’, which could cause countless problems in the long-term.    

DO check the condition of the property before proceeding with a property purchase. Properties that have been repossessed are often left in a very poor state. You may find that electrical wiring has been cut, bathroom and kitchen fittings have been removed and windows and frames are broken, for instance. Being aware of any damages means you won’t find any nasty surprises and can budget for repairs, as well as giving you leverage to negotiate a good price.

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DO consult a builder and/or architect or surveyor to check for any major construction defects before buying a bank-owned property in Spain. If there are any concerns regarding the construction of the property, seek professional advice before you sign anything to ensure that the property is fit for purpose. 

DO make sure you have an NIE (foreigners identification number) and Spanish bank account set up prior to putting in an offer in on a repossessed property in Spain. If you need to act quickly, failing to have these in place, could hold up the process and ultimately mean you miss out on your dream property (and a bargain!) Securing your NIE number in advance and opening a Spanish bank account also proves that you are a serious buyer 

DON'T assume that just because a property has been repossessed you will be able to negotiate a very low price with the bank.  Some Spanish banks are flexible in terms of receiving bids from interested parties, however, other Spanish banks are more inclined to maintain a fixed price regarding repossessed properties, especially if there is a high demand for the property. 

DO try to develop a good relationship with the branch manager and or bank employees of your Spanish bank as they can directly submit bids for a property to the bank´s headquarters. In addition, branch managers may be aware of the most recent homes that have been repossessed and those that are due to be seized. Therefore, they may be able to direct you to properties that are not already being advertised.  

DO check whether the property purchase needs to be completed within a certain time frame. Some banks have a fixed-term timescale in which all the necessary paperwork to purchase a bank -owned property in Spain must be completed. If this is the case you need to be aware so that you can ensure you lawyer meets the deadline. 

DO take Spain’s existing property tax laws into account and seek professional advice on this as it could have serious implications both short-term and long-term. As the purchase tax (ITP) payable on properties in Spain is based on the lowest official property value (not the purchase price) the ITP may be higher than the purchase price of the property. In addition, the cost of purchase tax varies depending on the region and whether the property is new-build or resale, so make sure that you're fully aware of how much tax you will have to pay before proceeding.

DON'T presume it will be possible to move into the property immediately. Many repossessed properties in Spain (even those that are brand new) have had essential utility supplies, such as electricity and water, disconnected. Your Spanish lawyer should determine if this is the case and advise you on arranging for the supply to be reconnected.  

Any potential complications involved with buying a bank-owned property in Spain shouldn’t put you off though. As with any property purchase in Spain, it’s not always plain sailing, but as long as you instruct an independent Spanish lawyer that has your best interests at heart and the necessary checks are carried out it can be stress-free and safe. There are plenty of bargains to be had and you could be sipping sangria on the terrace of your new Spanish property in no time!

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