Buying a foreclosed home in Spain can have its advantages, but it’s also a riskier option with several key factors you need to consider before making the purchase.
The Spanish housing market is getting increasingly expensive and so many people are looking at alternative options to the traditional routes.
One of these is buying a foreclosed home (vivienda embargada in Spanish), as this often enables you to buy it way below market price.
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In Spain, the core difference between a property that is “under embargo” and one that is “foreclosed” (repossession) lies in the stage of the debt recovery process, even though embargado is often used in both cases. An embargo is a legal lien or freeze on an asset, while a foreclosure is the final, executed stage where the lender seizes and sells the asset to satisfy the debt.
You may get a good deal buying one of these properties, but it’s important you know what you’re getting yourself into and understand all the implications first.
Here’s what you need to know:
Research the market
It’s important to remember that not all foreclosed homes are advertised for bargain prices. You should compare the value to other similar homes in the same area to confirm whether it’s actually a good deal or not.
Find out who the creditor is
You need to know who you’re buying the property from – is it a bank, the Treasury or even Social Security? Finding out who it is can help you understand the process and may even mean you’ll be able to negotiate more.
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Get a nota simple
You need to know everything about the property you’re considering, so you may wish to request a nota simple from the property registry. Once you have this you will be able to find out about the current owners and their shares, the mortgages in place and any potential restrictions on it.
READ MORE: What is a ‘nota simple’ in Spain and why is it so important?
Visit the property several times
You should definitely make sure to visit the property in person and several different times if you can. Online photos may look nice, but the reality is that there may be structural issues with the property, renovations that need carrying out and maintenance issues.
There may be debts to pay
If you take over the home, you could also be taking on its debts such as unpaid mortgages. It’s likely there will be other outstanding payments too on property taxes, community fees and municipal taxes. This means you could end up forking out a lot of extra money that you hadn’t budgeted for.
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The home may still be occupied
Sometimes a property may still be occupied by the former owners who were unable to pay their mortgage, tenants with ongoing contracts or even illegal squatters, so you may not be able to move into it as soon as you buy it. This may mean going through long legal proceedings in order to start evictions.
You may have to buy it at auction
Many foreclosed homes are bought at auction meaning you’ll need to big on the property, competing against other interest parties. This can require some skills in holding your nerve. It’s also important to go in with a top budget to make sure you don’t bid above that number.
You may need to look at alternative portals to find them
While some foreclosed homes are advertised on typical property sites such as Idealista, others can be found on special bank-owned real estate agencies. Many are also published in the BOE Auctions portal here.