Buying Property at Auction in Spain
With the costs of properties in Spain increasing, you may be considering buying a property at Auction. Juan Antonio unpacks the whole process, the terminology used and why you need legal representation to help you through the process.
1. Legal Representation: Why You Need a Team in Spain
To participate in an auction, you must interact with the online BOE Auction Portal. This platform is entirely in Spanish and requires a specific Spanish digital signature.
To ensure you don’t have to worry about the language barrier or technical errors, the standard procedure is to grant a Power of Attorney (PoA) to a Procurador (a specialized Court Agent) and to us. The Court Agent acts on your behalf following your exact instructions. Additionally, this PoA allows us to manage your NIE (Foreigner Tax Identification Number), a mandatory document for any real estate transaction or tax payment in Spain.
2. The Initial Deposit and the “Reservation Bid”
Before you can place a bid, you must post a security deposit (20% of the appraisal value subject to the discretion of the Court Clerk or Letrado de la Administración de Justicia). At this stage, you also need to make a strategic decision: do you opt for the reservation bid (reserva de postura)?
If you opt-in to the reservation bid: If you don’t win, but the highest bidder fails to pay the remaining balance, you become the next in line to acquire the property. However, the court will hold your deposit until the sale process is fully closed and the winner or next in line acquires the property.
If you opt-out of the reservation bid: If you lose the auction, your deposit is automatically refunded to you once the bidding ends.
3. Finances in place?
If you require a mortgage to buy the property, it is important to speak to a mortgage broker and or bank in advance to ensure you will obtain finance for the property. Otherwise you could lose your deposit.
4. Beware of charges on the property: Analyzing the Fine Print
This is the most critical step. In Spain, when buying at auction, you inherit any “prior” debts attached to the property (such as older mortgages or specific unpaid taxes).
Our legal team conducts a deep dive into the Land Registry Certificate to ensure there are no financial surprises. We identify and quantify the debts before you put a single euro on the table.
5. The 20-Day Electronic Bidding Process
The auction is 100% online and lasts for 20 calendar days. The strategic goal is often to reach 70% of the appraisal value. Why?
Because hitting this threshold usually guarantees an automatic and final award of the property, preventing the previous owner from introducing a third party with a higher offer.
During the auction period, the portal provides no information regarding the existence or absence of bids, nor their respective amounts, as such data shall remain confidential. Upon conclusion of the auction, the portal will only disclose the highest bid amount or, if applicable, state that the auction has concluded without bidders.
6. You’ve Won—What’s Next? (The “Remate”)
Once you are declared the winner, the judicial phase begins. After the Court notifies you, there is a window of 20 business days to pay the difference between your initial deposit and the final winning price. This final payment is technically known as “consigning the remate.”
7. Taxes and the Land Registry
After the property is paid for, the Court issues the Award Decree (the legal equivalent of a title deed). Before the house is officially in your name at the Land Registry, we must:
- Settle the Transfer Tax (ITP).
- Obtain the court order to cancel all subsequent liens.
- Register your title at the Land Registry to formalize your ownership.
9. Illegal occupiers in place?
If you are interested in an auction property, we would always recommend that you visit the property before you bid. You are buying what you see and if there are tenants or occupiers in place, you will have to take legal action to remove them.
Buying a property at auction is not for the faint hearted but if you have visited the property and have the finances in place, it could be a great purchase!
Contact our team of experts who can help you through the auction process.
