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General Home Loan

Bank auctions, do they suit you?

If you are thinking of buying a house or an apartment, you have surely heard of bank auctions. Buying a property is not easy, from searching the area and finding the ideal place, to having enough money to achieve it. The illusion of having a house of their own makes many people resort to bank auctions or real estate auctions because the properties have a much lower price in the market. 

However, it is important to know both the advantages and the risks involved in buying bank auctions. This will prevent you from having a negative experience or even being let down. 

What are bank auctions?

A bank mortgage auction is a legal process through which a property whose owner was sued for not paying the mortgage is auctioned off. This is because of the thousands of credits that banks deliver each year, many people are unable to make the corresponding payments. The mortgage auction works as a legal mechanism to recover the properties that were left as collateral in case of non-payment. In this way the banks recover part of the investment or credit granted.  

There are two types of bank mortgage auctions: 

  • Judicial Auction: In judicial auctions, the properties are part of a public auction before a judge. To participate it is necessary to deposit 10% of the value of the property through Bansefi. The price of the house is determined by the bids on the day of the auction in court.
  • Bank auction: In bank auctions, credit institutions offer properties directly or through legal offices.

If you have ever looked for houses for sale on real estate portals, you have probably noticed properties published at very low prices with the description of “bank auction”. These properties are priced from 40% to 60% off the total price. This is the main advantage of bank auctions, which is why they are often purchased as an investment to remodel and sell. However, if you don’t pay attention to the details, you may find yourself with more disadvantages. 

What are the risks?

The first thing that must be taken into account is that it is not possible to visit the property since it is most likely still inhabited by the debtors. This means that the state in which it will find itself once the trial is won is unknown. Another disadvantage is that the extra expenses that arise must be absorbed:

  • As it is not possible to know if the property is up to date in the payment of services such as water, electricity and predial, they must be considered within the extra expenses. 
  • The appraisal of the property must be paid.
  • Take into account the payment of the deed to change the name of the owner.
  • The fees of the notary public and lawyers hired for the trial must be covered.  

Also consider that you cannot pay for a property at a bank auction through a mortgage loan. You must have the total money that is being requested in cash, in addition to the extra expenses mentioned above, so the price of the property will most likely be higher than you expected.

Another factor that you must consider is that many times the occupants of the house do not leave even when you have already legally acquired the property. In this case, you must hire a lawyer specialized in evictions so that you can occupy it yourself. Keep in mind that this type of process can take months or even years. In most cases, after covering the cost of the property, it is delivered in a period of 1 to two years, although it may be less time, depending on the legal circumstances in which it is found. 

It is very important that if you are going to buy through a bank auction, you always do the process through a lawyer and a notary public. This is because there are many ghost companies that ask for advances of up to 50% and then disappear with the money. 

Are bank auctions convenient?

In conclusion, a bank auction is a good option if:

  • You have enough cash to cover the cost of the property plus extra expenses and notarial expenses that arise from it. 
  • You are not in an urgent need to buy a property, so it is possible for you to wait 1 or 2 years for it to be delivered to you. 
  • Accounts with reliable advice from lawyers and notaries to carry out the process, avoiding being a victim of fraud.

Start by visiting our apartments for sale in Naples and schedule a virtual tour. Our advisors are always ready to answer all your questions and guide you throughout the process.

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