In the last blog post I talked about why you probably don’t want to buy a repossessed home through a bank in Spain. This is true for about 95% of that type of stock but every now and again some interesting ones come up. This is because you need to understand the different types of property that the banks have on their books and how they came to have them.
Therefore you must bear in mind that not all bank owned property in Spain is repossessed stock. They also have two other main classifications of property and these can be found at decent prices. The advantage that they have is that as they are on the bank’s books the funding is in place just like in the case of repossessed property in Spain that belongs to the banks.
The two categories are:
1) Property given back to the banks in “Dación en Pago“.
2) Property that the banks are selling because the developers they funded have gone out of business and the property is therefore commercialised by the banks
Firstly what is “Dación en Pago“? This is when somebody is having problems paying the mortgage so they offer the bank the property in return for cancelling the loan. The bank has certain stipulations before they allow this, the debt must be less than 80% of the current value of the house and the debtor must be able to prove a change in circumstances that affects their ability to pay, and the rules are getting tighter as the banks don’t really want more property on their books. However, previously many houses and apartments in Spain were given over to the banks in this way.
Properties brought into the banks’ control in this way are usually sold off at debt value, no associated lawyer’s costs or interest added on, and therefore depending on the percentages involved they can be considerably below market value.
Secondly, there are new build properties in Spain that are now being commercialised by banks after taking over the sale process from the developers who were building them or even have finished construction but could not sell. Again quality and price vary enormously but there are some decent deals out there where the developer has closed down and the debt level was comparatively low. Banks can sell these properties at debt price.
The problem with many new build properties of course is that the reason the developer could not sell them was because of location issues. They are not in the areas that would interest the vast majority of buyers. However some are. Also some come back to the banks due to the absolute intransigence and stupidity of the developers, they refused to lower the price and cut their margins or even sell at cost price meaning that they got themselves into a situation where they lost the properties to the banks.
Now of course we have some of these properties for sale. We do a scrupulous check to see whether the properties offer value and the terms and conditions of the mortgages are good. If you want more details of what we have just send me a mail to [email protected] or hit me up on Twitter @grahunt and I will give you a very special link to download our PDFs of available bank owned properties.