Are the best Spanish property deals repossessions?
May 14, 2009 by OPPE News
Recently there have been many stories about distressed Spanish Property sales and Spanish bank repossessions from a variety of real estate companies. So the question is: Which represents the best value: A distressed sale, or a bank repossession? To find out, we asked Spanish Hot Properties Managing Director, Nick Stuart.
“Firstly you have to understand the difference between the two types of property sales. A bank repossession is just what it says on the tin. The bank has repossessed the property and accrued hefty costs which it then adds to the price. Nearly all Spanish banks try to recoup 100% of the total debt. Distressed sales occur because the owner has to sell quickly. This can be for a variety of reasons, but in my experience, the best deal to look out for is when the owner is in the last three months before the bank repossesses the property”.
“Bank repossessions don’t always represent good value, especially if the mortgage was a high loan to value. Some people borrowed more than the purchase price and when you add repossession costs to the outstanding…need I say more. There are very few bank repossessions under €500,000 in Costa del Sol that represent good value. However if you look above that level there are some very interesting properties”.
“A recently example of a bank repossession was a Villa in El Rosario that sold for €715,000. The property was valued by the bank at €1.8m with a more realistic valuation being €1.35m. The property needed €100,000 spending on it, and when complete the new owner will have a property worth at least €1.5m. Nearly double what they paid. The majority of distressed sales come at the bottom to middle end of the property market where the owners are desperate to sell”. So in conclusion you are probably better off with a distressed sale if your budget is under €500,000 and as your budget increases then some Spanish bank repossessions start to become more interesting”.
In conclusion: If you have a budget that stretches beyond €500,000 look at Spanish bank repossessions. Under that level you will probably find the best deals are in distressed sales.
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There’s clearly a 2 tier market in Spain. We see 2 levels in the market here in the Costa Blanca. Property has always been a bit more expensive than other areas and the majority of owners don’t need to sell. Occasionally we come across someone who needs to sell at any price, but they are still few and far between…unfortunately.