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KEY POINTS: What to know before buying a property at auction in Spain

There are real bargains available when buying a property at auction in Spain, but you need to be pretty savvy in order to make a success of it. Here are nine important points to keep in mind if you're considering buying a house this way.

Buying a property at auction in Spain
Things you need to know about buying a property at auction in Spain. Photo: OLIVIER CHASSIGNOLE / AFP

In Spain, when people or businesses are no longer able to pay their mortgages or debt, the bank will usually repossess their properties and then sell them at subastas or auctions.

For some people the practice is ethically debatable, for others it’s just another example of what constitutes a competitive property market.

While buying a property at auction can be risky and you need to know what you’re doing, it can also be a good way to grab a bargain.

Here are some crucial points you need to know about buying a property at auction in Spain to decide if it’s right for you.

Keep in mind, in order to buy a property at auction in Spain you must be of legal age and have the capacity to enter into a legal transaction.

You must also have the financial capacity to purchase the property or to be able to get a mortgage or loan to do so.

1) Generally, prices are well below market value

One of the main advantages of buying a property at auction is the chance to grab a bargain and buy a property at a low price. According to real estate giant Idealista, you can expect to get around a 15 to 20 percent discount.

Keep in mind that you will not always get a property below market value however, particularly not when it comes to luxury properties. You also need to think about how much it will cost you to renovate too, as many of these properties are not in good condition.

2) You need to put down a deposit

Usually, you are required to put down a deposit before you make a bid on a house. According to real estate agency Rentalias, this is typically around five percent of the starting price of the property, however many just ask for a flat fee of €3,000.

If you win the bid, you will have to pay the rest of the money within a certain time frame, usually around 15 days. However, if you do not pay the rest of the money by the deadline, you will lose the deposit.

READ ALSO: EXPLAINED: What are Spain’s rules and taxes for Airbnb rentals?

3) There are some safeguards 

Even though buying a property at auction can be risky, there are several safeguards in place. You can ask to inspect the legal documents for a property ahead of time (around 10 days prior), so you know what you’re bidding for. You can also arrange to visit the property before the auction.

In order to feel secure in your bid, you should have a full survey done on the property. If there are any major problems that were not disclosed during the auction or in the paperwork, your deposit can be refunded. Remember to always get a legal expert to help and advise you.

4) You need to consider the condition of the property

The best bargains are on apartments and houses that need renovating, but you may not realise the extent of the work that has to be done or have the budget for it. Make sure ahead of time that you know what you’re getting into and how much work the property will require.

5) Be aware of how the property is being sold

Houses are sold at auctions in different ways, some are sold with tenants already in them, meaning you can’t use the property for yourself. If you want to live in the property and make sure there are no tenants, you must choose properties marked as ‘Completa’. If not you may have to go through the complicated procedure of evicting them. 

READ ALSO: How the right orientation of your Spanish home can save you hundreds on energy bills 

6) You need to know what the legal situation of the property is

Many of the properties sold at auction have complex legal issues because of the previous owner and their debts and may have several mortgages attached to them. While the mortgage should be wiped before the property is sold, if it has several, this can not be guaranteed. You should request a certificado de cargas to find out how much debt there is if it’s not included in the information. 

The property will usually also have community fee debts that haven’t been paid. Typically as a new owner, you can expect to pay the last three years of community fees, plus the current one. It can sometimes take a long time and a lot of money spent on lawyers to fix these legal issues.

7) All is not lost if the property doesn’t sell

If the property doesn’t sell at auction or you didn’t feel confident enough to make a bid at the time, you can always make a bid afterward and you could still be in with a chance.

8) Know where to look for auctions

There are several places you can look for housing auctions. Sometimes real estate agencies will have a few apartments up for auction, but the majority of course are sold by the banks. The main place to look is the government’s state auctions website Portal de Subastas here. New properties are posted on here each Tuesday morning at 9am when you set the filter to show properties. 

9) You will need to secure a mortgage very quickly

If you need to get a mortgage for the property, you will have to do so very quickly because you usually have a short time in which to pay the rest of the money. This can be incredibly difficult to get done so fast, if not impossible. Although pre-approved mortgages do exist in Spain, most people don’t do it this way and have to find a way of raising a large amount of cash in a short time. 

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How to turn a bar, office or shop into a residential property in Spain

Commercial properties in Spain can be a lot cheaper than residential ones, but it’s not as straightforward as buying a former restaurant, office or shop and moving in. Here are the steps to follow and what you need to be aware of.

How to turn a bar, office or shop into a residential property in Spain

One of the tricks budget property hunters in Spain have been using in recent years is buying a local (commercial property), oficina (office) or nave (industrial unit) and transforming it into a vivienda (residential property) to live in or let out. 

It’s a trend that’s roughly doubled in big cities such as Madrid and Barcelona in the last five years. 

Buying a commercial property can work out to be 50 percent cheaper than a flat or house in Spain and there can be other advantages such as it being more open plan than Spain’s typical corridor-themed apartments as well having more money to invest in the renovation. 

Is it possible to turn a commercial property into a residential property in Spain?

Yes, in theory it is, but it’s not always possible. The rules relating to a change of property’s usage from commercial to residential or vice versa are determined by each municipality in Spain, so before you rush to buy un local, you have to do your homework first and be aware of some of the most common pitfalls.

It could be that the limit of residential properties per hectare has been surpassed already, or that without some major changes the property doesn’t meet the standards of size, rooms, space, height, layout, ventilation, air extraction or light of the town or city hall. 

It isn’t the most straightforward process and depending on the property and the individual municipal rules in place, it might just not be possible to live in the property or rent it out to others.

Living in a commercial property is illegal and may cause you problems such as not being able to activate water and electricity or register your padrón at the town hall.

Despite all the paperwork needed, flipping a bar or office and turning it into a home usually works out cheaper than buying a residential property in Spain. (Photo by ANDER GILLENEA / AFP)

Don’t be discouraged however, as in many cases it is possible to change the use of a property from commercial to residential and in regions such as Galicia authorities are currently facilitating the process to address the matter of empty abandoned stores and the lack of well-priced accommodation for young homeowners.

What are the steps to follow in Spain to change a property from commercial to residential?

Check the statutes of the community of owners: In order to make any changes within the community of neighbours, permission must be requested in advance. Beforehand, you can ask the comunidad president for a copy of the community statutes to see if the change of use from commercial to residential is mentioned.

READ ALSO: ‘La comunidad’ -What property owners in Spain need to know about homeowners’ associations

Request permission from the town hall: After getting the green light from la comunidad, you have to go to the ayuntamiento (town hall) of the town where the property is to find out if it’s possible to add another residential property to the finca (building). 

Even if this is confirmed, it doesn’t certify that the change of usage from commercial to residential is allowed, for which the town hall will ask you to provide an architect’s proyecto técnico or feasibility report based on municipal urban laws. You will only be allowed to swap from commercial to residential if the project meets the safety and habitability requirements of the Technical Building Code (Código Técnico de la Edificación).

Get the Building Licence: Known as licencia urbanística or permiso de construcción in Spanish, this is an official document required by the town hall for you to carry out a construction or renovation project. In other words, you’ll need this municipal authorisation to begin work on your future residential property, whether it’s major work or minor . 

Get the Certificate of Habitability: Once the renovation work is complete, you’ll need the cédula de habitabilidad to be able to move in or let the property out . The conditions for this are regulated by each regional government and again it’s an architect who must prepare a technical report in order for a town council technician to issue the certificate of habitability.

The certificate we need for the change of use is that of primera ocupación (first residential occupation), which has to include the usable surface area of ​​the home, rooms, address, location, maximum inhabitants etc.

How much does it cost to transform a commercial property into a residential one in Spain?

If for example it’s a 80m2 property with two rooms, the total would be about €50,000, according to property websites Idealista and Habitissimo, with the bulk covering renovation costs (€500/m2= €40,000) and the rest going to cover permits, architecture costs and taxes.

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