SPANISH PROPERTY FOR SALE - AND THE SPANISH BANKS

It is, of course, no secret that the banks in Spain are now the biggest owners of property in Spain. Naturally, this is not something that they welcome and, as a consequence, several have their own estate agencies (for example, Mediterráneo for the CAM bank and Habitat for Bancaja) to dispose of these properties.

The question is whether, as a buyer, you should automatically search for property in Spain by first going to a Spanish bank or their associated estate agency? Logically this would make sense - as you know that the banks will be invariably offering property at ‘distress’ prices. After all, what a bank wants is its money back i.e. the debt owed to it on a given property. This is irrespective of the true market value of a given property.

Normally, of course the debt on a property will be the mortgage which, in theory, should be less than the value of the property. So, in principle, buying from a bank should be compelling and allow you to pick up an almost guaranteed bargain. With so many properties for sale in Spain, it therefore also follows that, one way or another, you have a reasonable likelihood of finding a bank ‘distress’ property to suit you pretty much wherever you want to live.

However, life is rarely simple and just heading for the banks as your main ‘port of call’ for bargain properties in Spain does not necessarily make sense.

The trouble is that the debt on some properties can be greater than their present day value - given the fall in Spanish property values over the past couple of years. To state the obvious, if a 100% mortgage was granted on a property in 2007 (at the height of the boom) then the debt may be well beyond that property’s true market value in late 2009 (somewhere, possibly, towards the bottom of the Spanish property crash). So, to be told that you are buying a property only for a bank’s debt may be little more than ‘weasal’ words!

Certainly, you should be wary of taking on a Spanish property just for its bank debt value and you must research the prices of similar property within the same location within the general market place. You may find that they are being sold for less by mainline estate agents or private sellers.

That said, one of the advantages of buying a Spanish bank owned property is that the legalities are normally correct and in order. Furthermore, mortgages (sometimes with preferential terms) can sometimes be obtained.

Nonetheless, as I stress in my book ‘How to Move Safely to Spain’ – never forget that a bargain priced Spanish property is not necessarily a good buy. Indeed, the sale price of a property (anywhere in the world!) is only one of the many different criteria that make a property purchase a sound, long term investment.1