Property Repossessions in Spain

THE COMPLETE GUIDE TO HOME REPOSSESSIONS IN SPAIN

WHAT IS A REPOSSESSION IN SPAIN?

In common with many countries all around the world, the Spanish property market is suffering a major downturn and as a result many Spanish banks are repossessing properties. Put simply, a home repossession (or bank repossession) in Spain is a property where the owner has taken out a mortgage on the property and has not kept up with the agreed monthly payment to the lender (the bank) in which case the Spanish bank has seized or taken back the property (know as repossessing it).

SPANISH BANK REPOSSESSIONS ARE INCREASING

Home repossessions in Spain are increasing rapidly due to the deteriorating economy while at the same time mortgage costs are rising as are the basic costs of living i.e. inflation is rising in Spain. There are now many distressed property sales in Spain.

Electricity, gas, food and petrol prices have risen rapidly in Spain in the last year and so people with a mortgage on their Spanish property have found they have less money with which to make their mortgage payment to the bank.

Increases in the Spanish mortgage rates have also been considerable. Many people have bought property in Spain thinking low interest rates were here to stay. However the Euribor which most Spanish banks use to set their mortgage rates has been increasing as the European Central Bank seeks to keep a lid on inflation in the Eurozone.

Also unemployment has risen sharply in Spain. Many jobs in Spain are in the construction industry and many workers have been laid off.

Many repossessed properties in Spain are apartments. This is because many speculators put down a small deposit and expected to sell the apartment at a healthy profit when it was completed.

This worked for a long time but then suddenly the Spanish property market turned downwards and many buyers found the apartment was worth less than they what they had agreed to buy it for and so they either had to walk away and lose their deposit or try to keep up with the mortgage payments and try keep it going in the hope that over the long-term it would again rise in value.

But many of these property speculators in Spain have found they couldn't afford mortgages on two properties and so have had their apartments repossessed.

---

---

EXPAT REPOSSESSIONS IN SPAIN

Specifically, many expats who have moved to Spain for a better quality of life are finding their dreams turning sour as they face their dream Spanish property being repossessed. Many expats have moved to Spain and sold their properties in their home country. They have then reinvested the proceeds into buying their Spanish property but have of course needed to take on a Spanish mortgage in order to do so.

They have then found that it is hard to find good jobs in Spain when you are an expat and either don't speak Spanish or at least not like a native. Jobs in Spain are always going to be given to Spaniards when there is a choice so as the Spanish economy gets tougher there are less jobs and more competition.

Even when you find a job in Spain the pay can often be much less than you are expecting or hoping for. Many expats have also started a business in Spain and found it much tougher than they thought it would be. So slowly they have fallen behind on their mortgage payments and then found that the Spanish banks are very quick to repossess properties in Spain.

Many expats have put their properties on the market for sale but of course with the downturn properties are either not selling or are taking much longer to sell - and most importantly - Spanish property prices are going down - so this is putting property owners into negative equity - in other words their property in Spain is now worth less than they paid.

Also out of the blue the British pound has practically collapsed against the Euro, so if you are bringing money over from the United Kingdom to pay your monthly Spanish mortgage repayments suddenly you find you need much more money in order to meet the same repayment. In the last year this has added a 30% increase to your mortgage payments.

At the same time the strengthening of the Euro means it is now 30% more expensive to buy property in Spain from a year ago if you are a buyer who holds British pounds or US dollars - so everything is against the owner of a property in Spain. Now there are fewer buyers, many properties cannot be sold while at the same time many owners of Spanish properties cannot afford to keep up with their mortgage payments and face being repossessed by the banks.

Another factor which most expats in Spain are shocked by is the lack of equity in their properties. They think that because they have paid so much to the banks that they must have paid for much of the property by now. Not so! In the early years you are mostly repaying interest, only in the latter part of a mortgage in Spain are you really paying down the capital owed. So you could find that you can slip into negative equity in Spain and be in danger of repossession in Spain a lot easier than you can imagine.

HOW TO AVOID AND PREVENT YOUR PROPERTY IN SPAIN FROM BEING REPOSSESSED

Most property owners having their house repossessed in Spain feel a sense of embarrassment and shame but there are many valid reason that people have fallen behind on their mortgage repayments and subsequently had their property repossessed, these include divorce, ill-health or loss of employment.

When facing repossession in Spain the situation does seem impossible and obviously is incredibly stressful. The obvious and most common response is to go into a head-in-the-sand state of denial hoping that things will somehow improve. Sometimes you may be lucky and it does but most of the time not facing the reality of impending repossession in Spain only serves to make things worse.

The first and most important step is to talk to your Spanish bank as quickly as you can as it is possible to negotiate with them as long as you are not more than three months in mortgage arrears. At this point they will issue legal proceedings against you as a mortgage defaulter.

Before that time options to avoid being repossessed could include handing in the keys or extending the mortgage over a longer period thus reducing the repayments or making the mortgage interest only. These however are short-term fixes because obviously you still have to make the new lower monthly repayments, plus over the long-term you will have to pay much more for the loan or with interest only, at the end of the mortgage you would still have to pay back to the bank the capital.

REPOSSESSION AND JUST HANDING IN THE KEYS

Many people think repossession in Spain is different to other countries. Many believe you can hand in the keys to 'your' property in Spain and walk away with no consequence. Although this has happened in the past, times have changed and this really needs clarification.

If you bought your property in Spain a long time ago and it has gone up in value then you may well be able to just hand in the keys if you can't keep up with your mortgage repayments because the bank will be able to take back the property and sell it at auction and still recoup the amount still owed - however that is not going to be the case if the property has negative equity.

With property prices in Spain in steep decline, more and more property is slipping into negative equity. Generally the peak in Spanish property prices is acknowledged as 2004. Buying then or after and you are likely to be in negative equity.

If the bank repossesses your property and then the bank sell it for less than you still owe them, then you are liable for the difference even if you leave Spain - the bank can (and now typically does) chase you in your home country.

HOW TO FIND AND BUY HOME REPOSSESSIONS IN SPAIN

Many people looking to buy property in Spain are looking to find bank repossessions in Spain. This is because most Spanish property buyers associate the word repossession with cheap Spanish property or Spanish bargain property. In virtually every case they are correct - repossessions are often available at a deep discount to the true value of the property.

Of course every buyer in Spain wants to buy at below market value - so how do you find distressed property and repossessions in Spain?

Spanish Property Auctions - Spanish banks and many private sellers who are facing repossession - and must sell - will as a last resort put their properties up for auction. Many bargain Spanish properties will be found at these auctions. However you can also find yourself picking up a bad property so be very careful and do your research. A very cheap Spanish repossession may be in need of lots of work, both structurally and cosmetically. Obviously these repossessed properties are unlikely to have been looked after and had money spent on them for a long time.

Repossessions Direct From Spanish Banks - This could be your best bet to grab a bargain property in Spain - to physically walk into a Spanish bank and talk to the manager. Many people are unaware of this but many Spanish bank branches are franchised out. This means that the manager has a great deal of control over the local activities. If he has repossessed properties on his account book then he will no doubt be keen to get them off the books. The only problem you face here is getting to the front of the queue ahead of the local Spanish businessmen. But now there are so many repossessions in Spain this is less of a problem.

Direct From Property Owners - If an owner of a property in Spain is falling behind with their mortgage payments then clearly they know they are in danger of having their house repossessed.

These owners are often referred to as distressed sellers. They therefore must sell and as keen sellers you will certainly get a bargain property if you negotiate correctly.

But how do you find these distressed sellers? Well it won't be obvious but when you are looking for property, look for private seller adverts in local newspapers, many of these sellers will be distressed sellers anxious to offload their property quickly before it goes down further in value or that they fall further behind in mortgage arrears.

Look for Spanish property with estate agents also and look for those properties advertised as price reduced or low priced for quick sale. Ask the estate agents too, they may well tell you which sellers are likely to accept offers well below the asking price.