Bank repossessions in Corona times?

Lots of clients contact us in their search for cheap Bank repossessions on the Costa del Sol. Is a bank repossession normally a good deal? Or not? Lets find out! Shall you buy bank repossesions in Spain?
I am writing this in the beginning of September after what has been a very strange year so far indeed. After the spring quarantine we were able to open our offices again in May and start what is called the “new normal” with lots of hand sanitizer and facemasks. During the summer we actually sold more property than we normally do. July 2020 was the month of July when we sold the highest number of property since we stared the company in 2003. Of course, some of that business was a tip over for the spring, but the interest has been very high also on our ads, website and in our social media such as Facebook. Why? Sincerely I have no explanation for this as the logical conclusion would be that people would wait buying property in times like this. But it has proven that property is seen as a solid investment and property prices have actually gone up quite a bit on the Costa del Sol during these months, here are a few articles with more statistics.

Article from El Confidencial  – prices up 3,4% in Spain August 2020

Article from La Opinion de Malaga – prices hits a maximum in Malaga summer 2020

Buy Bank repossessions in Spain

So, back to the core issue! I have tons of calls and clients coming in with questions like: “Do you have any good bank repos? There must be lots of them now after this Corona crisis!”
The answer to question 1 is : No. The answer to question 2 is . No.
The following question we get is “If you are such a experiences, licensed and established agent – why haven’t you got the great bank repossessions I see advertised on the internet? If I search “buy bank repossession in Marbella on google I get all these ones up – look 70% discount”.
My answer – “Great! Click on it and go and see them – if they exist. “

Google search “Buy Bank repossession Marbella”

So last week I sat down together with a client and we searched “Buy bank repossession Marbella” on Google. We looked through the first 6 organic results on the first page and the client was shocked.
1. The first page we clicked on had a text about that the agency worked with all banks and had all the best bank repos. But strangely enough they had none advertised.
2. The second one had a nice looking landing page advertising several really good looking properties with discounts of up to 59%. That looked promising, but when clicking on the properties to see more photos the only thing that came up was a contact form to leave your details. When filling in the form we got a note saying “Thank you we will be in contact” – no further info. When they got in contact we were told “they were only examples”. Fake advertising!
3. On the third page the agent claimed they had “first pick” on Bank repossessions and there were a few advertised mixed with normal resale properties. We saw two that looked interesting, but after looking into it it, the first one was’t listed with this agent but another via the mls network and it wasn’t available. The second one was also with another agent and impossible to view.
4. This page had a short introduction but the properties advertised were from other agents again. Not own listings. Funny as they claimed to be locally known for bank repossessions.
5. This agent just showed a page with their cheapest properties. A storeroom in Fuengirola being listed as number 1.
6. This page actually looked good and showed things that looked very interesting! But when opening the first one up it stated “Future release. Not on the market yet. Register now,” which did not sound so encouraging. When clicking on the next one we were met with the text “The bank doesn’t pay us any commission so we charge our clients 2% on the sales price”. That is a praxis that is actually illegal in Andalusia as you as an agent has to have a signed permission from the vendor to advertise a property.

We could go on like this but to save this blog getting too long I can say that we did not find anything of interest! Only agents trying to get contact details from clients in order to offer them other things. Very sad and frustrating that people actually fall for this.

OK, so if we go directly to the banks pages? What do we find there?

So to do this we went on the 4 mayor sites for bank repossessions and searched for bank repossessions in Marbella. We took the best ones we found and compared them to what we could find on the open market.

1. Solvia is the Real Estate part for Banco Sabadell and that also handles property from SAREB (the governmental “bad bank” that was used in the credit crunch to buy the banks toxic assets).
By searching Marbella they showed 59 properties and I can say, after 19 years as an estate agent on the Costa del Sol, that none of them were cheap nor in nice locations. One of the best ones we found was a 2 bedroom apartment in El Soto de Marbella with a price “from” 162.000€. However not exactly the best unit in the development and we quickly found better ones at similar prices on the open resale market.

2. Altamira is the real estate section for Banco Santander and Banco Popular (which was absorbed by Banco Santander). In our search for Marbella properties we could actually search via an interactive map which was handy. However the real location of the properties were not always in the right place. The search did not come back with much as most to the results were in Estepona and Benahavis. In any case the “best” results we found were a 2 bedroom apartment in Urb. Lomas de Conde Duque in Benahavis for 273.400€ – hardly a bargain! We found similar properties on the open re-sale market for under 200.000€. And we were almost laughing when we found a 1 bedroom apartment in Calahonda Royale for 178.100€. – on the open resale market we found two similar units for 129.000€, another one for 130.000€, a 2 bedroom apartment for 158,000€ and even a 2 bedroom penthouse with roof terrace for 176.000€

3. Haya Real Estate sells property for Bankia. On this page we could only search for the province of Malaga or by post code. We searched by post code and got ZERO results for Marbella. But when searching the other way we did find one in the centre of Marbella in the building Marbell Centre, close to the beach. 

The property looked good at a glance as it was advertised with a 35% price drop from 521.500€ to 340.500€! But then we found a surprise in the description – “se vende la nuda propiedad con usofructo vitalicia a tercerras personas” which means the property is sold with tenants staying for free for life! Who would even condisder buying a property like that? Hardly a bargain…

4. Servihabitat sells property for CaixaBank. By far the best bank page! Easy to find and they had two pages of relevant property in Marbella. We found a 2 bedroom duplex in the ”Marbella House” complex for 370.000€ which was 50.000€ cheaper than what we could find on the open re-sale market. But we have to say that the one on the open market came in perfect condition while there was a very suspicious hole in the ceiling on the bank repo. So we clicked on it and filled in the contact form with the text ”Want to view this week. I know the complex”. They called back wihtin a few hours and an appointment was booked.
For the rest we didn’t find anything really interesting here.

So conclusions? Are bank repossessions cheaper or not?

In my professional experience as a licensed real estate agent active since 2001; No.
In my personal experience a s a property investor: No.
So, no Bank repos are generally not cheaper than other property and is almost always in worse condition due to the long time it takes the bank to actually get their hands on the properties.

Why is that? How does a bank repossession procedure in Spain work?

If you want to buy bank repossesions in Spain, first of all you have to understand the procedures in place for a bank to actually repossess a property. Since the new mortgage law came into place as of the 16th of June 2019 the protection of the loan taker is even higher than before. Now the loan taker has to owe a minimum of 12 monthly payments or 3% of the capital before the bank can start legal proceedings. That is for the first half of the mortgage term, after half the mortgage term has passed (i.e. after 10 years on a 20 year mortgage) it goes up to 15 monthly payments or 7% of the capital. When the clients is finally in ”enough debt” for the bank to start the legal proceeding it will take between 1,5 to 2 years at least before it comes up in court and a public auction can be organized. At that point the money the bank is owed, taking into consideration the legal fees, unpaid mortgage payments plus penalty fees, has soared and can even be higher than the actual market value of the property. The bank will put a minimum acceptance bid on the auction with that number in consideration. To give a fictional example to illustrate:
Mr Bruce Banner has a property worth 300.000€ with a mortgage of 240.000€ on 15 years repayment with 3% interest which leaves him with a monthly payment of 1.933€. Mr Banner has an unfortunate work accident and disappears, hence stops paying the bank. The bank will have to wait 12 months before taking action. When the case finally comes up in court two years after the initial year there are 36 payments owed; 69.588€ plus penalty interest and legal fees of approx 25.000€, total 94.588€. So in the banks view this property has cost them 240.000+104.588= 334.588€ and that is what they put as a minimum in the auction.
But the property was only worth 300.000€ initially so needless to say no one buys the property in the auction but the bank takes possession and put the property in their portfolio.
As you might suspect the bank does not want to loose money – at least not on paper. And the banks are not distressed to sell their assets at a loss. So the normal thing for the bank to do is to wait for the market to go up as well as writing off part of the debt year by year. The bank will also offer preferential finance for a person buying one of their properties, for example 100% finance, and hence reaching a part of the market that are otherwise excluded from purchasing property. That is the low income families that do not have the capacity to save up enough money for the deposit needed to buy a property on the open market.
For example. The bank sells a property for 150.000€ while the exact same property next door is on hte market for for 120.000€. The bank offers 100% finance on their property but only 80% on the one on the re-sale market.
So the buyer would only need the 10% in closing cost to buy the bank property; 15.000€, while they would need 20% plus 10% closing cost to buy the cheaper one on the open market; 24000+120000=36.000€. For a family that might only earn 1000 – 2000€ per month they will have no other possibility than to buy from the bank even though the price is actually higher.
The banks profit is double! They sell at a higher price and gets a mortgage.
This sounds crazy but it is the sad reality. The bank always wins!

So if you thought you could beat the bank, know that you have a better chance in Monte Carlo than in Spain!

So if you are unlikely to find a bargain bank repossession where can you find a bargain in the Costa del Sol property market?
My best piece of advice is to first locate the area you want to by in and then speak to the most established and experienced Estate Agents in that area. They will get in distressed property sales from inheritances, divorces or simply people who have had enough, or are too old to enjoy their holiday home. A lot of the time these properties do not even hit the markets but are sold directly on the agents list of existing clients.
When I look for an investment property myself, I always start calling colleagues to see if they have anything special coming up and sometimes they do.

By Christofer Fogelberg

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