Foreclosure in Mallorca is not uncommon in times of economic hardship. Mortgages can quickly no longer be covered and the banks file an application for foreclosure with the Mallorcan enforcement courts. All legal principles and procedures for the foreclosure of properties in Mallorca, also known as subasta judicial, are laid down and regulated in the Ley de Enjuciamiento Civil (Spanish Enforcement Code). How does a forced sale in Mallorca work and can property buyers really get a bargain on houses and apartments? This is what we at Neptuns International Real Estate look at in this article.
What is a forced sale in Mallorca?
Whenever the installments of a mortgage can no longer be paid, a forced sale is carried out, in Mallorca and in Germany. This is an enforcement procedure. Through the auction of a property and the resulting proceeds, the creditor is to be satisfied. The process is a sovereign act of the state.
How is a foreclosure auction initiated in Mallorca?
In the first step, the enforcement court requests the list of encumbrances from the land registry and enters the forced sale of the property in Mallorca in the land register. Then the parties - creditor and owner/debtor - are informed and requested to present the notarial deeds of acquisition or the legal proof of the right of possession. Subsequently, an expert is hired to determine the market value of the property.
What is the procedure for a forced sale in Mallorca?
The official date of a forced auction is announced in Mallorca 20 days before, along with sufficient information about the property in the Spanish Official Gazette of the Autonomy. Participation in a forced auction is open to both local and foreign property seekers. The auctions have a public character. Each bidder must show identification, accept the general terms and conditions and pay a deposit of the appraised value. Those coming from abroad need a Spanish tax number (N.I.E. / N.I.F.).
In a forced auction in Mallorca, the winning bid is the one that submits a bid of at least 70% of the appraisal or auction value. This is the lower auction level. With the proceeds the debts, which lie on the object with the creditor, are paid off. If the highest bid is below 70%, the debtor has the option of naming a bidder within five days who will settle the minimum claim, or the creditor acquires the property himself at 70% of the appraised value.
What happens after a forced sale in Mallorca?
If a bidder is successful in a forced sale in Mallorca, all claims are extinguished. The proceeds cover these and are used to satisfy the creditor. What remains is used to satisfy all subordinate creditors in hierarchical order. The new owner can then use the
The court will make the entry in the land register after the award decision. For the amount of the surcharge of the foreclosure, the real estate transfer tax (ITP) is due in Mallorca. Furthermore, the registration fee is added. You pay the purchase price maximum 20 days after the knockdown. From this the deposited security is deducted. Thus, only the purchase amount less the deposit is to be paid.
Please note: It is important to know whether a first or subordinate charge is to be settled at the auction. In the case of a first-ranking charge, the property is then debt-free. If the forced sale only involves a subordinated charge, all other existing charges remain in place and you take them over. In some cases, the purchase may still be worthwhile. However, you should bid together with an expert. Otherwise it can quickly become expensive.
Does a foreclosure auction in Mallorca bring benefits to real estate seekers?
Foreclosure in Mallorca has the advantage that the price of a property is significantly lower. In addition, the value is based on an expert opinion, so it represents the actual current value. Although the taxes are the same, you pay less because of the lower purchase price.
What are the disadvantages of a foreclosure for real estate seekers in Mallorca?
In the case of a forced sale, it is often not possible to inspect the property. You can express a wish to inspect the property, but this does not have to be fulfilled. The creditor has no right of access. In some cases, complications with the eviction are not excluded. If the property is a rented property, the tenants have a normal right of termination within the statutory period. Furthermore, in the case of a forced sale, you do not have any claims
or guarantee on the property in Mallorca. This means that construction defects or inherited liabilities are also taken over. Therefore, it is of immense importance to check a property before the auction as best as possible.
Are you interested in a forced sale in Mallorca? Get in touch with us at Neptunus International Real Estate. We will help you with all your questions and support you in your search for a property in Mallorca. Due to the favorable location, it does not always have to be a property from a forced sale in Mallorca. Together we will find exactly the right finca, the right apartment or the individually plannable Plot for you. Get in touch with us now.
