Spain’s property market is replete with discounts and deals, so it’s no surprise that British buyers are heading for the auction house.
The conundrum facing anyone needing to sell property in Spain may be obvious to many, but it’s an increasingly confusing market for returning buyers, too. Overseas property trade magazine OPP recently reported that auctions have now become the first choice for distressed property sellers and for this reason, if you’re considering auctions, you need to be clued up on what makes a sensible purchase and what good value really looks like.
Inez Rix, director of Direct Auctions, based in Marbella, says: “We used to be the last chance for sellers – now we’re often the first port of call.” However, Rix added that the auction market has not been flooded by repossessed properties. In December, A Place in the Sun was forced to cancel its first Spanish property auction in London because of a lack of bidders, with only 20 members of the public attending. Andy Bridge, MD of APITS Ltd., told OPP magazine, “There’s no definitive answer as to why more people didn’t attend… maybe our audience finds the idea of an auction too intimidating, maybe the properties did not appeal at the reserve price or maybe people think the market has further to drop.”
But if you are confident about attending an auction in 2010 or 2011, “be sure you know what you’re buying,” says Mark Stucklin, head of Spanish Property Insight.com. Nick Snelling, author of How to Move Safely to Spain says, “The absolute key is to buy slowly and carefully from a position of knowledge. Never ever hurry or be pressured,” he says. “All the feedback I’ve had from my research in to the use of auctions has been negative. Cheap property, at auction or otherwise, is not always the same thing as a sound buy and so taking time to buy carefully is essential. Auctions can be places of intense pressure.”
Mark Stucklin alerts British buyers to the need to focus on British-organised commercial auctions, as “the traditional Spanish auctions are for the old hands, the professionals. Generally they have been a final repossession procedure, a judicial procedure; an insiders’ game. Don’t just go and see if you can get a bargain. Visit the property and do as much due-diligence as you can before you commit to anything. You mustn’t go in ignorant – and remember that reserve prices can often exceed the true market price. Auctions are now being presented as a new way to buy, but bear in mind that they’re actually a good way to sell distressed properties.”
Karen Mulcahy, MD of DC Invest Ltd., works with a number of agents in Spain, and believes that the traditional agent-led purchase is safer and making a good recovery. “I have received more than 130 new leads since September, all seeking advice and professional guidance. Clients often need the reassurance that goes with many years in the industry, both from the UK support side and from the Spanish agents involved in the client educational visit, which not only includes showing property but advising on area, schooling, taxation, becoming registered etc. None of this is accessible under auction circumstances.”
Chris Garwood, of Costa Blanca Select, agrees, saying “There is no ‘goodwill package’ with an auction purchase, no one to talk through the individual nuances and idiosyncrasies of an unfamiliar property; no instructions for the boiler, no direction to the stopcocks!”
But if you are prepared to do your homework, visit property, assess the comparables and you feel clued up on the market, the commercial auction could still work well you. Paul Charlton, of Property Ibiza Auctions recently announced the company’s first auction, to be held in April at the five-star Aguas de Ibiza Hotel. He says, “House sales fall through all too often; however at auction once the hammer falls, the successful bidder is legally bound to complete the sale.”
As Paul highlights, buyers stand to gain an instant purchase with quick completion in return for a non-refundable deposit paid on the day. Despite a disappointing turnout at London-based auctions, those involved in organising auctions in Spain are upbeat about the potential for closing sales. Warrick Wincup, MD of Direct Auctions, said: “Our September auction had 12 properties for sale and sold six. Our November auction had 12 for sale and sold ten.”
Inez Rix believes that auctions show greater transparency and open up the trading floor. “We let the buyers decide if something is a bargain or not. We don’t set out to persuade people; we inform them, source the documentation they request and organise a viewing. We don’t push and we put any offers that come in before an auction to the vendor, no matter how low they are.” She points out that contrary to some of the PR talk about auctions, Spanish law does not facilitate a secure sale just by winning a bid at auction. She says, “You haven’t actually bought a property until it goes to the Notary.”
Rix affirms the importance of research. “It’s vital. Each vendor has his or her own room for negotiation and there is no particular region where you’ll be sure of finding a bargain. Sensible buyers, though, know what they’re doing and often go to auction to see what doesn’t sell – and then they come in with a much lower offer. It’s a psychological game for many buyers.”
But if you want to play, Patrick Robinson, Managing Partner of Marbella Mortages.com, stresses the importance of having finance in place before bidding, saying, “Though vendors don’t like it, don’t pay any money until you have your mortgage approved. Negotiate. Pay a conditional holding deposit in to a lawyer’s account.
“Getting a mortgage is more difficult now. Spanish lenders are assessing applications on the basis of finding reasons not to lend rather than how it was two years ago, and the choice of lenders who are willing to give 70% of the purchase price are remote now. Most have dropped their limit to 60% and below. Solbank and Banco Halifax are probably leading the way in terms of offering buyers higher loans.”
If you’re financed and ready for a bidding war, Martin Brown, owner of Portfolio-Service.co.uk, advises buyers to treat every property on its own merits. “I spend all my time looking for bargains, and that means property with a decent value, bought several years before the boom and with a small mortgage. Check with the land registry for any debts owed against the property, to help you determine how realistic the reserve price is in terms of true value.”
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