A common scenario is to auction the properties and offer them on a 100% ( no deposit) low interest rate mortgage-one where just about anyone can qualify for. This may sound great so far, however, things that sound too good to be true often are, and this is definitely the case here.
Two identical style apartments in the same street, one up for sale by a private vendor, the other a bank repossession.The property will have been repossessed at about €120,000 value originally. It is priced at €160, whilst the private sale €110,000. The bank sale will go ahead whilst the other private sale languishes on the market for months, or in some cases years.
Because banks are only granting mortgage lending on their own stock in the main. Even if you are a good prospect on paper. The only way to buy a Spanish property without being ripped off by the bank is with cash and by negotiating with the vendor direct. Those buyers are few and far between.
In some cases the banks will offer 70% loan to value mortgages, but, in effect this means by requiring such a big deposit the open market property will actually cost more than the bank repossession. Add to that the excessive interest rate and it’s plain to see the measures at which banks are prepared to go to be rid of this housing stock.
Consider The Future
If a buyer purchased a property with these bank terms and for some reason had to sell, they would be in the same position as the vendor above- unable to sell because of bank competition. To add insult to injury, in Spain, following article 1911 of the Spanish Civil Code, the mortgage deed makes the buyer liable with all their current and future assets.
Effectively, defaulting on a Spanish mortgage allows the bank to not only seize the property, but if there is any negative equity, the bank can pursue you for the outstanding debt even in your home country. Court cases are continuing in the UK around this legal fact now.
*extracts sourced from houses-for-sale-in-spain