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The Truth about Bank Repossessions in Spain

Property repossessions – are you really getting the deal of a lifetime?
You take one look at the property price before you and think, “wow, this offer is far too good to ignore!” this is a statement too many real estate agents in the Costa del Sol, Spain hear almost every day. The truth is bank repossessions may seem like the deal of a life-time, but in some cases the realty is you can be trapped in a money pit.

Marbella 2014 and a look ahead

The South of Spain is making a major come back; Marbella2014 is the new trend. Statistic and projections are telling us that 2015 is going to be a great year for property investments in Marbella, and across the Costa del Sol. However, we can´t just simply forget the real estate fiascos that plagued Marbella before the crash.

bank repossessions in spain

The financial crisis that hit Spain back in 2008 left many without homes, even more without work, and in some horrible cases, some without even enough money to eat. Many blame the crisis on poor government choices, while many also contribute the demise of the property market in Spain to plain and simple greed; this couldn´t be truer with regards to Marbella alone. No matter what the reasons may have been, believe us when we tell you, the Spanish have learned their lesson and then some.

The resulting feelings that now occupy the minds of Spaniards are one of condemnation – a promise to oneself that this will never happen again. Besides the doom and gloom surrounding properties in the Costa del Sol, a new day is dawning and once again things are starting to look up. Properties around the Costa del Sol are being bought up at much less the original amounts. The banks are once again (albeit slowly) starting to give credit – all in all, things are finally starting to move forward.

But, what about bank repossessed properties in Costa del Sol? Of course we can’t blame the banks for trying to recover by any means necessary; some have slashed the costs of villas in Costa del Sol by 50,000 Euros or more. Even the words villa in Spain can stir some positive emotion; after all, isn’t it everyone’s desire to retire in paradise at the lowest cost possible? We spend years saving, paying taxes and working just to attain that stability we need towards the end of our lives to enjoy something…anything! It’s completely normal, and when it comes right down to it, we deserve to be happy, healthy, and have that spare change in our pocket.

The appeal of bank repossessions in Spain can be misleading

However; the appeal of bank repossessions can be seriously misunderstood – what seems like the deal of a lifetime that promises everything you’ve ever wanted in a simple property investment can turn to despair in a matter of months.

Bank repossessions, especially in an economy as volatile as the South of Spain should be approached with caution. In no way should it be approached alone; a licensed real estate agent, who understands Spanish law, has connections with the banks that allow mortgages and credit should be standing close by your side. Not only that; but before making a property investment in costa del sol, understanding facts first can save you from years of heartache.

Probably the best way to truly understand whether or not bank repossessions are worthy of attention is by offering up a scenario or two.

Scenario #1:
James Randall bought a penthouse 4 years ago on the Costa del Sol. His luxury penthouse in Marbella was bought for him and his wife to enjoy a bit of the good life. James paid around 200.000 Euros at the time of purchase. Fast forward to today, and we can estimate that his property has a market value of around 140.000 Euros. Adding to this scenario, let’s say that James bought his penthouse 4 years ago with a 110% mortgage, which includes any additional charges; thus the total mortgage will be 220.000 Euros.

Today, and unfortunately; James Randall is facing financial difficulty and can no longer afford to pay his mortgage. He has little choice but to go into foreclosure. The bank then has little choice but to repossess. Now, we must keep in mind that James still owes the bank 200.000 Euros; which is a lot of money, money that the bank will desperately try and get back. The banks, regardless of how we might feel, need to get back something from this sale, therefore, it makes complete sense that they will try and sell this apartment for 200.000 Euros.

What does this all mean? Well for starters, the above bank repossession scenario is NOT a deal for whoever comes across the sale of this penthouse. Simply attaching the words “bank repossession” next to a number like 200.000 Euros doesn’t mean you’ve found the deal of a lifetime – just the opposite in fact.

Let’s look at another scenario…

Scenario #2:
Our next buyer, Mr. Smith, purchased a Spanish property 4 years ago. This time however; Mr. Smith had disposable money, and chose to pay cash directly for the property, and without a mortgage. Fast-forward to today, and for personal reasons, Mr. Smith would like to sell his property. The value of his property is estimated at 140.000 Euros; however, because Mr. Smith wants a quick sale, he lists his property at 110.000 Euros.

So, what does the Mr. Smith scenario say? It actually doesn’t say much, but it certainly screams out great deal! The Mr. Smith scenario is the kind of re-sale you need. Not to say, bank repossession worthy of your attention might come knocking at your door; but, when it comes to investing in property, things can’t be taken too lightly. Research and facts are essential when it comes to investments of any kind.

The facts around bank repossessions in Costa del Sol

The key to keeping your financial wits about you comes down to simple understandings. The banking and property crisis in Spain hit hard, and even though places like Marbella; the centre hub of everything good that Andalucía has to offer is flourishing, it doesn’t mean we should let our guard down. Depending on where you want to invest in property on the Costa del Sol (it’s a big coast!), there are some facts you need to be aware of first.

Living the dream in Marbella

Over the last 4 years Spanish properties have gone down in price by 30%
Repossessions do not necessarily mean good deal
We must remember that banks want to recuperate losses as well when a homeowner is forced into foreclosure
Understanding the value of property based on past years can help you find a more suitable property deal in Spain
More often than not, real property bargains never see the light of day on websites because they are sold within hours
Real estate newsletters or signing up for alerts from an estate agent on the costa del sol that you trust can yield faster results on purchasing your dream property on the coast

In retrospect, it doesn’t have to be difficult or confusing when searching for the ideal property in Spain. Common sense is really all you need, and if that’s not enough, you are welcome to contact a number of trustworthy estate agents in the Costa del Sol. The bottom line is Spain is slowly coming out of the slump, and particularly Marbella and the Costa del Sol. Now would be the ideal time to see what’s available, whether you are looking to retire or simply rent out a nice flat for some extra income.

Whatever your property needs, you’ve got plenty of opportunity here in the South of Spain.


Published in Costa del Sol Property News |