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21^st April 2025

Introduction

One possible way to acquire property in Spain is through a public auction. These properties that fall under a gavel are known in Spanish as ‘ejecuciones hipotecarias’, or bank repossessions in English.

Given how inflation remains unchecked post-Covid, central banks have steeply increased the price of money (interest rates) which in turn has translated into higher monthly repayments for millions of borrowers. Thousands of struggling borrowers have capitulated, and lenders have repossessed their property.

Bank repos are properties in which a borrower has fallen in arrears with his mortgage repayments and his lender (normally a bank) has taken back the property legally.

These properties are then sold on in public auctions for a fraction of their street value. For example, let’s say a reckless borrower by the name of Feliz Joseph fails to service his €500,000 mortgage loan. Once his lender repossesses his Mijas property, you can buy his home for under €200,000! Interested?

Although it may sound at first like a great option, there are in fact quite a few caveats that exceed the purpose of this blog post. The gist is that this option is better be left to professionals who know what they are doing and are prepared to accept steep financial losses. Bank repos are not everyone’s cup of tea and are not fit for laymen.

However, for those who are dauntless, the rewards far outstrip the risks. In effect, you are acquiring a property through a law court for half of its street value, or even less!

Given Spain’s ongoing property boom, which is now closing its fourth year, and how properties have appreciated by double digits in major cities and in selected coastal areas, bank repos offer a welcome respite to buyers and investors alike. Always an option to explore by savvy investors. You are strongly advised to retain legal counsel on following this option. Our law firm can assist you in these procedures if interested.

The six steps of a bank repossession

1. The borrower falls into arrears – The borrower fails to service his mortgage repayments. Delay interests (‘intereses de mora’) accrue to cover penalties. The lender contacts the borrower and first attempts an out-of-court settlement.
2. In technical default – Three months from the first arrear. After 3 months in arrears, a client’s file is passed onto the bank’s legal debt collection department which tries in a last-ditch effort to recover the debt. A lender will then initiate an Executive Procedure against the encumbered property.
3. Foreclosure and notary intervention – Depending on the chances of debt recovery, 15 to 20 days after the technical default. A letter by recorded delivery is sent by a Notary Public, with acknowledgement of receipt, informing a borrower that a repossession procedure is underway.
4. Repossession order – The court contacts the property owner to pencil a date for the trial. The judge formally notifies the borrower that his lender has instigated a repossession proceeding.
5. The court sets a date for the public auction – Normally between 6 to 12 months after initiating the Executive Procedure. The judge sets the date of the auction. The value for auction purposes cannot fall below 75% of the appraisal value. However, if no-one bids the gavel falls and a lender is legally entitled to seize the property for 60% of its appraisal value. Should there be a guarantor in the mortgage deed the bank will chase his assets first it is easier to seize them. The property will now be registered under the name of the new owner at the Land Registry (normally the lender).
6. Eviction – In the event the now ex-owner still dwells in the property, after a period that normally spans six months, police officers will arrive at his doorstep with a locksmith and a judicial bailiff to evict them by force, if necessary. The lender gains physical possession of the property, and the locks are changed.

At Larrain Nesbitt Abogados (LNA) we have over 21 years of experience specializing in immigration & residency visas. We also assist clients in buying, selling, or renting properties in Spain. You can contact us by e-mail at info@larrainnesbitt.com, by telephone at our UK line (+44) 0754 3838 218 or Spanish line (+34) 952 19 22 88, or by completing our contact form.

Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. Ní neart go cur le chéile. VOV.

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