The complete guide to repossession property in Tenerife

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Jesse Harry Hodges
6 years ago
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The complete guide to repossession property in Tenerife At present, uttering the words 'Credit Crunch' to any bank will cause an uneasy silence to fall.

1 The complete guide to repossession property in Tenerife At present, uttering the words 'Credit Crunch' to any bank will cause an uneasy silence to fall. The worldwide credit crunch has literally brought many banks to their knees and Spain is no exception. The first step for buyers is to understand a little about the current housing market crisis in Spain and the Roman legal system that governs the Spanish banks. Understanding this provides opportunity for Tenerife Property Investment to help you to take advantage of the current financial crisis. It s a matter of conjecture, but most experts are of the opinion that the Spanish property market peaked in June However, it didn t become clear until the beginning of 2008 (or even later) that there was indeed a huge problem. The World banking crisis soon followed which exacerbated Spain s already existing problem of over-supply that had created a national wave of non-performing loans. As with all property cycles, 2009 presented the first opportunity for investors to take advantage of the crash - and since that time shrewd purchases of prime location properties at drastically reduced prices have been made. The reality of today is that the more mature property markets have now stabilized and it is only in countries such as Spain where you see these huge discounts on offer. The Canary Islands, which includes Tenerife, are relatively unaffected. There is a misleading statistic where the press quotes a large Spanish housing stock unsold. Any unsold stock is mostly of a type that people would prefer not to buy given the choice. In mature suburbs house stocks are small and discounts far less than quoted in international press (source: DM Property Report 2010). In this recession the Spanish banks initiated a new strategy of creating their own real estate company, which was set up to clear their own real estate assets. Unfortunately they misjudged the level of skill required for international marketing and are now more open to

2 other routes of selling stock. For a number of reasons, both political and economic banks have tried to secure 100% of their debt. However things are changing and with strict guidelines from the Bank of Spain the banks are finally coming to terms with the fact that they will have to write off some debt when selling a property. So, finally, as we go into the second half of 2011 there are some wonderful opportunities for those wanting to buy Spanish bank repossessions especially those who are cash buyers!

3 What types of Spanish Bank Repossessions are there? There are in real terms three types of bank repossessions with the first two types being for cash buyers only. Subasta Firstly, a Spanish bank repossession presented at the judicial auction (known as 'Subasta' in Spain) which is still in the name of the original owner defaulting. This is where you can buy at some of the best prices by purchasing the loan, but the system involves an auction or bidding process in a court. As the property is still owned by the defaulter, property generally cannot be viewed. Unlike the UK and other major western economies it is fraught with danger for those who do not understand what they are doing and you have to deposit a large percentage of the proposed purchase price in the Auctioneers bank account prior to being allowed to bid for a property. For this reason alone most properties are sold to local people. This is obviously very complex which we would be happy to explain to you in greater detail in our consultancy meetings, while you are here in Spain. The 21-day rule The second type is where you can buy at the best opportunity without the risks of buying at auction. This is the 21 days immediately after the property has gone to auction but no one has met the reserve price set by the bank. The bank has 21 days in which to pay all the taxes and put the property in their name. This is when the bank is at its most negotiable point as they would prefer to avoid those extra costs. In some cases the bank will consider refinancing on the new price. Repossession The final type is where the bank has fully repossessed the property, paid property taxes and notary fees to officially place the property in their name. They then offer these properties for sale. Generally this provides an availability of properties with excellent mortgages of up to 90% directly from the bank that is keen to move the property on and get it off their books. Our

4 Company has lists of these properties, as we are registered specialists who manage this for a number of banks. A bank repossession is ultimately where a bank has taken legal possession of a property due to the owner failing to repay the finance that was originally borrowed for the property. These repossessions vary from a single property owned by an individual all the way up to an entire housing project being repossessed from the developer. If a homeowner defaults on a mortgage, meaning he or she cannot make the mortgage payments, the lender will seek to repossess the home. After the repossession process is complete, the bank owns the property and will try and sell it to recover its losses. However, the bank is only interested in recovering the mortgage money that is owed on the property and this amount is usually significantly lower than the property's actual value. This remaining mortgage value is known as the credit price or mortgage debt and is the key amount that, as an investor in bank repossessions, you should be interested in. Key ready repossessions A key ready repossession is the sale of a property by the bank whereby the property is already legally owned by the bank and has gone through the repossession process. This means that the bank has been granted full legal possession of the property by the courts and is in a position to sell it to whomever, and for whatever value, they wish. More and more banks are negotiating with home owners who are in default with their mortgage repayments to simply hand over the legal title of the property and walk away. Banks are using this method because it is cheaper for them but it also means that the homeowner can wash their hands of the property whilst still keeping their credit history intact. This entire process moves extremely fast and can often be completed in just a few days. Therefore it is very important that a client's funds are readily available before the process begins.

5 Non-key ready repossessions In the case of non-key ready repossessions, an investor is not buying the repossessed property from the bank but is instead buying a property's mortgage debt from the bank. This means that if a homeowner defaults on their mortgage payments, the lender can sell the mortgage debt on to a third party (the client). The third party will then follow a legal process with the aim of ultimately taking possession of the property due to the owner being unable to pay back the debt. The legal process that investors must follow when purchasing non-key ready repossessions is detailed and extensive but still follows certain timescales; however, this will be handled mainly by your lawyer. There are two possible outcomes that could arise when purchasing a non-key ready repossession: 1. The mortgage debt that you purchase could be paid back to you by the property owner plus 20% interest charges, along with your conveyancing costs and late payment fees which are all enforceable by law. 2. You take full legal possession of the property on which the debt is owed - hugely under market value. This whole process from the initial stages of choosing a property usually takes anywhere from a few months up to a year. The average timescale centres around 6 months so investors are required to have the necessary funds available from the start of the process. As soon as the bank releases the property documentation (after you have paid the initial 10% deposit) your solicitor will very quickly be able to advise you on whether to pursue the deal and how long the process should take. There will be a number of factors they will advise you on.

6 Both types of repossessions offer fantastic opportunities to investors and it really comes down to which process you feel more comfortable with. The key ready repossessions offer a very short period of time before you take possession of the property compared to non-key ready properties which can take much longer. However, you will have to act very quickly to purchase key ready repossessions whereas you are able to look through a list of non-key ready repossessions. Many investors are purely interested in a quick return on their money and are not concerned with taking possession of a property So, What Represents the Best Opportunity for Cash Buyers? Without doubt, the best opportunity for our clients in Spain is where the property has been through the first judicial auction and hasn t sold. The bank has 21 days to complete the sale to a buyer before having to buy the property and pay all the property transfer taxes associated with the process and this is where the best deals are done. However a buyer will only see the financial information prior to the auction photographs and property visits are only possible once the auction has finished. Therefore, our clients need a professional organization that has an existing agreement with the banks to allow viewing and then complete the transaction within the 21-day period. It goes without saying that there needs to be a lot of preparatory work done and that our clients are decision makers who can act immediately. Selected real estate from these portfolios can be found in good locations and fully occupied buildings. The emphasis of these properties is not on a failed project, but an unfortunate individual. This category of real estate is far more suitable for immediate selling.

7 So, how do you take advantage of the 21-day Window of Opportunity? Very importantly you must have the following in place: Your NIE number as without it you cannot buy a property in Spain Your Spanish bank account and funds ready to complete the property purchase A chosen lawyer in place and an exact understanding of how you wish to buy the property Proof of financial resources to complete the purchase to provide to the bank There are other smaller points but the above checklists are a must and you will need to work with a professional agent to make sure you can complete the transaction in the stated timescale. In conclusion Bank repossessions, whether key ready or non-key ready, can offer investors the type of unbelievable discounts that often people can only dream of. With the opportunity to purchase properties hugely below the market valuation, locking in instant equity and providing a great chance to make huge returns, purchases like these are truly rare. However with fast turnaround times, immediate deposits and quick decisions needed, these deals are certainly not for everyone. Investors need to be fully aware of what each process entails and which one they feel more comfortable with. This way, things are able to move quickly, smoothly and ultimately end with the result that all investors aim for.

8 Why choose Tenerife Property Investment? When placing your investment in such complex matters it is important to deal with a company that you can completely trust in their capacity to execute such a process. The following are some of the reasons why you should use Tenerife Property Investment: Day-to-day experience of working with Spanish banks for many years. Unrivaled expertise in all areas of Spanish bank repossessions Established contacts and relationships with all the major banks in Spain and judicial lawyers. Exclusive property from select banks Access to the best deals before they become available to the general market Access to our internationally recognized Architecture department and construction company services for any renovations The best level of financial service for mortgages anywhere in Spain The ability to then sell your property and free your profit If you would like to know more about what makes Tenerife Property Investment different to the rest then please call us - we will be only too delighted to explain the reasons to you. For further information please contact info@tenerifepropertyinvestment.com or Call

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