These days, as a result of the economic situation and the increase of people who do not pay their mortgagees, the banks have gathered a huge housing stock and, sometimes, these kinds of properties, which have been acquired by way of foreclosing procedures, are offered for sale at very low prices.
Some people can think that these are good opportunities to acquire a property without spending a lot of money but…sometimes the `opportunities´ can be costly. To make sure there will not be any surprises later on, precautions should be taken to be protected and to ensure that we are carrying out a sound transaction.
These precautions are referred basically to the property situation and to the possibility of the existence of debts linked to the same because if an indebted property is sold, the new owner will become responsible for some of these debts.
Firstly, we need to ensure that the property complies with the construction regulations. ¿How can we do that? There are some documents which can bring important information with regards to the planning situation of the property. For example, the first occupation licence or the certificate of occupancy. Asking for these documents could be a good first step towards a safe conclusion.
Another relevant document is the 10 year building insurance guarantee. This is an insurance policy that covers constructive defects during ten years. If you are going to buy a property which is less than 10 years old, check the existence of this policy.
Once we have this information, we can go to the next step: the debts. Most times these kinds of properties sold by banks come from owners who have several debts such as debts with the supplies companies or the community of owners. Some of these debts are real liabilities, like the debt with the Community of owners, and they are attached to the property and the seller/bank needs to pay them before completion. In some occasions, the bank is going to cover some of these debts, but, in other occasions they are not going to pay anything and the buyer will be liable for them. As the price in these sales is attractive, you may accept taking over some reasonable debts BUT first you need to know exactly the nature of the debt and the amount involved, otherwise you could end up being liable for thousands of euros.
After bearing in mind all this information, the six-million-dollar question is: How can I obtain all the documents and information before completing the purchase? The seller, in our case, the bank (or a company connected to the bank) must provide you with this information, as they are the current owners. They have all the documents and you are entitled to analyse them in order to avoid risks. Sometimes, gathering all the information can be more complicated than initially expected because the bank will put pressure on the buyer to sign promptly. Instructing your own lawyer will certainly help as he will be able to check the documentation and provide you with his professional opinion as to how safe is to proceed with the purchase.
This article has been written in collaboration with Laura Perez Gil de Gómez from DWF LLP.
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