Real estate auctions in Italy
Property auctions in Italy represent a fantastic opportunity to pick up a home at a knockdown price.
They can also be a minefield for the unwary unless you are thoroughly well-versed in the process. Here’s a broad outline of how it works. However, it is highly advisable to go through a specialist company that will handle everything for you – this is just one example here– if you are seriously considering purchasing at auction in Italy.
There are three main reasons properties go under the hammer in Italy:
· When they have been or are in the process of being repossessed by a financial institution because the previous or current owners have defaulted on mortgage payments (fallimentari);
· When they have been seized in legal/criminal proceedings (giudiziarie);
· When a governmental or a public body owns them and wishes to sell them off(cartolarizzazioni).
The popularity of property auctions has increased in recent years, and with it, the scope of available properties.
First, because a more challenging economic climate since the 2007-08 global crash has led to a greater number of home loan defaults.
Second, because recent regulatory changes have made the process more transparent and less onerous.
Auction notices are now publicly available, along with details of the properties to be sold off.
That allows prospective buyers to view the asset beforehand and discover, for instance, if the property is vacant or currently lived in and/or rented, along with its condition.
An impartial surveyor will usually have carried out an inspection and will compile a report outlining any issues such as subsidence and the condition of the property. They may also provide photos and floorplans.
However, photos and floorplans are not obligatory. Therefore, since viewings can be arranged by contact with the nominated judicial keeper – who can be the owner or a third party – it is important to personally view the property ahead of the auction date.
The auction is open to anyone bar the previous owner.
Prospective bidders must register their interest beforehand. Registration times vary from sale to sale but can sometimes start as early as 60 days before the auction.
You must put down a deposit equal to 10% of the property starting price, plus the cost for registering the property under your name should you win.
You have to provide proof of having made this payment in order to attend the sale.
You can apply for a mortgage for auction purchases. But at registration for the auction, you have to provide a mortgage promise from the lender.
Auctioneers always check that every prospective bidder is present (either in person or through a proxy.
Property auctions are held either with reserve (senza incanto) or without reserve (con incanto).
In the first case, buyers submit binding offers in sealed envelopes, which are then opened in the auction room. Bidding then starts from the highest offer. A final bid cannot be successful unless it is at least 20% of the reserve price. In any case, the seller has the ultimate right to refuse a final bid. In the second, the property is sold to the highest bidder regardless of price.
Should you fail to secure the property, all money you have paid is refunded to you immediately after the auction. If you win, what you have already handed over is used as a down-payment towards the property and payment of the “transfer decree” – equivalent to the final deed in a normal house purchase.
Buyers typically have 60 days after the auction to settle the outstanding balance. Remember that you have entered a binding contract; if you win the auction but decide not to go ahead, you lose whatever money you have so far paid.
Another benefit of auctions is that on completion of the purchase you do not have to pay a notary, which would normally cost up to €5,000.
Additionally, in certain cases, in judicial auctions a court may grant a buyer an amnesty over any illegal building work previously carried out on the auctioned property.