Since way back in the economic crisis of 2007, Spain’s banks have been forced to take back a huge number of properties on to their books. Of course the banks typically have no desire to take over management of the often under-performing assets that they had made loans against and so these same banks are undergoing an unprecedented stock clearance, with the market consequently seeing a glut of repossessed property in Spain.
The release of these properties on to a market already suffering an excess of supply served to pin prices at a low level and as a result, such repossessed properties can appear extremely attractive to those of us seeking a bargain ‘home in the sun’.
However, caution should be exercised as many of the properties can have hidden costs due to the fact that they are repossessed; costs that are not always disclosed by the banks at the time when the deeds are being signed.
Firstly, every property in Spain has an assigned fiscal value which is considered to be the minimum value that may be declared when any fiscal operation is undertaken – for example, a property conveyance. (This value is determined as a result of the ‘catastral’ value – a notional value used for the calculation of taxes – and the region in which the property is located).
Often, the market value of the property, which is ultimately declared on the property deeds, is below the minimum fiscal value, as determined by the competent fiscal authority, above all in the case properties embargoed by banks that wish to reduce their stock as quickly as possible.
In such cases, it is possible for the buyer to find themselves in the strange position that, having paid the government stamp duty on the basis of the price paid and declared on the property deeds, they receive an additional bill from the tax authority, for the additional tax payable on any difference between the price declared on the deeds and the minimum fiscal value.