What are real estate auctions?
In all parts of the country there are many properties available for auction at often very low prices whereby attractive real estate investments can be made.
What is the sale of a property at auction
The sale of real estate at auction, more correctly called judicial sale, is a civil legal procedure by which a magistrate establishes that, in order to settle the debts of an individual or a company, it is necessary to sell by force one or more of its assets with the intention of satisfying the creditors with the proceeds of the sale of the building. These are measures taken in extreme situations in which the auction of one or more goods is the only possible solution to satisfy the creditors, after exhausting all other possible methods. The owner of the property sold at auction, on the other hand, will have the right to retain the full balance of the amount obtained from the judicial sale, naturally after having satisfied the creditors, and it is therefore in his interest that the auction be concluded as soon as possible and with the best possible result. In many cases, this particular buying and selling mechanism achieves the objective of making the buyer carry out an excellent real estate transaction and of raising the situation of the defaulting debtor, who will be able to settle his disputes with the creditors and who, we hope, will also have a good amount of money to continue his life with more serenity. From the point of view of those who buy properties at auction, as mentioned, excellent deals can be made as the base auction price established by the Court is usually much lower than the market price of the property and therefore, with a good auction management strategy and with caution, you can buy apartments, houses or commercial properties with great savings. Often times, properties for auction turn out to be excellent investments, for their location, for the type of building and, in general, for the prospect of earning income through leasing or other schemes.
Is buying properties at auction easy?
To be honest, the answer to this question should be no. Or rather, one could say that buying properties at auction can only be easy if one relies on the advice of an expert in the sector, such as a real estate agency. Indeed, the legal, economic and financial aspects of this very particular type of sale are not very easy to manage for the layman and there is often the risk of making, through inexperience, procedural or valuation errors which may then be very heavy from the point of view of consequences, especially economic.
First of all, we must distinguish the cases in which the property auctioned belongs to a company, in which case we will talk about bankruptcy proceedings, liquidation or arrangement with creditors, from those in which the debtor is an individual, for which we will talk about real estate execution. Indeed, the two situations provide for procedures and conditions of access to participation in auctions that are quite different from each other and it is therefore necessary first of all to ensure that you have the necessary conditions to participate in an auction.
Specific auction of a property
If you meet the conditions, you will have to carefully follow a series of specific procedures to obtain, for example, the opportunity to visit the property, to sign and deliver the offer, to participate correctly in the auction itself, etc.
Are real estate auctions safe?
The question of the safety of buying real estate at auction stems from a fact that not all non-experts may be aware of: the Court can also auction off an asset which has a predatory mortgage, in part or in whole, or not in conformity with the conditions of habitability or the exercise of a commercial or professional activity. In other words, real estate units that could not normally be put on the market, can on the contrary be the subject of a judicial sale, precisely because of the urgency and gravity of the debt situation of the owner who allows an exception to the normal rules of real estate sale. While this criterion is undoubtedly a help for both the debtor and the creditor, it can prove to be a stumbling block for the buyer who may not take into account certain problems linked to the property that he’s getting ready to buy at auction.
Unforeseen events to be incurred after the purchase
Therefore, a careful review of all the legal documentation that accompanies the auction notice, such as appraisals, floor plans and final accounts of the condominium and any heating costs that may still be due, is necessary, in order to be able to fully assess the profitability of an investment made by auction tool. There is no doubt that great deals can be made by buying properties at auction, but it is necessary, as we have attempted to briefly illustrate above, to pay attention to a series of issues, even of considerable complexity. This is why the advice of an Italian lawyer specializing in real estate law can be the key to progressing safely in the world of judicial real estate sales without fear of having missed a procedural step or of ending up with expenses.