Buying a house at auction: everything you need to know
Notary Valentina Rubertelli, president of the National Council of Notaries, provides with useful tips for buying a house at auction while saving costs.
Why does a house go to auction?
There are three different reasons why a property ends up at auction. The first concerns individual citizens: because when one or more creditors are not able to pay, the latter have the right to retrieve their property. The second case concerns companies that in the event of bankruptcy see their assets alienated. The third case concerns public bodies: when they decide to sell a property they must necessarily do so through the auction which guarantees maximum transparency.
What are the three main tips to give to those who intend to buy the house at auction?
The first is certainly to read the court-ordered appraisal very carefully, and it would be even better to have it read by a trusted technician to verify the sanability of any building abuses. The second concerns the certainty of having economic coverage or being able to access a mortgage. The third tip is to check who are the people who live in the house and make sure that the release of the property is foreseen in the notice of sale at the time of the award or, at the latest, the signature of the decree by the judge. The release will in any case be guaranteed, in case of non-spontaneous initiative of the occupier, through the intervention of the public force.
How do I document and what is the best way to look for an auction house?
Auction houses must be advertised both on the web and in printed newspapers; it is the judge who in the sales order indicates where. There are therefore specialized sites, the sites of the Courts, the site of the Notaries and, when it becomes mandatory, all the advertisements of the Italian Courts will be collected on a single Portal managed by the Ministry of Justice which, in turn, for the photos and the details of the case, will refer to the commercial sites enabled for legal advertising. One of these is the Notary Public Sales Portal.
Once I have identified the house I like, which is the step to follow?
Once the house has been identified, you must pay close attention to the notice of sale which contains an indication of the property offered for sale, the date, time and place of the auction, the base price, the measure of the minimum raise, the deadline. Submission of offers, the methods of sale (whether with or without enchantment, but now the latter method is the rule, the former the exception) and, finally, the website on which the appraisal report is published, which constitutes an integral part of the notice of sale and which describes in detail the factual and legal situation of the property.
How is the basic auction price established?
This is established by the expert appointed by the Judge and reported in the appraisal report which is published on the website indicated in the order of sale, in homage to maximum transparency towards the market and citizens. The minimum increase required in the tender is also established in the sale order.
Do you need to make a bid equal to the basic auction price or can you offer less?
The auction base is that set by the execution judge on the basis of the property appraisal and it is the same judge who determines the amount of possible discounts that the delegated professional can accept after the first deserted auction. But be careful if you want to be sure that your offer is accepted you will not have to go down – during the bidding phase in a sealed envelope – by more than 25% of the value of the auction base. In fact, after the 2015 reform, real estate auctions – launched from 27 June 2015 – take place almost exclusively with the “sale without enchantment” procedure under which the bidder submits his offer in a sealed envelope which will not be considered effective if more than 1/4 lower than the base price indicated in the notice of sale. An example: if the set price is 100, those who want to participate in the auction must submit a bid of at least 75. Anyone who submits a lower bid will see it declared ineffective.
I decide to participate in an auction. What is the process I need to follow and what are the necessary documents?
For each house that goes to auction there is a sale notice where we find all the information necessary to participate in the auction. Widespread throughout the country there are also numerous associations of delegated professionals (many are notaries) who since 1998 have been dealing with this type of activity by delegation of the judges: these associations are perfectly structured to provide all kinds of information in person or even through websites full of valuable information.
But let’s try to summarize the most important things to know: 1) each participant must present, in the place and on the days indicated in the notice of sale (except for online auctions), an offer in a sealed envelope and without identification marks, containing an indication of the price offered and a deposit set in the notice of sale (normally 10% of the price based on auction) and a photocopy of your identity document and tax code, as well as the other documents required in the announcement, which must be read carefully; 2) it is not allowed to submit the offer anonymously, except by giving power of attorney to a lawyer.
Can the executing debtor submit an offer?
No, but his relatives and friends will be able to.
How can I verify that this is the house I am really looking for? Can I visit it first? Surely. I can ask to visit the caretaker with a simple online question on the ministry website or by asking the custody professional. It is essential to visit the property before the auction also to become aware of aspects not mentioned in the report (such as, for example, the environmental context), and to ask for information on any prejudicial situations. It is also necessary to estimate that at the time of release the conditions of the property may be worse than those described in the appraisal or personally encountered during the visit.
All the required documentation to whom should it then be delivered?
Everything must be delivered either directly to the court chancellery or to the professional delegated by the judge, whose study address (or of the association) is indicated in the notice; from 1998 to 2006 only notaries were delegated, while from 2006 onwards accountants and lawyers can also be delegated. In some Courts a mixed proxy system is adopted for which the lawyer is entrusted with legal advice to the custodian, the accountant with the allotment plan and the notary with the drafting of the notice, the management of the auction (after collecting the offers) and the preparation of the transfer decree to be signed by the judge.
On the day of the auction, can I hope to win the asset at a lower price than the market prices?
The possibility that the auction base price falls represents one of the great opportunities of the auction system as it is possible to buy properties at advantageous prices. With the recent legislation the judge has the right to foresee that starting from the 4th deserted auction, the price can be lowered by 50%. Many young couples today buy a house thanks to the auction market.
How and in how much time do you pay for a house bought at auction?
Those who buy at auction must be able to quickly dispose of the entire amount (generally there is time between 60 and 90 days from the award). Alternatively, you can take out a mortgage but you need to organize yourself in time and contact banks that offer specific products for this kind of purchases, characterized by special rules.
How much does the auction house cost from a tax point of view?
There is no difference in the taxes to be paid, compared to the house that is purchased privately: the registration tax is paid according to the first or second home rates, depending on whether the buyer is eligible; the calculation basis is represented by the cadastral value (if it is lower than the hammer price) if it is a home and the successful bidder is a natural person.