A judicial auction is the public sale of an asset ordered within an enforcement procedure. When a debtor stops paying and the court orders the sale of their property to satisfy the debt, that property goes to auction. Since the aim of the procedure is to recover what is owed, and not to obtain the best possible sale price, these properties are frequently awarded below their market value. Therein lies the opportunity for the investor who knows how to analyse what they are buying.
Today judicial auctions in Spain are not held in a courtroom. They are held electronically on the Auction Portal of the State Agency Official State Gazette (BOE), accessible online. The entire process, from the publication of the notice to the bidding, is carried out remotely, which has opened these operations up to many more investors.
The process, step by step
Registration on the BOE Auction Portal
To be able to take part you must register as a user on the BOE Auction Portal. Identification is done through a digital certificate or the Cl@ve system. Without that registration you can neither consult your personal area nor, later on, bid.
Study the notice and the registry situation
Each auction publishes a notice with the conditions: the appraised value, the type of auction and the details of the asset. But the essential thing is the registry situation. Before bidding it is advisable to request a land registry extract (nota simple) from the Land Registry to find out the charges, the owners and the annotations that affect the property.
Lodge the prior deposit
To be able to bid you must lodge a prior deposit, which usually amounts to 5% of the value at which the auction opens (it is an indicative figure, stated in each notice). That deposit blocks the amount for the duration of the auction and is returned to those who are not the successful bidder.
Bid during the open period
BOE auctions remain open for a set period, they are not settled in an instant. During that time bidders can improve their bids electronically. It is advisable to set a maximum price in advance and not get carried away by the bidding.
Approval of the auction award and award decree
Once the period closes, if you are the highest bidder the court approves the award in your favour. The award is formalised through an award decree, which is the document certifying that the property becomes yours.
Pay the rest of the price
The deposit is deducted from the final price, but the rest of the amount offered must be paid within the timeframe set by the procedure. It is essential to have the financing arranged before bidding, because failing to pay on time can lead to the loss of the deposit.
Obtain possession
With the award decree registered, the last step is to take possession of the property. If it is unoccupied it is usually straightforward. If it is occupied, it may be necessary to apply for the eviction before the court, a step that lengthens the timeframes.
The risks you need to know
The discount of an auction is not free: it comes with uncertainty. These are the risks worth bearing in mind before deciding to take part.
Prior charges are not cancelled. When the property is awarded to you, the charge being enforced and those registered after it are cancelled, but the charges registered before it (prior mortgages, seizures, liens) survive and become the successful bidder's problem. That is why it is essential to check in the Land Registry which charges exist and what their order of priority is.
The property may be occupied. Many properties at auction are inhabited, sometimes by the debtor themselves, sometimes by third parties. Recovering possession of an occupied property may require an eviction procedure and time, which reduces the appeal of the initial discount.
You cannot view the inside. As a rule it is not possible to go in and see the property before the auction. The real condition of the home (necessary refurbishment, damp, defects) is an unknown that has to be taken on or estimated by other means.
Before bidding, always check the registry charges on the property. The charges registered before the one being enforced are not cancelled with the award and become the buyer's responsibility. An up-to-date land registry extract (nota simple) from the Land Registry is the first document you should review, not the last.
The auction transfer (cesión de remate) as an alternative
There is a formula that lets you bid and, if you are the highest bidder, transfer the award to a third party before it is formalised in your name: the auction transfer (cesión de remate). It is a useful tool for those who identify and work up the operation but do not want to keep the property, and also for structuring investment operations. If you want to go deeper, we have explained what an auction transfer is and also the differences between auctions, auction transfers and NPLs.
Why work with a specialist firm
The point that separates a good purchase from a costly problem is the prior analysis. Studying the registry charges, assessing the occupancy situation, estimating the condition of the property, calculating realistic timeframes for the procedure and setting a maximum price consistent with the return are tasks that require legal judgement and experience in this market.
A specialist lawyer or firm reviews the land registry extract, interprets the notice, checks the order of the charges and warns whether the property is occupied before you bid. That preliminary work turns the discount into real profitability. The auction is only one of the routes to discounted assets: there is also the purchase of unpaid debt, as we explain in what a REO is.
At Equus Capital, a legal and wealth advisory firm based in Valencia, we study each auction before you bid: the charges, the occupancy and the expected return. We analyse the operation with our own legal and financial judgement, and we accompany the investor from the initial analysis through to taking possession. The first consultation is free and with no obligation.
Frequently asked questions
How much money do I need to bid at an auction?
To be able to bid you must lodge a prior deposit, which usually amounts to 5% of the value at which the auction opens, although it is an indicative figure stated in each notice. In addition to the deposit, you must have the financing for the rest of the price arranged, since it has to be paid within the timeframe set by the procedure after the award.
What happens if the home is occupied?
An occupied property may require applying for an eviction procedure before the court to recover possession, which lengthens the timeframes and adds uncertainty. That is why it is key to check the occupancy situation before bidding and to factor that cost in time and management into the price you are willing to offer.
Can debts or charges on the property be inherited?
With the award, the charge being enforced and those registered after it are cancelled, but the charges registered before it (prior mortgages, seizures, liens) are not cancelled and become the successful bidder's responsibility. That is why it is essential to review in the Land Registry the charges on the property and their order of priority before taking part.
Can I visit the home before the auction?
As a rule it is not possible to go in and view the property from the inside before the auction. This means that the real condition of the home is an unknown that has to be estimated by other means, such as the information in the notice, the registry situation and knowledge of the area. It is one of the risks you have to take on when buying at auction.