NPL stands for Non-Performing Loan: a doubtful loan, more than 90 days in arrears or unlikely to be repaid in full. It may or may not be secured by a mortgage; property investors are interested in the ones that are. In Spain there are billions of euros in this type of asset, in the hands of banks, investment funds and credit institutions that would rather sell them at a discount than manage them.
That is where the opportunity appears.
In this article
What an NPL is
NPL stands for non-performing loan: a loan that is not being repaid. For European banks, a loan becomes non-performing when it is more than 90 days in arrears or when the borrower is unlikely to pay. Most of those sold in Spain are mortgage loans, so there is a property behind the debt.
Buying an NPL means buying that loan: you take the bank's place, with the right to collect the debt and, if it is not paid, to enforce the mortgage. Banks sell them at a discount to the amount owed because they prefer to recover money now rather than wait years for court proceedings to end.
NPL, auction assignment and REO are not the same
| What you buy | When | |
|---|---|---|
| NPL | The loan, with its mortgage | Before the auction, sometimes even before the claim is filed |
| Auction assignment (cesión de remate) | The right to keep a property someone has won at auction | Just after the auction |
| REO | The property, which already belongs to the bank or fund | After the award or a deed in lieu of foreclosure |
We have an article on each: the auction assignment and what a REO is.
Who sells them
They are sold by banks, Sareb and the funds that bought large portfolios after the 2008 crisis, often through management companies known as servicers. They can be bought in portfolios of hundreds of loans, as funds do, or one at a time, which is where a private investor can come in.
How an NPL is bought
- The deal is studied using the documents provided by the seller (see below).
- The assignment of the loan is signed before a notary. If it has a mortgage, the deed is registered at the Land Registry.
- The borrower is notified. Until they know the loan has changed hands, if they pay the old bank, that payment discharges them.
- If there are court proceedings, the buyer asks the court to substitute them as the enforcing creditor, proving the assignment.
The five ways to get the money back
- The borrower pays or a deal is reached. Full payment, refinancing, a deed in lieu or an agreed sale of the property. It is the fastest exit and, well handled, usually works for both sides. The borrower can even free the property by paying the whole debt before the auction sale is approved.
- An auction where a third party bids. The buyer of the loan is paid from the sale proceeds, up to what is owed. Any surplus goes to later creditors and then to the borrower.
- Auction assignment. The enforcing creditor, or a later creditor, bids while reserving the right to assign the award to a third party, and does so within the following five days. The assignment price may be lower than the auction price.
- Award and later sale. The creditor keeps the property if it is the highest bidder and then sells it, by then as a REO.
- Selling the loan to another investor. It is assigned again, under the same rules.
What changed in auctions in 2025
Since 3 April 2025, under Organic Law 1/2025, property auctions work like this:
- To bid you must deposit 20% of the auction value. The enforcing creditor bids without a deposit.
- If the best bid reaches 70% of the value, the sale is approved and the balance is paid within 20 days. Below that, the borrower has 10 days to bring in someone who improves the bid.
- For a main home, the minimum is 70%, or 60% if that covers the whole debt.
- If nobody bids, the creditor can no longer ask for the property to be awarded to it. The only options are lifting the seizure or the borrower, on their own initiative or at the creditor's suggestion, naming a third party who takes it for at least 50% (40% if that pays off the whole debt).
This changes the numbers of many deals, especially those that relied on keeping the property after an auction with no bidders. We explain it in buying a home at a court auction.
The risks and where they come from
- Prior charges. Whoever buys at auction accepts the charges that rank ahead of the mortgage being enforced. They must be checked in the certificate of charges.
- Occupation. If the property is occupied, recovering possession takes time and money.
- Litigious credit redemption (retracto). If the loan is in litigation, the borrower can be released by paying the buyer what the buyer paid for it, plus costs and interest, within nine days of being asked. It completely changes the outcome of the deal.
- Unfair terms. A term struck down (acceleration, default interest) can reduce what is recovered or halt the proceedings.
- Main homes and vulnerable borrowers. They have their own protections, and since 8 October 2026 Royal Decree-law 29/2026 adds two: until 2030 it bars funds and firms that buy portfolios, and large-holder companies, from buying homes below 70% of their valuation, and it requires the borrower's defences and codes of good practice to be respected when their loan is sold. It is pending ratification by Parliament, so it has to be checked on each deal.
What we check before buying
- The mortgage deed and the certificate of the debt.
- The Land Registry extract and the certificate of charges.
- The court file, if there is one, and what stage it is at.
- The valuation and the real market value in the area.
- Whether the property is occupied, and by whom.
- Whether it is the borrower's main home, and their circumstances.
Real results
Every deal is different. These are some of ours, before costs: a mortgage NPL with direct negotiation where €160,000 was invested and €215,000 collected in 60 days, without going to auction; a court auction in Madrid resolved in 9.5 months with an IRR of 24.4%; an auction assignment in Alicante that left about €20,000 net after costs; and a REO in Vallecas bought for €55,000 and sold for €220,000. Timing is what varies most: if the auction is already scheduled or there is a deal with the borrower, it can take months; if proceedings are just starting, it can take years.
In our deals, the amount per deal usually starts at €80,000 or €100,000.
How we work at Equus
We find the deals, analyse them with our lawyers registered with the Valencia Bar, and only bring you those that pass that analysis, with their risks and figures in writing. We stay with you to the end. Equus is paid by the investor: fees are agreed with you before we start and we take no commission from the bank or fund selling the debt. The first consultation is free: NPLs and property investment in Valencia.
Frequently asked questions
What is a real estate NPL?
A mortgage-backed loan that has gone more than 90 days unpaid or is unlikely to be repaid. Whoever buys it takes the bank's place, with the right to collect the debt or enforce the mortgage.
Can a private individual buy an NPL?
Yes. Funds buy whole portfolios, but loans are also sold one at a time, and that is where a private investor can come in with the right legal analysis.
What is the difference between an NPL, an auction assignment and a REO?
With an NPL you buy the loan; with an auction assignment, the right to keep the property won at auction; with a REO, the property that already belongs to the bank or fund.
What happens if nobody bids at the auction?
Since April 2025 the creditor can no longer ask for the property to be awarded to it. The seizure is lifted, or the borrower, alone or at the creditor's suggestion, names a third party who takes it for at least 50% of the value (40% if that pays off the whole debt).
What is litigious credit redemption?
If the loan is in litigation when it is sold, the borrower can be released by paying the buyer what the buyer paid, plus costs and interest, within nine days of being asked.
Must the borrower be told their debt has been bought?
It should be done straight away: until they know, paying the old bank discharges them. If there are proceedings, the buyer also asks the court to substitute them as the enforcing creditor.
Does Royal Decree-law 29/2026 affect me?
Until 2030 it bars funds and firms that buy portfolios, and large-holder companies, from buying homes below 70% of their value, and it strengthens the borrower's defences when their loan is sold. It is pending ratification; we check it on every deal.
Who pays Equus in an NPL deal?
The investor. Fees are agreed before we start and we take no commission from the bank or fund selling the debt.