How to acquire real estate from a bank through an Assignment of Auction

The acquisition of real estate properties has evolved over the years, and one of the forms that has gained relevance in Spain is the assignment of the auction. This, especially when it comes to properties belonging to banking entities. But, what exactly does it mean and how does it relate to the purchase of real estate from banks?

1. What is the assignment of the auction?

The assignment of the auction refers to the act by which a successful bidder in a public auction transfers its rights over the auctioned property to a third party, called the assignee. This process takes place in the context of judicial executions and is usually used for the sale of foreclosed assets.

2. Judicial auctions and the role of banks

A large number of properties available on the market come from judicial auctions. These auctions originate when a debtor is unable to meet his financial obligations and, as a result, his assets are seized and put up for sale by the courts to satisfy the outstanding debt. It is here that banks play a central role, as they are often the main creditors in these judicial proceedings.

3. Actors involved in the assignment of auctions

During the foreclosure process, several agents are involved who play crucial roles for the transaction to be carried out properly. The main protagonist is the successful bidder or auctioneer, who turns out to be the highest bidder in an auction and acquires the right to own the property. However, if he decides not to keep the property, he has the option of assigning his position to a third party, known as the assignee. The foreclosing party, usually a bank or lender, is the one who requests the foreclosure of the property due to the debtor's non-payment. In addition, the process involves the Legal Counsel of the Administration of Justice, who supervises and ensures that the rules are complied with during the auction and subsequent assignment, and the Land Registry, which validates and registers the change of ownership of the property. It is essential that all these agents fulfill their roles properly to guarantee the legality and transparency of the process.

4. Process and deadlines in the assignment of the auction

Once the successful bidder is declared the winner of the auction, it has a period of time, usually 20 days, to complete the payment of the auction price. In this interval, if the successful bidder decides not to acquire the property directly, it may choose to assign its position. It is essential that such assignment be properly notified to the Counsel for the Administration of Justice. The process ends with the issuance of the award decree in favor of the assignee, reflecting in it both the award price and, if there are differences, the price agreed for the assignment. It is crucial to respect these deadlines and procedures to ensure that the auction assignment is carried out in a valid manner and in compliance with the regulations in force.

5. Why is the assignment of the auction relevant in the banking context?

Although an individual or entity may be awarded a property at auction, sometimes complications or changes in circumstances may arise that prevent them from formalizing the purchase. This is where the assignment of the auction comes into play, allowing the original successful bidder to transfer their rights to a third party, usually a bank or specialist investor. This flexibility is beneficial both for the original successful bidder, who avoids incurring penalties, and for the assignee, who acquires a property often below its market value.

6. Conditions for the assignment of the auction

• Only applies when it is the Bank that has initiated the foreclosure process.
• The bank must be awarded the property, either because it is the highest bidder or due to a lack of bids.
• The assignment must be made within a certain period of time (not specified in the law) but reasonably, it would be in accordance with articles 670 and 671 of the Civil Procedure Law.
• It is formally made before the Legal Counsel of the Judicial Administration.
• There may be a prior contract between the creditor and the assignee stipulating certain covenants.
• The RDGRN of October 19, 2017 clarifies that it is possible the assignment of the auction for an amount different from the award price.
• It is possible for a mortgage to be established on the right of the auctioneer over the auctioned goods in a judicial process.

7. Tax differences between the assignment of the auction and the purchase of a property from the bank.

Although there are two transactions (from the bank to the third party and from the third party to the final purchaser), taxes are only paid on the final purchaser's acquisition. The bank does not pay any tax on this assignment, provided that it is made in accordance with Article 20 of the Transfer Tax Law Regulations. However, when a real estate asset is purchased directly from the bank, such tax is settled twice. This is because, for legal purposes, the property has undergone two transfers: first from the debtor to the bank and, subsequently, from the bank to the buyer. This tax peculiarity is essential to take into account when evaluating both acquisition options.

Conclusion

The assignment of the auction represents an opportunity in the Spanish real estate market, especially for those interested in acquiring properties at competitive prices. However, it also carries its risks. First of all, it is essential to understand that this type of transaction takes place within the framework of a judicial auction, which may involve legal and administrative complexities. If the procedure is not followed properly, there is a risk of losing both the property and the money invested. In addition, there may be uncertainty as to the actual condition of the property, as there may be limitations on prior inspections. It is also vital to take into account possible unidentified charges or encumbrances that may affect the property. It is crucial to have the right advice, preferably from professionals with experience in auctions and auction sales, to minimize risks and make informed decisions.

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