Distressed and Repossessed Spanish Property

June 30, 2009

It was revealed recently that the level of bad debtors in Spain is so high that banks and building societies are choosing not to flag the loans as bad, nor repossess the property or assets concerned.

It is strange that the banks haven't made a concerted effort to dispose of these properties. After all, buyers seem to be waiting for the bargain properties to appear - surely some of these 'distressed properties' could make attractive purchases?

However, many of today's repossessed Spanish properties were originally artificially over-valued when the banks were happy to lend in excess of 100% of the market value of a property. This means that even when offered for sale to clear the bank debt, such properties are still over-priced.

Also, unfortunately for the banks, the repossession process in Spain is extremely slow - often taking in excess of 12 months. The owners of properties advertised today as 'repossessed', probably began defaulting on their mortgage payments 18 months ago.

The length and complexity of the repossession process adds significantly to the eventual sales price of the property. Repossession adds approximately 6% to the debt of an average property - a cost that is recovered from the buyer.

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