Has it ever crossed your mind to purchase Italian property by auction?
If you have never considered the opportunity to purchase Italian property by auction, you should know what a great deal it could be. It could turn out to be a brilliant opportunity to purchase a property for a convenient price. You could get a huge saving of up to 60 % off the offered selling price on the market.
This may be an advantageous path, but certainly not one free of pitfalls. Which makes it necessary to engage the services of a technical-legal advisor to carry out all the necessary evaluations, starting with the determination of the most likely market value of the property and concluding with thorough verification of all the legal, building, town-planning, cadastral and administrative aspects in order to reduce or, at least, contain the risks that may arise from the purchase, also in view of the absence, in forced sales, of a guarantee for defects.
But what is a property auction?
In general terms, a property auction can be defined as a competitive sale. It begins with the presentation of one or more bids with the transfer of ownership going to the highest bidder.
There are two kinds of property auctions.
1. Those for the disposal of public assets, which follows specific legal rules.
2. Those of a judicial nature, which applies whenever assets owned by a natural or legal person (known as the execution debtor) that were previously seized are subject to a forced sale. At this stage of the expropriation procedure, the sale is “forced” as it is managed by a third party (the executor judge or his/her delegate), whose objective is to liquidate the involved asset and to maximize the revenue from the sale in order to repay, in whole or in part, the creditors of the execution debtor who take part to the procedure on various grounds and guarantees.
How to participate in a real estate auction?
There are two types of auctions:
1) Sealed-bid auction
2) Open ascending-bid auction
In the first case, the participant will have to electronically submit their irrevocable and binding bids within 12:00 a.m. on the day prior to the opening of the envelopes through Portale delle Vendite Pubbliche – Public Sales Portal (now the predominant system) or in sealed envelopes that must meet a number of requirements specifically indicated in the auction notice and on the websites of the courts. The bids, under penalty of nullity, must always be accompanied by a deposit amounting to at least 10% of the offered price.
The sale by open ascending-bid auction, which is currently obsolete as it is arranged when it is considered possible to obtain a rather improbable figure, i.e., a price higher than half of the value of the property, is, in any case, a secondary and possible method, chosen in case of unsuccessful sealed-bid auction.
Participants must in this case publicly make at least one bid that is higher than the last declared price, and the auction closes when at least three minutes have elapsed since the last bid and without any further bids.
Important things to consider when purchasing Italian property by auction
Having said that, if you wish to take part in an auction, is certainly necessary getting legal support. This will help you to be informed and assisted in all the preparatory and subsequent phases of the forced sale, in particular with regard to the following information:
1. Starting price of the sale (the base price at which the asset is for sale).
2. Bid increment (minimum increase in the raise set by the executor judge).
3. Security deposit (minimum amount to pay in order to take part in the auction).
4. Date of the sale (when the auction takes place).
5. Availability of the property (state of the property: if it is vacant and/or subject to constraints of persons and/or things; the property may be occupied by virtue of a lease or a loan agreement and so on).
6. Town-planning- cadastral compliance of the property.
7. Place of the sale (auctions used to be in the courts or courts of appeal, but as of 2018 they are now mostly and preferably held online on dedicated online platforms; it is, therefore, necessary to register and access “Portale delle vendite pubbliche” of Ministry of Justice).
At De Tullio Law Firm, we have over 55 years of experience managing all types of Italian property transactions. We have in-depth expertise in Italian and international legal systems and processes.
There are many potential pitfalls and legal ramifications to consider when buying Italian property at auction. We would always recommend that you seek independent professional advice before participating in an Italian property auction.
Buying Italian property at auction can be done safely but, it is definitely not for the faint-hearted. if you would like to discuss your situation, please get in touch.