The Auction

Why is a property auctioned?
The most common reason for a property auction in Italy is that a debtor fails to honour its obligations. This can be a natural person, but also a company. It is common in Italy for companies to take out loans with real estate as collateral. In addition, auctions can be initiated by (government) institutions. Some companies and institutions have a statutory provision that their real estate may only be sold by public auction, for instance to combat corruption.
Finally, we have recently seen a growing number of private auctions, with owners using auctions to get rid of their properties quickly.

How does a property auction in Italy work?
These forms of auctions are most commonly used in property auctions:

“Senza Incanto”
Until recently, the most common auction was a “senza incanto”. This involves interested parties submitting their bids in a sealed envelope within the deadline set in advance. Each bidder commits to a down payment of 10% of the base price. In this type, the property is awarded to the highest bidder. If there are multiple bidders, they usually have a week to increase their bids.
“Con Incanto”
This type of auction is gaining momentum, and is now dominant in almost all of Italy. It is the more familiar way of auctioning for us, by bidding directly against other interested parties, often online.
Also for this type of auction, participation is possible only after the required documentation and a deposit of 10% of the minimum bid, or the base price of the auction (may vary from auction to auction) have been submitted to the court. Apart from the possibility of direct overbidding, an important difference is in the award. This takes place when no more bids are received within a predetermined time.

Pitfalls
It goes without saying that it is important to know exactly what is being auctioned off. This seems like an open door, but there are certainly pitfalls that necessitate thorough research. Not every property on offer is auctioned off in its entirety. Regularly, only part of a property is involved, or only the usufruct is auctioned. Another important issue is licences. In Italy, despite the rules being very strict in most regions, buildings are regularly built without the proper permits. Should the auctioned property not comply with these, the buyer is responsible and fines may follow. Apart from a fine, the new owner may have to restore the property to its “original” state. So always pay attention!

Sanctions | Occupancy status
Any penalties should be known in advance, but take them into account when determining the bid price. Another problem may be that the property is still occupied, usually by the owner/debtor. Although the law requires the auctioned property to be handed over empty, it is not always obvious that this is the case. In that case, eviction proceedings can take up to six months. This is why the discount for an “occupied” property is always higher than for an empty property.
Apart from being occupied by the owner, a property may also be rented out. If this “senza titolo” (without a contract) is the same eviction procedure applies as for owner occupancy. If there is a contract, the legal rules mentioned in the contract apply. So any rental contract should always be requested, studied and respected.

Too good to be true?
Like me, you no doubt wonder how it is possible for real estate to go off at such high discounts. Where does the supply come from?
The majority of auctions are bankruptcy auctions. There are two main reasons why banks auction these properties instead of “just” selling them.

Speed
The property market in Italy is less liquid than in, say, the Netherlands or other countries in Europe. It is a large country and regional or even local differences are huge. The quickest and most efficient way of selling is therefore an auction. The court does all the preliminary work, such as valuation, checking permits and the bank only has to collect the money.

Transparency
Italy has not always (had) a good reputation when it comes to corruption. By selling property by public auction, there is always a notary to oversee the process. This prevents real estate being awarded privately to “cronies”. The latter is also the reason why many (government) institutions are obliged to auction their real estate if they want to get rid of it. That too creates additional supply.

Advantage
An advantage of public auctions over buying through an estate agent is that all the research into any debts resting on the property, hard-to-find owners, correctness of building permits and the like have all been carried out before the procedure is started. You could say that buying property at auction is more transparent than the conventional route through an estate agent, because they themselves are responsible for this kind of research. Without an army of lawyers, technicians and support staff like the court conducting the auction.
Still, it is important to have everything properly checked by a lawyer with expertise. After all, just because the court has examined everything and mapped out all the facts does not mean that everything is actually in order! Sometimes only usufruct is auctioned off, or a percentage of a property, or settlements still need to be made because building permits are not in order... We have the expertise to inform and advise you on this.

Debts
At the time of transfer, the court will arrange for the cancellation of all mortgages and debts resting on the house. These can therefore never be recovered from the buyer.

Interest
There is certainly a lot of interest in the auctions and there are dozens of consultancies in Italy that guide Italians to buy. As we do now for non-Italians. What makes the auctions for foreigners so interesting is that the type of property “we” want to buy is quite different from what Italians themselves want. Foreigners are often looking for a holiday home in the hills, an agriturismo or a flat as a pied-a-terre in a tourist village, while Italians are mainly interested in houses and flats that are easily accessible in an urban environment. That means there are real bargains to be found for “us”!

Read more about buyer protection at a foreclosure auction in Italy? Read this blog On the differences with the Netherlands and Spain.