The Auction

Why is a property being auctioned off?
The most common reason for a real estate auction in Italy is that a debtor is not fulfilling his 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 laid down by statute that their real estate may only be sold by public auction, for example to prevent corruption.
Finally, we have recently seen a growing number of private auctions, with owners using an auction to get rid of their property quickly.

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

"Senza Incanto"
Until recently, the most common auction was a "senza incanto." This means that interested parties submit their bids in a sealed envelope by 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 one week to increase their bids.
"Con Incanto"
This type of auction is on the rise, 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 (can vary from auction to auction) are submitted to the court. Apart from the possibility of direct overbidding, an important difference is in the award. This occurs 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 that is offered is auctioned off in its entirety. Regularly, only part of a property is involved, or only the usufruct is auctioned. Another important issue is permits. In Italy, despite the fact that the rules are very strict in most regions, people regularly build without the proper permits. If the auctioned property does not meet these requirements, the buyer is responsible and fines may follow. In addition to 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 keep them in mind when determining the bid price. Another problem may be that the property is still occupied, usually by the owner/debtor. Although the law requires that the auctioned property be delivered empty, it is not always obvious that this is the case. In that case, eviction proceedings can take up to six months. This is the reason why the discount for an "occupied" property is always higher than for an empty property.
In addition to being occupied by the owner, a property may also be rented out. If this "senza titolo" (without a contract) 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 the books 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 real estate 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 enormous. Therefore, the fastest and most efficient way of selling is 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 the property by public auction, there is always a notary to oversee the process. This prevents real estate from being awarded privately to "cronies." The latter is also the reason why many (government) institutions are required to auction their real estate if they want to get rid of it. This also creates additional supply.

Advantage
One advantage of public auctions over buying through a broker is that all the research on any debts that may be on the property, hard-to-find owners, accuracy of building permits and the like have all been done before the procedure is begun. You could say that buying property at auction is more transparent than the conventional way through a broker, 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 out by a lawyer with expertise. In fact, just because the court has investigated everything and identified all the facts does not mean that everything is actually in order! Sometimes only usufruct is auctioned, or a percentage of a property, or there is still settlement 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 the transfer, the court takes care of the cancellation of all mortgages and debts resting on the house. Thus, these can never be recovered from the buyer.

Interest
There is certainly a lot of interest in the auctions, and there are dozens of consulting firms in Italy that assist Italians in buying. As we do now for non-Italians. What makes the auctions for foreigners so interesting is that the type of real estate that "we" want to buy is quite different from the wishes of the Italians themselves. Foreigners are often looking for a vacation home in the hills, an agriturismo or an apartment as a pied-a-terre in a tourist village, while Italians are mainly interested in houses and apartments that are easily accessible in an urban environment. This means that for "us" there are real bargains to be found!

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