Real estate law

Italy: Home Auctions and Savings of 30-40%

Italy

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Reading this guide you’ll learn how auctions work in Italy and why real estate experts agree those years (2022, 2023, 2024) are the right moment to buy your house in the Belpaese – for investment or vacation purposes.

Judicial auctions: the Italian Law

When someone can’t pay a debt for a long time, and the sum becomes a consistent amount, the unpaid debt is transformed into foreclosure by the judge. After a long period of insolvency, the court decides to foreclose a valuable asset owned by the person concerned. This asset will be sold publicly and the proceeds will be used to repay those who have accrued bad debts. Most of the cases concern bankruptcies, home mortgages, and unsettled loans.
A judicial auction follows a specific process: first the judge issues the order of sale. This document sets a deadline between 90 and 120 days within which bids can be proposed. The methods by which the deposit must be paid are also defined.

So, basically, with an auction, the judge allows the forced sale of a property owned by an individual or a company. But who is in charge of the whole procedure? The judge is obliged (Article 591-bis- Italian Code of Civil Procedure) to delegate the sale operations to a notary, a lawyer, or another accountant listed in a special group of professionals according to Article 179-ter of the same code. This decision works out unless the judge decides to proceed directly to protect the interests of the parties. After the sale, all other activities are delegated, except for those governed by section 586 of the Code of Civil Procedure.
When you participate in an auction, you are protected by the notaries, who act as intermediaries and guarantee against risks of disruption or money laundering.

What is a home auction? How can you participate?

A home auction is an opportunity to buy a property saving money. According to the most recent real estate market data, when you buy a house in an auction you can save up to 30%-40% of the house price/real value. Purchasing a property at a lower price is always an interesting thing – you can use it for:

    1. making a short-time investment
    2. use it for your holidays
    3. rent it out to make a profit all along the years.

When choosing the first option, if you want to take out the best of your investment, you can just renovate it and flip it out to increase its value. House flipping means refreshing the design and furniture to make a good impression on buyers.

What are the two main types of judicial sales in Italy?

Without auction

The bid is submitted to the court registry in a sealed envelope. The envelope contains a paper with the price offered by the participant, the time, and the payment method. As long as a confirmatory deposit – that is not less than 10% of the price offered. If the offeror does not win the auction, the sum turns back to him. The offer is irrevocable.

With auction

This type of judicial sale is rarely used nowadays. When there is an auction, the award is provisional. This means other bids are still allowed during the following ten days. So that the price of the property can rise as a result of bigger bids. If the property is not assigned in the first phase of the auction, the judge prepares a new sale.

Remote online auctions

In the past, all auctions were normally held inside Italian courts, after a mandatory minimum period dedicated to the advertisement and the auction itself.
In more recent years the majority of home auctions are held online. Il Consiglio Nazionale dei Notai (Italian National Council of Notaries) has built a dedicated platform. Sales take place at the ‘auctioneer’ notary or ‘peripheral’ notaries, appointed by the executive judge.

Who can participate?

“Everyone, except the debtor, is allowed to offer for the purchase of the foreclosed property personally or by means of a legal attorney also pursuant to Article 579, last paragraph (the aforementioned paragraph governs the offer per person to be appointed, in the form “Anonymous”, through a third participant).

Auctions in Italy: payments, timings, former owner’s rights

When you buy in the normal market, you just need to agree on the sale price with the owner and proceed with the deed. When buying all’incanto the timing is longer, first of all you need to wait for the auction day set by the judge and any subsequent tender between participants who have submitted an offer.
After the property has been assigned, the judge issues a decree that establishes the payment terms and other deadlines.
Once the legal proceedings have been concluded, it is then necessary to wait for the deadline established by the judge, who gives to the former owner a limited time to go out, or for the term of the lease of any tenants. This is why a home at auction is a perfect solution for those who want to save money, but do not have an urgent need to move into a new home.

Another important information to have previously regards the tenants who currently live in the property. You must check whether the release of the house is indicated in the decree signed by the judge. Very often, those who win a foreclosed home have to deal with tenants who refuse to abandon it. In these circumstances, the only solution is to resort to the police to provide for the eviction. However, it is always better to check this aspect to avoid this practice.

How to participate

Both natural and legal persons can take part. What are the requirements?
It is necessary to submit:

  • the application to participate in the auction, i.e. the bid.
  • the bank draft/IBAN transfer, as a deposit, for an amount not less than he 10% of the bid price
  • the two-side (front and back) copy of the identity card and the Codice Fiscale of the persons participating in the auction.

Please remember that if you give up the property you have been awarded the deposit you have paid is not returned.

What to evaluate before buying a house through auction in Italy

There is important information to evaluate before participating in the sale. That is why you need a dedicated consultant who knows everything regarding the Italian real estate market.
He can be a specialized attorney, an architect or another professional working in the real estate business. Otherwise, there will be problems.

Real estate appraisal

First of all, if you intend to participate in a judicial auction you need to see the Real Estate Appraisal. This is a document containing an unbiased professional consulency of a home’s real value. Through the property appraisal the fair market value of a home is determined. What does the appraisal contain? All the essential information regarding the property, like:

  • The floor plan
  • Property layouts, amenities and features
  • Cadastral data (living area, land area, etc)
  • Construction style
  • Overall quality of the materials
  • Age – Date of construction
  • Status of the owner’s payments to the condominium
  • Modernization updates
  • Presence of any building abuses in the house

Remember that you can also consult the appraisal online.
Finally, pay attention to any building abuses on the property: the new owner remains subject to penalties for any defects committed by the debtor. The same applies to condominium expenses: whoever takes over is obliged to catch up with any arrears.