What is an auction
An auction is a public sale of goods or jewellery to the highest bidder, and is regularly mandated by a judge or other authority. Etymologically, it comes from the Latin sub (low) and even (lance) and has its origin in the distribution that the Romans made of the possessions of the defeated after a war. This distribution was announced with a lance.
Legally, our system and specifically article 636.2 LEC (Law of Civil Procedure) contemplates the auction as a means of disposing of seized goods that must take place when said goods are not susceptible to direct delivery to the creditor and no agreement has been approved with respect to their realization.
The auction aims at and allows the transformation into money of mortgaged or seized goods so that the debtor defendant can pay the debt claimed in full or in part depending on the amount obtained from it. In the event of non-payment, the debtor will respond with that which has an economic value: generally furniture (jewellery, paintings, machinery…), real estate (flats, houses, land, ships, premises…), vehicles or any other type of property or rights (i.e. company shares).
What is the origin of a judicial or administrative auction?
An important part of the judicial auctions comes from the non-payment of a debt, and in particular, of a mortgage debt. Inheritances, divorces, disagreements between undivided owners, insolvency proceedings, criminal sanctions, etc. are also causes of auctions.
What is the process like from the moment you start defaulting on payments until an asset is auctioned in a mortgage debt case?
When the first letter of the mortgage of a property is not paid, the procedure followed by the bank (creditor) updated with the new mortgage law (Law 5/2019 of 15 March) is the following:
– After 15 days of non-payment: first notice.
– After one month: official communication from the bank.
– After the 5th month: entry in ASNEF or RAI lists (delinquency).
– 12th month after default: legal action if the first unpaid instalment is for the first half of the loan.
– At 15th month of unpaid quotas: judicial demand if the first unpaid quota is of the second half of the loan.
– Registration of the letter in the Land Registry.
– Call of the auction: publication in the BOE. It is not obligatory to notify the debtor.
– Holding of the auction.
– Eviction or launch.
Characteristics of the auction market
The auction market is a market of opportunity, especially for speculative real estate investors or patrimonialists. State bodies such as the Treasury or the Social Security and banking institutions (among other creditors) have this public auction system at their disposal in order to recover part or all of their unpaid debts, and experienced investors in this market – known as auctioneers – have access to opportunities generally much more attractive than in the regular market.
It remains a market feared for the degree of knowledge, specialization and structure needed to be able to operate in it with guarantees, and at the same time coveted for the succulent returns it offers. As in any investment market, it is necessary to bear in mind that past returns do not guarantee future returns, and in each auction a multitude of risk factors come into play that are not present in other types of investments. Once again, the risk-profitability parity is met: the greater the risk, the greater the expected profitability.
Another characteristic is that this is a competitive market, not so much because of the number of competitors but because of its degree of specialisation and complexity.
As for the possibilities of access, it is limited by the impossibility of financing the operations so that the investors who come will have to assume all the risks at their own expense, with their capital.
Finally, I would like to highlight four essential ingredients of this market: you must have a lot of patience, the work is hard, flexibility can be lucrative and the decision-making process is condemned to be agile.
The auction market in Catalonia and the Balearic Islands: figures 2019
To get a detailed idea of the judicial and administrative auction market in Catalonia, let’s look at the figures for 2019 in the four provinces:
|Value of transactions
|% with bets
As can be seen, a total of 3,143 auctions were held, of which 1,112 (35.38%) were bid for a total of more than 245 million euros. As regards the percentage of auctions with bids, Barcelona stands out with more than 40% of the total auctions. Tarragona, on the other hand, is the province that recorded the lowest number of bids per auction, with 22.36%, although it would be in second place in the ranking by volume of auctions and in third place by auctions with bids.
Due to its geographical proximity, language, importance and attractiveness with Catalonia, we also indicate data on the Balearic Islands as a whole for the auctions of 2019:
|Value of transactions
The data from the Balearic Islands is striking because of the amount (52 million euros) and the percentage of awards (65.12%) over the total number of auctions (301). Comparatively fewer auctions were held in the Balearics than in Lleida, but the volume of transactions in the Balearics is practically the same as the provinces of Girona, Lleida and Tarragona combined.
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