Buying a house at auction: how to do it, risks and opportunities

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Interest in buying a home at auction is growing. But against a strong international trend, Italy is still lagging. Many steps to overcome. How to move forward?

In 2022, the number of auctions in Italy decreased (-53% over 2019 and -0.7% over 2021)

However, the percentage of properties sold at auction exceeded 60% for the first time

Interview with Bruno Saglietti, notary and president of Apep, the Professional Association for Executions in the province of Padua, on the opportunity and advantages of being able to buy or sell a property at auction

The possibility of saving money (by obtaining the property at a lower price than the market value) and the speed of the bureaucratic process (which does not include brokerage costs) have increased interest in the mode of buying a house at auction as an additional investment opportunity in the real estate market. And this is also, especially in the current market environment of rising inflation and interest rates.

Yet, unlike other vital markets (such as Great Britain, the U.S., or Singapore), Italy remains somewhat on the sidelines. According to the latest data illustrated by Apep - Professional Association for Executions of the Province of Padua - in our country, on the one hand, in 2022, the number of auctions set was reduced by 53 percent compared to 2019 and is also slightly down on 2021 (-0.7 percent), on the other hand, however, the percentage of adjudication of properties sold at auction exceeded 60 percent (62.1 percent) for the first time, registering a record increase of 58 percent on 2019 and 4.9 percent compared to 2021. The long wave of Covid has reduced the number of active executive procedures, and this factor, combined with a lower supply of properties put up for auction and increased demand for this type of property, has consequently generated an increase in the percentage of adjudications.

What is the situation in Italy, and what are the suggestions for investors interested in participating in an auction? We Wealth asked Bruno Saglietti, notary public and president of Apep.

Saglietti, in Italy, unlike other countries, there is a lack of culture about buying and selling real estate at auction, what does it depend on and what to do?

It depends on the fact that the world of auctions has, until recently, been the preserve of a few, generally professionals in the field. Thanks to the legislative reforms introduced on the subject and the simplification of participation procedures (including telematics), only in recent years has it opened up to private individuals, who currently represent the majority of those who participate in auctions. Spreading a culture on the subject is not easy because, beyond the participation aspect, there are several considerations to be made, many of a legal-economic nature, which are outside everyone's reach. The judge makes the difference when he delegates competent professionals as auxiliaries in the procedure. Notaries professionally deal with the buying and selling of real estate; where delegated, they ensure very high standards of security and control. To educate people about auctions, it would be helpful to organize targeted courses/conferences held by delegated professionals, where the peculiarities of buying property at auction are explained.

What are the advantages of buying property at auction?

The main advantage is savings. One can buy inexpensively without necessarily relying on a professional and thus being able to act independently. There are no brokerage fees; the transfer cost is 50 percent lower than a traditional purchase and sale.

What are the steps for an investor to approach this market for the first time?

Is buying a property at auction by taking out a mortgage possible? The first thing to do is to read the notice of sale well and then the appraisal report. The second step, however, is to go and see the property of interest in the person to verify that everything has stayed the same since the time it was appraised. In addition, it is possible to buy at auction by taking out a mortgage; most people who buy at auction take out a mortgage for the purchase. In this case, however, moving in good time with the lending institution that will provide the financing is a good idea.

Conversely, what are the risks of buying a house at auction?

There are no risks if the appraisal is done well and the delegated professional has done all the appropriate checks. One aspect of evaluating the timing of the buyer's entry into possession is the condition of occupancy (vacant, occupied with or without title).

Who does this type of investment appeal to, and what are the motivations?

Individuals buy mainly for investment (usually seniors) or because it is the property to be used as a home (Millennials). Corporations buy mainly to renovate for later resale, while institutions buy primarily to deal with housing emergencies.

Focusing on the marketplaces of Milan and Rome alone, how much is a property at auction discounted compared to a similar property on the open market? How often does it go to auction on average?

Discounting compared to market prices varies greatly depending on the area and the property's condition. In highly urbanized contexts such as Rome and Milan, for the most coveted neighborhoods, the purchase price is equal to the market price; for those more decentralized properties in good condition, the savings are in the range of 20/25% (in each case, you save the costs of 'brokerage and that of the deed from the notary because it is the judge who transfers the property); After the latest reforms introduced that have provided the minimum price in auctions for desirable properties (centrally or semi-centrally located) in good condition, it is difficult to get to the second experiment. Substantial declines are obtained only on suburban properties in poor condition.
Director of and editor-in-chief of the magazine. A professional journalist, she holds a law degree from the University of Turin. She has worked at MF, Bloomberg Investments, and Finanza&Mercati. She has contributed to Affari&Finanza (Repubblica) and Advisor.


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