Buying property at auction: what are the costs and tax aspects?

foto digitale - Nicola Dimitri
Nicola Dimitri
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The purchase price of houses sold at judicial auctions is generally 40 per cent lower than the market price; there are also tax benefits provided

Depending on whether the selling party is an individual or a company taxes to be paid differ

It is possible to publish properties for auction on specialized websites, newspapers as well as on the portal of the Ministry of Justice

Real estate at auction: general profiles

Judicial property sales through the auction mechanism can prove to be excellent investment opportunities, both in terms of the purchase price (generally speaking, the price is 40 percent lower than the market price) and in terms of any tax benefits provided. In addition, there is no foreclosure, and it is possible to participate in the auction telematically, thus without being physically present.   
Three categories of properties end up for auction: belonging to private individuals, unable to meet the scheduled payments (e.g., mortgage); belonging to companies subject to bankruptcy proceedings; belonging to public entities.   
It is possible to find the properties for auction on specialized websites, newspapers, and the Ministry of Justice portal. Another option is to navigate on the court's dedicated sections of their websites, which are territorially competent to the property's location.   

Tax treatment for auction purchases between individuals

Even when it comes to purchasing real estate at auction, one must consider the tax scope. The taxes are to be paid differently depending on whether the selling party is a private individual or a company.   
If the seller is a private individual, the following taxes are due:   
Registration tax of 9 percent, with a minimum base of 1,000 euros Fixed mortgage tax of euro 50; A fixed cadastral tax of euro 50. If the seller is a construction company, VAT must also be considered. In these terms:   
- 22% VAT if the property is a luxury property (in other cases, 10% VAT) 
- Fixed registration tax of euro 200 
- Fixed mortgage tax of euro 200 
- A fixed cadastral tax of 200 euros. 
The purchase of a property at auction does not preclude the possibility of taking advantage of "First home" benefits.   
On this point, in its answer to interpellation No. 808/2021, the Internal Revenue Service clarified that property at auction also entitles one to benefit from the first home benefit.   
The right to the property is also acquired due to case law.   
In this hypothesis, one must consider:  
- 2% registration tax 
- Mortgage tax of 50 euros 
- A cadastral tax of 50 euros. 
In addition, in general, when it comes to the registration tax, the taxable base is the adjudication price of the property and not the transfer price indicated in the deed of sale, adjusted to the revalued cadastral value.   

Costs to be incurred

Although buying a home at auction saves on the purchase price, there are several expense items to consider, including:   
- legal and tax advice, surveyor's report 
- compensation of the professional delegated to follow the judicial auction 
- any outstanding condominium expenses of the previous owner 
- notary fees 
- virtual stamp and registration of the deed 
- energy performance certificate 
- costs for the cancellation of transcripts of inscriptions on the property. 
Editor and coordinator of the Tax & Legal section at We Wealth. Previously worked in tax law and international taxation at leading law firms.
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