Thousands of visitors flock to Italy by the year and hundreds of them dream of buying a charming Italian house. The timeless allure of la Dolce Vita is what put the €1-houses scheme in the spotlight: virtually everyone fantasized about flying to Italy and buying a wisteria-covered sea-view cottage for less than the cost of a cup of coffee.
As it turns out, a lot of these exquisite homes are in the middle of nowhere and need (a lot of) renovation. So should you ditch the idea of having your own Italian farmhouse with a vineyard or villa forever?
A house up for auction may be your break into the Italian Bellezza
Not necessarily. What you should do is consider an alternative strategy, and that is buying a property that is up for auction. Real estate auctions are a great way to find valuable property and get it for a competitive price. This is true in many countries, but in Italy the financial advantages of buying property at auction are inspiring.
In Italy, apartments, houses, villas, etc., that are up for auction typically sell for prices that are below their market value, and all property registration costs and transcription fees are waived. Buying property at auction is also generally safer and easier to handle, provided the prospective foreign buyer does her/his homework properly.
How property ends up at auction in Italy
Property is put up for auction when its owner does not pay off a loan or debt. In these cases, the creditor can apply to a judge, requesting payment be demanded. The judge’s decree becomes executive when the debtor is unable to settle; the creditor may then choose to satisfy the claim and put the property up for judicial auction. Pursuant to Italian law, auctions must be public and available to an unlimited number of participants, hence all auction offers are published on the Ministry of Justice’s website.
Types of property auctions in Italy
Standing Italian legislation provides for two types of auctions: Vendita senza incanto (Italian Civil Code, art. 570) and Vendita con incanto (Italian Civil Code, art. 576 et seq.).
The Vendita senza incanto is the most common. It implies a minimum set price and is held during a specific time frame. All participants must make their bids within the set period of time. Bids are made in sealed envelopes that are deposited at the chancery and opened by the authorities in charge. The property is awarded to the bid that exceeds the minimum price by at least 1/4. If no bid meets this requirement, the judge may choose to summon a Vendita con incanto.
The vendita con incanto is a public open auction, i.e. a competition among bidders held in a public hearing room before a judge. The property is awarded to the highest qualified bidder, regardless of the price, and the judge has three (3) minutes to decide. If no new bid is made within the said three minutes, the last bidder wins. This decision is provisional, not final: if a new bid that is at least ⅕ higher than the originally successful one comes in within 10 days of the last bid, the judge reopens the auction. This second hearing will be available only to those who participated in the first one.
Today, the great majority of auctions take place online, rather than in person. A strategic perk for prospective foreign buyers.
How to find your way through the Italian property auction market
Real estate agents and lawyers specialized in property law play leading roles in the Italian auction market. Having an expert by one’s side can be extremely helpful, especially if you live abroad and are not 100% fluent in Italian. A real estate agent can offer precious insight into the current market trends, helping you find better deals. Lawyers, on the other hand, provide invaluable assistance when it comes to checking documents, carrying out due diligence on the property, and finally ascertaining that all runs smoothly when it comes to transferring ownership and signing the final deed.
The arguments in favor of buying a house up for auction are quite straightforward, but there are cons too. Wanna-be owners should keep in mind that they’ll have a limited timeframe to inspect the property and that when they buy, they’ll be purchasing it as it is. This is to say, they may end up “buying” the house or estate’s legal encumbrances, too.
Conducting due diligence properly is essential, and the only way one can do that is by hiring a proficient English-speaking Italian lawyer. Plus, before attending an auction in Italy one will have to appoint a local lawyer anyway: applications must, by law, be submitted via a PEC, the certified email address held by professionals. Also, they’re byzantine and tricky to fill in.
Where to find your dream Italian house up for auction
Finding one’s dream Italian house isn’t necessarily easy, but ascertaining what properties are currently up for auction is relatively simple. The properties are listed on the websites of the Ministry of Justice (in Italian and English) and the National Association of Judicial Auctions (alas in Italian only). Both are great sources: you’ll find property details, prices, auction dates, times, and places.
Assessing a property’s value
In Italy as elsewhere, properties up for sale by auction have a guide price, a figure that provides an indication of the property’s value based on elements such as location, condition, and market trends. Prospective buyers should always keep in mind that this figure is only an indicative starting point, and the final sale price may be lower or higher.
Buying property in Italy as a foreigner: the legal and bureaucratic requirements
Can a foreign national, specifically a non-EU citizen, buy property in Italy? Yes, provided certain requirements and conditions are met. Current Italian legislation sets specific rules that differ depending on nationality and place of residence.
A non-resident foreigner who is a citizen of a non-EU member country can purchase real estate in Italy subject to the condition of reciprocity, that is to say if there is an international treaty between Italy and her/his country of origin that establishes that an Italian can also buy property in that country.
A non-EU citizen that resides in Italy can buy property in Italy (independently of the condition of reciprocity) if she/he holds a residence permit for employment or self-employment, sole proprietorship, family reasons, humanitarian reasons, or study reasons.
All foreign nationals who meet one of the above requirements can buy property in Italy, provided they comply with standing bureaucratic requirements: obtaining an Italian fiscal code, the Codice Fiscale, and opening a bank account in Italy.
Talking about banks, foreign buyers should consider that buying property up for auction in Italy can be more profitable than they’d expect. This is because several Italian banks offer mortgage loans specifically drawn up for auction buyers. In some cases, these can cover up to 40-50% of the asset’s value. Again, having straight-to-the-point advice and firsthand info from a professional is vital.
Participating in an Italian property auction
Anyone, except for the debtor, can participate in a judicial auction in Italy. To do so, individuals must submit their application to the court registry, notary, or appointed professional in charge within the day before the auction is scheduled to be held.
If the prospective participant is a company, the application must be submitted and signed by its legal representative.
To be on the safe side, prospective participants should:
- have the application reviewed by a professional;
- check how much the initial deposit required amounts to (generally 10% of the price);
- have the property’s technical appraisal reviewed by a professional;
- visit the property.
All things considered, judicial auctions may be one of the best ways to find one’s dream house in Italy, and a sharp, resourceful Italian lawyer can offer priceless insight, and help you get a great deal.