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Learn about the benefits of conducting a real estate auction

Real estate auctions are an interesting option for both owners and banks looking to sell a property quickly and with high profitability. While property auctions often apply to homes with mortgage debt, an auction can also be a good option for homeowners who have an unusual home they want to sell.

Fair market value

One of the biggest benefits of a real estate auction is the high probability of selling the property for its fair market value. This happens when buyers compete to reach a winning offer, bringing the price of a home to the highest price buyers are willing to pay and the lowest price a seller is willing to accept. This benefits both sellers and buyers, who can use the auction process as an indicator of home value.

Prior approval

Buyers wishing to bid on a property at a real estate auction must register with the real estate agency that oversees the auction. This allows the real estate entity to pre-approve buyers based on their creditworthiness. When it’s time to bid, only pre-approved buyers can participate and know the seller’s reserve price in advance. This ensures that a buyer can make the purchase safely.

Quick sale

Auctions are much faster than most conventional home sales. Sellers can schedule a date and know exactly when the home will sell. This can be useful for scheduling a move or making other plans that require financial commitments. The speed of a home auction also reduces the cost of selling a home by the realtor. Homeowners also save by reducing maintenance costs while the home is on the market.


The real estate auction is an alternative for homeowners who have a home that would be difficult to sell or value on the open market. This is especially true for homes that include some type of special feature or unusual features that may attract a certain group of buyers.

How can you organize a real estate auction?

To successfully carry out a real estate auction, a day must be scheduled to hold the event. Before starting the auction, a minimum starting price for the property must be set. All interested parties should bid a minimum amount to be able to access the auction, it could be from 1% to 3% of the minimum established value.

Once the auction is open, potential buyers must proceed to deposit their offer in a sealed envelope. We must remember that there is a base price and logically the offer, to be really tentative, must be above said value. Once all the offers are received, all the envelopes are opened in the presence of potential buyers, making sure that the process is as transparent as possible. The person or entity that made the highest bid is the one to whom the property is awarded.

Once the auction is closed, a deposit contract is prepared where the buyer is granted a certain time to pay 10% of the amount. If this customer defaults on the payment, the purchase is automatically awarded to the second bidder.

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What taxes are you going to pay for the purchase of a property?

When it comes to buying a new property, one of the least attractive aspects for new owners is the payment of taxes corresponding to the acquisition of the property. Taxes usually represent in most cases 10% of the price of the house. A cost that is irrecoverable in relation to the investment, if we compare it with the investments made for remodeling or improvements to the property.


The answer will depend on the seller and the house. If it is assumed that the purchase of a home is made for own use or rental, only VAT will be paid. Which corresponds to 10% of the price, or 4% if it is an officially protected home. On the other hand, if it is a new house, the same amount will be paid throughout Spain, with the exception of the Canary Islands.

In addition to VAT, the Documented Legal Acts (AJD), a modality of the ITP-AJD, must also be paid. The amount to be paid by AJD will depend on the location of the house: from 0.50% in the Basque Country and Navarra to 1.5% in Galicia, Aragon or Catalonia, going through 0.75% in Madrid.

Onerous Asset Transfer Modality (TPO)

The TPO to pay for the purchase of a used house will depend on the Autonomous Community, the price and the fulfillment or not of certain requirements that have to do with the use that the buyer will give. In each Autonomous Community there are different rules, so it will be necessary to review all those that may apply.

Both TPO and AJD are self-assessed in the Autonomous Community, so it is important to apply the discount if it corresponds to the purchase. It must be taken into account that if the purchase is not previously presented by the Autonomous Community with the self-assessment, the title of the property cannot be registered in the Property Registry. You will not be able to register either if it is not proven that the transferor has declared the municipal capital gain.

What is the tax base of the ITP?

You need to be very careful on this point. Let us remember that the law for the prevention and fight against tax fraud contains a measure that not only fights against fraud, but also changes certain rules of the Administration. The base of this tax was set according to the real value that has been declared by the taxpayer in his self-assessment.

The reason for the change to the law was partly due to the way in which the Administration used to assess the value of the property (with statistical or comparative methods). Faced with this, the Supreme Court determined that the value of a property was not demonstrable by said method. It was necessary to visit the property in order to make an individualized and justified valuation.

Now the tax base is the reference value. It is a value set by the Land Registry based on statistical data, average prices reported and adapted (according to the law) to the individual characteristics of the property. However, this amount does not include the reforms carried out by the owner on the property.

The real condition for the payment of the IBI

There is also a real effect on assets due to tax debts imposed on previous transfers. These charges must be recorded in the Property Registry. However, these notes do not mean that the tax has been assessed and paid. On the contrary, they only indicate that the property is subject to payment if the settlement was not correct.

On the other hand, the Law establishes that the IBI for the current year must be paid by the owner on January 1, even if it is paid for the property throughout the year. The Supreme Court has ruled that the seller can pass on to the buyer the proportional part of the IBI for the days of the year that belongs to him. This point is important to agree on in writing expressly.