Since the virtual collapse of the Spanish housing market a few years ago, one positive result of the downturn has been a number of Majorcan ‘distressed’ properties appearing on the market, attracting potential buyers looking to own their dream home on the island of Mallorca.
Now the housing market in Mallorca is showing signs of recovery, many people feel that this is the ideal time to snap up a bargain in ‘distressed property’ before prices begin to rise again.
Times have been hard in the property market, but experienced, professional real estate agents such as Pollensa-based Balearic Properties, have weathered the storm partly due to their solid local knowledge of the Mallorca property market. The result has been a significant number of distressed properties appearing on their books.
Types of distressed property
In simple terms, there are two types of distressed property potential investors can choose from. The first type concerns those properties currently going through a repossession process from the lenders; the second type is where the repossession process has been successfully completed.
From a buyer’s perspective, it all depends on whether you are a relatively small investor on the lookout for a home in Mallorca at a good value price, or a serious (and rather brave!) investor prepared to take the risk of buying ongoing bank repossessions at a heavily discounted price, but with the risk of unexpected losses in pursuit of profit.
So let’s take a look at some of the advantages of buying distressed property in Mallorca.
NPLs and Key-Ready Properties
Many distressed properties fall under the category of Non Performing Mortgage Loans (NPLs) or Key-Ready Properties. Usually a borrower falls into arrears on the mortgage loan and faces having their property being repossessed by the lender. These types of property can bring about a three way process involving the borrower, the lender and the potential buyer. Some of these properties have already been fully repossessed by the bank and can, in some cases, provide a real bargain purchase.
Key-Ready Properties are just that, which means that once contracts have been exchanged, you can move in straightaway. Also, unless you are a cash buyer, you can usually benefit from favourable lending terms on a mortgage. (Warning: Although Key-Ready Properties provide the best risk-reward ratio, make sure you check that the property is not in negative equity.)
Remember also that you will need to put down a decent-sized deposit – traditionally 10% – 15% of the asking price.
NPLs and Key-Ready Properties might not give you a big financial reward, but if it is peace of mind and legal security you are looking for, these type of properties are most definitely recommended.
If you are looking for a hassle-free purchase of distressed property in Mallorca, as opposed to potentially making a quick buck on your investment, these are the ones to be on the look out for. (As a rule of thumb, you will usually get a better deal by going through a respected Majorcan estate agent).
Ongoing Bank Repossessions
With this type of distressed property, the lender (the bank) is currently in the process of repossessing the property. In cases such as this, the properties hold an attraction for serious investors who have nerves of steel and can offer huge financial rewards (as well as considerable risks).
Normally, serious investors will buy bulk properties at discounted prices from banks willing to get rid. It’s important to note here that hiring the services of a professional lawyer and reputable estate agent is most definitely recommended.
So whatever type of distressed property you may be interested in on the island of Mallorca, one thing is for certain: it is most definitely a ‘buyers’ market’ at the moment.
If you are looking for a distressed property in Mallorca, Balearic Properties, one of Majorca’s most experienced and respected estate agents, can advise you all the way in order to make your purchase of Mallorca property trouble free.
To view our latest Mallorcan properties go to: balearic-properties.com
Or why not pop in to one of our offices for a friendly chat? You are most welcome!