The best property bargains can often be found at auctions (at 1/3 to 1/2 of the court valuation of the property) but you must know exactly what you’re doing. Also, buying at auction can be stressful and is not for everyone and perhaps it is best to give power of attorney to a licensed real estate to purchase a property on your behalf.
In Croatia properties that are to be repossessed by mortgage lenders or properties over which there are inheritance disputs can be purchased at court auctions. Mortgage lenders repossessing properties are the most common cases at court auctions.
In order to best serve our clients that are looking to find a property in Croatia for a good price, I have been attending court auctions now for several months since there has been a significant increase in the number of foreclosures / court auctions, in order to understand the process and to see how much interest there is at bank auctions. Somewhat surprisingly, there often isn’t a lot of competition for properties sold at auction, particularly as many of the properties are not of interest to the average buyer. Properties are usually sold at 1/3 to 1/2 of the court appraisal (value) of the property.
Properties due to be sold at auction in Croatia are not well advertised.
The information that can be found at the Croatian Chamber of Economy consists of just the basic information containing the date and place of the sale, a very short description of the property, land details with cadastre references, details regarding inspections, the court valuation of the property and the reserve price and other information, such as the required deposit (which is usually 10 per cent of the reserve price). The deposit must be paid in advance by bank draft but is refunded if your bid is unsuccessful.
If you are not in the city where the court auction will be held, you need to hire a licensed real estate agent to inspect the paperwork, be with you at court to advise you, and if necessary represent you in court if you will not be in attendance. You can also hire a lawyer to represent you Naturally when title of the property looks complex to foreigners, as in some Italian heritage homes in Zadar, then a licensed real estate agent should refer you to a lawyer that speaks your language to answer your questions.
Notices for auctions are only provided 30 days prior to the auction, which means that if you want something in particular you should hire a real estate agent to regularly check the auctions being posted in the county where you wish to purchase a property and who can notify you when something of interest to you is to be auctioned.
To purchase at auction you must first make arrangements to come to Croatia, open a bank account to be able to transfer funds into and to meet with a real estate agent who you trust and is prepared to work on finding you a suitable property at a bargain price.
Inspections of the inside of properties are usually not possible unless the owners agree, which is rare in Croatia. Several days prior to the court auction the court appointed appraiser documentation can be viewed at the court. What is most important to ascertain is whether the property is a good buy and at what price the mortgage lender will allow the property to sell for. There can be other liens on the property but these are all wiped clean when the property is sold at the auction. Often even if the bank does not allow a short sale at the court auction, all is not lost as the bank then takes the property onto its own books and then it is a matter of negotiation with the bank as to what price the bank is willing to sell the property for.
Naturally, it is best to purchase only land or investor properties which are not occupied as otherwise there is the entire process of eviction to consider.
A real estate agent should always investigate the current owners situation and let you know of the potential of a stressful situation, and then it is best not to proceed and let the bank take back the property and be responsible for any eventual eviction.
Sometimes it is also possible to work out a deal with the owner and the bank for a pre- foreclosure sale. Situations vary from case to case.
The cost of a real estate agent helping you purchase a property in this manner is negotiated upfront based on the % of the sales price achieved (and savings achieved) in the event of a successful purchase. A separate contract and fee is negotiated for managing an eviction.