In Italy there are many cost-effective alternatives to the standard real estate process. Two particularly popular options are the 1 euro that gained prominence in Italy a few years ago, and the more familiar model of auctions. What exactly do these two alternatives entail and which one suits your needs best? In this article, we break down each option, outlining their advantages and disadvantages.
1 euro homes
We’ve previously provided extensive coverage of the 1 euro home phenomenon, available in our articles here and here. To summarize, these properties generally have a price tag of just 1 euro—or bidding will begin at 1 euro—although certain conditions, such as property renovation and other obligations, apply. The clearest advantage of this arrangement is the incredibly low cost of the properties. Additionally, most of these properties are located in rural areas with small villages, making them an excellent choice for those seeking a quieter life away from the chaos of the cities.
For example, at the time of this article (2023), the Sicilian town of Pettineo has an initiative to sell 1 euro homes for the purpose of getting people to invest in property there. Obligations include preparing and presenting a renovation plan within 3 months of signing the contract, to finish the renovations within 3 years, and to come up with a surety policy.
Despite the attractive low cost, there are quite a few stipulations to consider when confronting the purchase of a 1 euro home, as seen in the above example. Often, the renovation needs to be completed within a set timeframe, and the project must be approved before you can purchase the property. Along with the fees for renovation, there are notary fees, costs to set up utilities, registration costs, and even an insurance payment to the municipality, which can range from €1,000 and €5,000. You might also be required to visit the property in person before the purchase and establish residency there. Some properties may also have restrictions on resale. Finally, each town can impose its own unique requirements. For example, the initiative in Presicce, Puglia, limited applications to European citizens. For these reasons, 1 euro homes are generally best suited for those who already live in Italy or plan to. If you are not prepared for the extensive renovation work or are unwilling to comply with municipality guidelines, purchasing a property at auction might be a more suitable option.
Homes at Auction
Another appealing and cost-effective option for purchasing a house in Italy is to go through an auction. Like 1 euro homes, judicial auctions provide a more affordable scheme to go through the home-buying process. The Italian courts conduct an examination of the property and then determine a base price. There is also a minimum price (generally 25% below the base), at which interested buyers can begin bidding. Bidding will occur at a tribunal before a judge, and about 10 days before the determined bidding date, all interested parties will pay a deposit by cashier’s cheque. Generally, the deposit put in at auction is 10% of the minimum price. At the auction, the person who offers the highest amount is considered the successful bidder. Those who weren’t successful receive their deposits back on the same day. He or she then has a time period (usually around 120 days after the auction) to pay the full balance minus the deposit. If this balance is not paid on time, the property will return to auction, and the successful bidder will lose the deposit. This does not mean you can’t use a mortgage for a home bought at auction, but if the loan does not cover the full price, you will still need to cover the remainder. Once this balance is paid, the judge will officially transfer ownership of the property.
Advantages of purchasing properties through auctions include avoiding the need to pay for third parties such as realtors or notaries. The entire process is also conducted through the court system, ensuring maximum transparency. Along with this, all transcriptions and registrations are typically cancelled.
As mentioned earlier, for 1 euro homes, it’s usually necessary to be in Italy, but auctions offer more flexibility. With IREL’s services, for instance, we can act as power of attorney to represent you throughout the entire process, even if you’re not physically present.
It’s important to note that properties bought at auction must be paid off within a certain time frame, or there can be a risk of losing the home. Something else important to be aware of is that properties at auction are often in the midst of a legal process involving debts and potential structural issues due to foreclosure. Therefore, it is advisable to have an attorney who is well versed in Italian real estate, particularly for purchasing properties at auction.
While 1 euro schemes and homes at auction are great options for affordable properties, this does not mean you can’t find cheap homes on the regular market. House prices depend greatly on the region, and even the individual province, you’re looking at. For instance, as of 2022 Calabria was ranked the region with the cheapest homes to buy. The average price here is 852 euros/m2, followed closely by the regions of Molise and Sicily as next cheapest. If you look carefully, you can find properties in the 10k to 60k range in nearly every region, though, some perhaps needing renovation, others not.
Cost comparison
We have examined the general process of how 1 euro homes and auctions work, how they help you save money in your home-buying venture, and some important things to be aware of. But what is the cost comparison? Which is the cheaper option? There is no simple answer to this, given the variables outlined above. The most important first step is to determine whether you can be in Italy or not for the process, if you’d prefer to live in the country or city, and how much renovation work you’re comfortable investing in.
For 1 euro homes, plan to spend at least €30,000, considering the renovation work, security deposit, and other additional fees.
Similarly, buying a house at auction can save you significant money, even as much as 60% of the market value.
Conclusion
There are many advantages to purchasing a 1 euro home or a home at auction in Italy. Both involve significant savings but, as mentioned, there are also many conditions and requirements to be aware of. Ultimately, it is up to you to decide which method best fits your budget and what you’re comfortable with. We’re also here to assist and would be happy to help! Feel free to contact us at info@italianrealestatelawyers.com.
