Buying a property at auction may be a great option for you (“You could end up with a good deal!”)
If you are interested in buying a home in Aruba, you may also consider buying a property at auction. The advantage of buying at auction, in addition to expanding your options, is possibly buying at a discount.
Types of auction
There are two types of auction: voluntarily auction and the foreclosure auction. In Aruba, the auctions are usually foreclosure auctions, so we will elaborate on this variant. If you are interested in a voluntary auction, you can always contact our auction specialists at [email protected].
Foreclosure auction
When a homeowner has not paid the mortgage for at least a few months, they may fall into default and end up in foreclosure. If the homeowner does not pay the balance owed or renegotiate the mortgage with the bank, the bank can put the home up for auction and recover its claim from the debtor’s property. By law, foreclosure auctions are held exclusively by the civil law notary who must comply with all foreclosure rules and case law.
Here are the steps in a foreclosure auction:
- The notary will set a date, time and place for the auction in consultation with the bank.
- The notary, through the bailiff, notifies the debtor, owner and any lien holder of the auction no later than 30 days before the auction date.
- The notary in consultation with the bank sets the auction conditions and price and publishes the information regularly in local newspapers and on its website.
- The notary’s advertisement indicates that the public has the opportunity to make a private bid to the bank through the notary no later than 14 days before the auction date. This bid is unconditional and irrevocable. In the event that the bank or the owner of the property agrees to the private bid, a purchase agreement between the bank and private bidder will be signed and submitted to the Court for approval no later than 7 days before the auction date. By submitting the purchase agreement, the auction date will be suspended. The Court will then assess whether acceptance of the private bid benefits all creditors and the debtor. If the Court approves the purchase agreement, the public auction will be canceled and the auction will be settled privately between the bank and the private bidder.
- In the event that the bank is unwilling to accept the private bid, the auction will continue.
At the auction
On the day of the auction, the procedure is as follows:
The notary shall announce the auction and the auction conditions, the outstanding property taxes, auctions costs and charges to be borne by the buyer.
During the session the notary is authorized:
- to not recognize a bid as such;
- to exclude one or more bidders from the auction;
- to resume the auction at the second last bid, reopen the auction, cancel or interrupt the auction; take other necessary measures.
It may happen that a bidder has made a mistake when submitting a bid. In such a case, the notary determines whether or not the bidder can be held to his bid.
The judgment of the notary is decisive regarding everything that occurs during the auction and the interpretation or application of the auction conditions.
Auction method
The auction takes place in two phases:
1) ascending bid
During the first phase the notary calls the starting price that the bank wants as a minimum first bid. In the event that the bank has not set a starting price, the notary asks the public to make an initial bid. Bidding takes place openly in a clearly observable manner, generally by raising a hand or finger. If a first bid has been made and as long as a higher bid is made, the notary will ask the public to increase the bid by a fixed amount, for example AFL 1000 or a multiple of that amount. The person who makes the highest bid is determined by the notary with a tap of the hammer. The person will identify himself before the notary and sign the deed report which includes his details and the bid amount.
2) descending bid
During the second phase of the auction, the civil-law notary, in consultation with the bank, will set an amount that is above the highest bid that was made in the first phase. The notary will then count down with a fixed amount of, for example, AFL 1000 or a multiple of that amount, until someone from the audience exclaims “my”. If a person exclaims “my” at an amount higher than the highest bid in the first phase, the notary will tap of the hammer and thereby establish the bidder in the second phase as the highest bidder of the auction. The person will identify himself before the notary and sign the deed report which includes his details and the bid amount. If no one exclaims “my”, the notary will tap of the hammer and thereby establish the bidder in the first phase as the highest bidder of the auction.
**After the auction, the bank has 5 working days to decide whether or not to award the property to the highest bidder.**
The bidding
- Bidding at the auction is not without obligation. A bid is always unconditional, irrevocable and no reservations can be made. Usual reservations such as a reservation on financing are not possible at the auction.
- If two or more persons bid together or buy together, they are each fully liable for the obligations entered into (each of them for 100%).
- Bidding at the auction as an representative of a third party is possible. However, note that the authorized representative is jointly and severally liable for the obligations that have been entered into.
Identification and “financial soundness”.
The bidder is required to identify himself (passport, ID or driver license) and to provide all information necessary to verify that the financial obligations arising from the auction can be met. As part of this, the bank requires a bank guarantee or a “declaration of willingness” (in Dutch: bereidheidsverklaring). A “willingness statement” is a written statement from a recognized banking institution stating that the bank is willing to finance you for the purchase price and costs. For the record, that is not a bank statement.
If these documents cannot be shown at the auction, the auction will be repeated.
Also, with the approval of the notary, a bidder can, prior to the auction, pay a deposit into the notary account. If you are then the highest bidder, the notary will hold that amount in his account as a deposit and if you are not the highest bidder, you will receive that amount back.
Key takeaways:
- Inquire carefully about the costs of the auction, whether or not the property has been leased with the bank’s permission and the purpose of the property to see whether or not it matches your intentions.
- The best way to assess an auction property is to work with real estate agents, appraisers, and contractors. These industry representatives understand construction and remodeling costs and can accurately estimate the property’s value and the cost of the work it may need.
- Plan in advance what the amount is for which you want to buy the property to be auctioned. Bidding too early results in you paying more than you actually intended. And if you bid too late, you may miss an opportunity. If you suspect that you will be getting nervous, it is wise to ask for help of a third party (for example, a real estate agent). The real estate agent can then make the bid on your behalf.
