How to Avoid the Auction of Your Property by Selling It First

What does the court auction of a property involve?

A court auction is the culminating phase of foreclosure proceedings, triggered by the creditor when prolonged defaults occur. If the debtor does not satisfy the claimed amount or reach a payment agreement, the court liquidates the asset by publishing it on the Official State Gazette (BOE) auction portal.

In this scenario, the awarded price rarely aligns with true market value. If the bidding is left uncontested or the offers submitted are low, procedural legislation allows the creditor to be awarded the property based on percentages regulated by the Civil Procedure Act (such as 70% of the valuation value in the case of a primary residence, or for the total amount owed across all concepts if that figure is lower).

Reaching a public execution carries severe financial consequences for the debtor:

• Accelerated loss of equity: The transfer is formalised at a value significantly lower than that of an ordinary private sale.
• Risk of remaining debt: If the proceeds from the auction do not liquidate the full principal, default interest, and court costs, the lender may request the seizure of other present or future assets.
• Prolonged listing on credit blacklists: Retaining an outstanding balance after losing the property prevents removal from registers such as ASNEF or RAI.
• Court-ordered eviction: Once the award decree is approved, the court sets the date for eviction from the property.

Up to what point can you sell the property to stay the process?

There is a widespread misconception that a property cannot be sold once foreclosure proceedings have begun. Within the Spanish legal framework, the owner retains legal title and ownership of the property until the decree of award in favour of the bidder or creditor is signed and registered in the Land Registry.

Therefore, completing an open-market sale to settle the debt is legally feasible provided the award has not become final. However, acting early is crucial: the sooner marketing of the property begins, the greater the scope for negotiation to request a temporary stay of auction from the bank's legal counsel before the court.

Key phases of execution proceedings

Understanding the stages of the process helps determine the window of opportunity available:

1. Notice of execution claim: The court formally serves a payment demand on the defendant.
2. Certificate of title and encumbrances: The Land Registry sends the court details regarding ownership and current charges on the property.
3. Notice of auction: The edict is published on the official BOE portal to open the bidding period.
4. Decree of award: The property is assigned to the successful bidder or claimant, formalising the change of ownership.

Introducing a committed buyer prior to the auction facilitates a voluntary stay of proceedings via a joint application for suspension agreed with the creditor.

Advantages of selling the property voluntarily before auction

Managing the direct sale of the property prior to a judicial ruling provides decisive benefits compared to an award in a public auction.

Securing true market value

Selling on the open market allows a price to be set according to local supply and demand. This typically yields a significantly higher amount than the judicial knock-down price, enabling appropriate capital recovery from the real estate asset.

Full debt clearance and cancellation

Proceeds from the sale are allocated first to clearing the mortgage, ordinary and default interest, and procedural costs. If the purchase price exceeds the total amount claimed, any surplus belongs directly to the seller. Should the market value fall short of covering the total balance, direct negotiation with the lender allows for agreeing a debt reduction or voluntary surrender of property that clears the debt entirely.

Halting default interest and legal costs

Prolonged court proceedings increase the outstanding debt daily due to punitive interest rates and legal fees. Clearing the debt early through a sale immediately halts the accumulation of these costs.

Restoring creditworthiness

Upon debt settlement and execution of the registry cancellation, the bank closes the recovery file. This enables the debtor to request permanent removal from credit bureau databases.

Steps to sell a property with encumbrances or under execution

Marketing a home subject to ongoing execution proceedings requires a rigorous procedure to ensure the transaction is completed with full legal guarantees:

1. Request a debt settlement statement for redemption: It is necessary to request an official certificate from the creditor or its legal representative specifying the exact amount required to clear the mortgage and costs as of a specific date.
2. Set a competitive asking price: The property must enter the market at an attractive price point that enables closing the deal within a timeframe compatible with court deadlines.
3. Agree a procedural stay with the lender: Upon receiving a committed offer backed by a deposit contract, the bank's legal team is asked to submit a formal petition to the court to suspend proceedings or the auction.
4. Complete the sale before a notary: At completion, the buyer provides banker's drafts earmarked to formally clear the debt with the claimant and settle court costs. Any surplus is handed to the seller.
5. Register the discharge and dismiss the case: The lender issues a zero-balance certificate, the mortgage or charge discharge deed is executed, and a formal request is filed to dismiss and permanently close the court proceedings.

Specific requirements in the Comunidad de Madrid: Official Protection Housing (VPO)

If the property subject to execution is an Official Protection Housing unit (VPO) located in the Comunidad de Madrid, selling prior to auction must strictly comply with regional regulations governing protected housing.

Within the Comunidad de Madrid, the following factors must be observed:

• Verification of the protection period: It must be verified whether the property remains subject to the public protection regime according to its final classification.
• Processing voluntary declassification: If regional regulations permit, voluntary declassification of the property can be processed with the Madrid administration to sell at open-market prices.
• Sale authorization and Maximum Legal Price: If the protected status is retained, the transfer requires prior authorization from the competent Regional Department of the Comunidad de Madrid and adherence to the applicable Maximum Legal Selling Price.

Co-ordinating administrative timelines with the Comunidad de Madrid alongside court scheduling is essential to prevent judicial execution from progressing before necessary authorizations are obtained.

Professional advice for managing a sale with debt

Navigating the sale of a property subject to attachments or foreclosure requires aligning bank negotiations, procedural steps at the court of first instance, and direct real estate management. Working with specialized professionals helps stay the auction with legal backing and structure the sale securely for both buyer and seller.

Sky Real Estate has a specialized technical team experienced in managing liabilities and distressed real estate assets. Its legal department, Sky Law, was recognized at the European Legal Awards in 2023, 2024, and 2025 for its work in complex real estate transactions. Furthermore, Sky Real Estate operates as a regulated real estate credit intermediary, registered with the Banco de España under ICI code D-286, providing full institutional credibility when liaising with financial institutions.

If you need to halt the execution on your property and want to explore options to settle your encumbrances, you can find out how to sell a property with debt or a mortgage in a structured manner to protect your assets and resolve your financial situation prior to auction.