How to Sell a Property Seized by the Tax Office: Step-by-Step Guide

Did you know that a foreclosed home can sell for up to 30% less than its market value? However, you can sell a house embargoed by the tax authorities (Hacienda), and knowing the correct process can help you minimize these losses.

In fact, selling an embargoed apartment is completely legal and possible, although it requires following certain specific steps. The process begins after five unpaid installments, and the only way to remove the embargo is by settling the outstanding debt.

It's important to understand that selling an embargoed property requires full transparency: the buyer must be informed about the property's situation and the amount of the debt. Additionally, you'll need to obtain crucial documents such as the judicial charges certificate and, in some cases, a judicial resolution.

In this step-by-step guide, we'll explain everything you need to know to sell your embargoed house legally and efficiently. Are you ready to begin?

Understanding an Embargo by Hacienda

A tax embargo by Hacienda represents a legal measure that allows the Tax Agency to seize a person's assets to guarantee the fulfillment of unpaid tax obligations. This process is activated when the taxpayer fails to pay their debts during the established voluntary period.

Main causes of a tax embargo

The Tax Agency can initiate an embargo process for various reasons. Primarily, an embargo arises from the non-payment of tax obligations, although it can also result from debts with other public bodies managed by the tax administration.

The most frequent causes include:

• Non-payment of tax declarations such as VAT or income tax (IRPF)

• Failure to meet deadlines for agreed deferrals and installments

• Unsettled tax penalties

• Debts with city councils or other public bodies

The process begins with a notification of the enforcement order, which includes an additional surcharge. If the debtor does not respond after this notice, Hacienda proceeds with the corresponding embargo diligence to obtain the amount of the debts, plus surcharges, interest, and costs through the debtor's assets.

Differences from other types of embargoes

Hacienda's embargoes differ from other types of embargoes in several fundamental aspects. Firstly, while judicial embargoes are ordered by a judge, tax embargoes are executed directly by an administrative authority.

Furthermore, Hacienda's embargoes follow a specific order of action established by law:

1. Cash or bank accounts

2. Credits and short-term realizable rights

3. Wages, salaries, and pensions

4. Real estate

5. Commercial establishments

A distinctive feature of a tax embargo is that the Tax Agency has the power to seize assets without the need for a prior judicial order. However, the process must respect the principle of proportionality, ensuring that the value of the seized assets does not significantly exceed the amount owed.

It's important to note that even if an asset is embargoed by Hacienda, the owner retains physical possession of it but cannot freely dispose of it or sell it without first settling the outstanding debt. This restriction remains until the debt is settled or an agreement is reached with the tax administration.

Pre-Sale Steps

Before initiating the process of selling a property embargoed by Hacienda, we need to complete several fundamental steps to ensure a successful transaction.

Obtaining necessary documentation

To sell an embargoed house, we must first gather all essential documents. Among these, the simple note from the Property Registry (Nota Simple) stands out, detailing the current status of the property. Additionally, we will need the energy performance certificate and the certificate of occupancy (cédula de habitabilidad), which are mandatory documents for any real estate sale.

Furthermore, it is essential to obtain:

• The original property deed

• The latest IBI (Property Tax) receipt

• The certificate of being up-to-date with community fees

• Utility payment receipts

Calculating the total debt

The Tax Agency offers a specific calculator to determine the exact amount of the debt. This calculation must include:

• The principal amount owed

• Accumulated surcharges

• Generated interest

• Procedural costs

It's important to note that the total debt will determine the minimum sale price, as it will be necessary to cover at least this amount to release the embargo.

Verifying the current status of the embargo

Before proceeding with the sale, we must confirm the current status of the embargo through direct communication with Hacienda. At this point, owners must provide property titles and any documentation related to embargoed real rights.

Verification includes:

• Checking if there are multiple embargoes on the property

• Confirming the exact period since the process began

• Checking for any additional ongoing procedures

During this phase, it is crucial to maintain fluid communication with the Tax Agency, as any sale will require their prior approval. Furthermore, the potential buyer must be informed about the complete situation of the property to ensure transparency in the process.

Legal Sale Process

The legal sale of an embargoed property requires a meticulous process based on Article 131 of the General Tax Law and Article 112 of the General Collection Regulation. Let's look at the fundamental steps to carry out this transaction successfully.

Communication with Hacienda

The first step is to establish direct communication with the Tax Agency. During this process, we must submit a detailed document specifying the total amount outstanding, including interest and legal costs. Additionally, we will need to obtain the debt balance certificate, a crucial document that determines the exact amount owed at the time of signing the sale agreement.

Buyer requirements

The prospective buyer must meet certain specific requirements. First, they must be fully informed about the property's situation and the amount of the debt. Likewise, the buyer will need to:

• Go to the notary to receive payment and settle the debt

• Sign a document confirming compliance with outstanding payments

• Present a document signed by their lawyer requesting the lifting of the embargo

Payment and release management

To finalize the sale, the payment and release process follows a specific order:

1. Preparation of a check payable to the buyer for the total amount outstanding on the date of the deed signing

2. Presentation of a document waiving additional claims once payment has been made

3. Issuance of a certificate by the Court, signed by the judge of the Property Registry, confirming the settlement of the debt

During this process, the sale price must consider two fundamental factors: the amount of the debt and the desired profit. However, it is advisable not to focus too much on making a profit, since the priority is to prevent the debt from continuing to increase.

A viable alternative is for the buyer to negotiate directly with the bank to renegotiate the mortgage. In this way, the buyer assumes the current debt, while the seller is completely freed from it.

Options to Speed Up the Sale

To maximize the chances of selling an embargoed property, specific strategies can make the difference between a quick sale and a prolonged process. The key is to adopt a proactive and realistic approach.

Setting the right price

Price is a determining factor when selling an embargoed home. Buyers look for properties free of charges, so the value must be significantly lower than similar properties without embargoes.

To set a competitive price, we must:

• Conduct an objective evaluation of the property's condition and real value

• Consider the additional costs the buyer will incur

• Calculate the total amount of the debt and outstanding surcharges

It is essential to understand that an embargoed property tends to naturally depreciate. However, this does not mean we should undersell the property. The goal is to find a balance between attracting buyers and obtaining a fair value.

Negotiating with potential buyers

During negotiations, transparency is essential. Buyers must be aware of the property's complete situation from the outset. Additionally, we can implement the following strategies:

• Offer a price reduction in exchange for the buyer assuming outstanding debts

• Present valuation reports that justify the established price

• Highlight the positive features of the property that could increase its value

To expedite the process, it is advisable to work with professionals specializing in urgent sales. These experts can:

• Filter genuinely interested and solvent buyers

• Manage legal and administrative documentation

• Negotiate favorable conditions with both buyers and the Tax Agency

It is important to remember that time is of the essence when dealing with an embargoed property. Therefore, maintaining a flexible attitude during negotiations, without excessively compromising the property's value, can be the difference between a successful sale and missing real opportunities.

Conclusion

Selling a house embargoed by Hacienda represents a significant challenge, although certainly achievable by following the correct steps. The key to success lies mainly in maintaining transparent communication with all involved parties and gathering the necessary documentation from the outset.

Although the process may seem overwhelming, remember that there are multiple options for managing the situation. The sale price must reflect both market reality and the special circumstances of the embargo, always considering the need to cover the outstanding debt with Hacienda.

Undoubtedly, having specialized professional advice will make a significant difference in the final outcome. Experts can help us navigate the legal, administrative, and financial aspects, ensuring a successful transaction that benefits all parties.

Selling an embargoed property requires patience and determination, but by following this step-by-step guide, we can effectively resolve the situation and begin a new financial chapter with peace of mind.

FAQs

Q1. Is it legal to sell a house embargoed by Hacienda? Yes, it is completely legal to sell a house embargoed by Hacienda. However, the process requires following certain specific steps and obtaining approval from the Tax Agency before completing the sale.

Q2. How long can an embargo on a property last? The embargo annotation has a maximum validity of 4 years. However, this period can be extended for additional periods of up to 4 years if the competent body orders it before the initial embargo expires.

Q3. How does an embargo affect the sale price of a property? An embargoed property generally sells for a lower price than the market value, potentially up to 30% less than its real value. This is due to the additional costs and risks assumed by the buyer when acquiring a property with charges.

Q4. What documentation is needed to sell an embargoed house? To sell an embargoed house, you need to obtain documents such as the simple note from the Property Registry (Nota Simple), the charges certificate, the original deed, the latest IBI receipt, and a certificate of being up-to-date with community fees, among others.

Q5. Can the buyer assume the debt of an embargoed property? Yes, it is possible for the buyer to assume the debt of an embargoed property. In this case, the buyer can negotiate directly with the creditor entity to renegotiate the mortgage, assuming the current debt and releasing the seller from it.