Property auctions in Brazil: how to compare the opening bid with market value

In Brazil, the opening bid at a property auction is almost never calculated from the market. It starts from an appraisal carried out for the proceedings or for the contract, and from the rules of the type of auction. Comparing that figure with the market value requires knowing where it came from.

This guide is educational and does not include a numerical example. We explain why in the last section, and which data would be needed to do that calculation responsibly.

1. Where the opening bid comes from

There are two main routes:

• Judicial auction, within an enforcement action. The judge sets the appraisal value and may set a minimum price. The Code of Civil Procedure prohibits a bid at a vile price (art. 891): a price is vile if it is below the minimum set by the judge and stated in the notice or, in the absence of that minimum, below 50% of the appraisal value.
• Extrajudicial auction, when the creditor retakes a property given as fiduciary alienation (Law No. 9.514/1997). The rules on the minimum bids for each round are set out in the law and in the notice, and they have changed with recent amendments to the law: always read the version in force.

In either case, the notice is the governing document. It is where the appraisal, the minimum bids, the dates, the auctioneer's commission and who pays the property's debts are set out.

2. Appraisal is not market value

The appraisal in the notice may be out of date, may have been made without visiting the interior of the property, or may use criteria different from those of a buyer. A bid "below the appraisal" is only a real discount if the appraisal is close to what the property is worth today.

To test this, look for comparables: similar properties (type, area, standard, condition, floor, parking space) in the same region, preferably sale values and not advertised prices.

3. Which official references exist, and what they are for

Rivesta integrates some official Brazilian series. It is important to know what each one measures:

• Central Bank, Real Estate Market Information: appraisal value and purchase value of financed properties, by UF (federative unit). They show the trend in the state's mortgage lending, not the value of a property at auction.
• IVG-R and MVG-R (Central Bank): index and median of the collateral values of financed residential properties. They are national trend indicators.
• IBGE (SIDRA): population and income by municipality. They help to understand the demand in a place, but they are not prices.

None of these series is an appraisal of a property. Using them as if they were leads to wrong conclusions, especially in large cities, where prices vary greatly between neighbourhoods.

4. The costs that go into the calculation

The bid is only one part. Add, depending on the notice and the municipality:

• Auctioneer's commission, stated in the notice;
• ITBI, municipal transfer tax, with a rate and calculation base defined by each municipality;
• Registration of the arrematação certificate or the deed, and certificates;
• IPTU and condominium debts: check in the notice who assumes them;
• Vacating the property, renovations and the time the property is unused.

5. Occupation and legal risks

Before making a bid, investigate:

• Occupation status: an occupied property may require a court action to obtain possession, with cost and time;
• Up-to-date land register entry: seizures, mortgages, unavailability orders and other records;
• Progress of the case: appeals and requests for nullity may delay or undo the arrematação;
• Sale "as is": as a rule there is no viewing and no guarantee about the condition;
• Payment rules: lump sum, instalments, deadlines and penalties.

When there is a legal doubt, advice from a lawyer experienced in auctions usually costs less than the mistake.

6. How to do this on Rivesta

In the Brazil property search each listing brings together the published auction data, the dates and the type of sale, and a link to the source, where the notice and the land register entry are found. Use them as a starting point and confirm everything at the source.

What would be needed for a numerical example

To compare rigorously the opening bid of a specific property with the market, the following would be needed:

• the appraisal in the notice and the date on which it was made;
• transaction values in the region, for example those declared for ITBI, where the municipality publishes them;
• comparables of similar properties in the same neighbourhood;
• the condition of the property and its occupation status;
• the rates and fees of the municipality.

The UF-level and national series we currently have integrated are not enough for this, and that is why this article does not invent figures.