The entire match remained 0-0 till the 94th minute when Antonio Sanabria scored the lone goal for Real Betis to clinch a victory.
Cristiano Ronaldo, who has returned to the field after a five-match ban, failed to make any impact.
After the loss to Real Betis, Real Madrid is now seven points behind the league topper Barcelona.
Real Betis is presently at sixth position with nine points from five matches.
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