Buying A Spanish Property – How To Avoid Paying Too Much

Introduction
For many reasons people buying homes in Spain are often paying too much for their property and/or services – all of which adds to the cost of purchase and living. Being in a different country where you are unsure of the process, and don’t have the time to compare prices, many agents take advantage of you – in fact many locals will even increase their price if they know it is a foreigner buying.
So how do you avoid paying too much for your property?
The main problem is that buyers set their own prices whereas in the UK you are given a realistic (sometimes) valuation of your property’s worth. Many buyers tend to set their prices too high. This happens for a number of reasons.
1. It means they have more negotiating room when a buyer is found
2. Typically a foreigner will buy a property because it is cheaper than a similar property at home.
3. Many people have unrealistic expectations about what their property is worth
4. Sellers/agents/developers will increase the price if a foreigner is buying it
Many people find they have bought a property and then cannot sell it at even break even for at least two years because they have been caught out by one of the above motives.
Most agents in Spain are reliable and honest, but a handful have given the business a bad name – and typically (and strangely too) it is British and Foreign agents that rip off their own countrymen. I have seen examples where agents locally have sold a house for €132,000 but the owner has received €72,000 – the agent pockets the difference.
It is especially easy for agents who use coercive trips (wine dine and sign on the line) for those visiting which give the buyer absolutely no time to make comparisons with other property in the area. But saying a property isn’t worth the money is not the same as it won’t sell – because they do – by preying on buyers that don’t know the difference between a cheap property and a good value property.
So you need to do some homework to ensure that you don’t overpay for your property.
1. Research the area you are looking into buying. This is a lot easier now with the advent and explosion of the internet where many properties in the same area can be easily compared (and in fact the same property on with different agents – which should give some idea as to which agents to avoid)
2. Note important features and compare each property against relevant features (i.e. number of bedrooms, property type etc). Although there is no proven formula you will at least have a better idea as to whether a property is worth the asking price.
3. Use a good agent. Most agents (regardless of what they tell you) will act on behalf of the seller. If you can – find a buyers agent. But if not then at least research which agents in your area are reliable, honest and don’t overcharge. This can be easily done by asking around and asking the agent about how they operate. A good agent will try and achieve a fair price for both the seller and the buyer and will be happy to tell you what commission they charge
4. BEWARE of agents who charge both the seller and the buyer. Regardless of what they tell you THIS IS NOT acceptable practice nor is it common, but they do it because they know they can get away with it with na?ve foreigners and it means they can charge double their stated commissions. But the price you see is not the price you then pay.
5. Don’t be afraid to negotiate. British buyers say very little about prices and will accept the price put in front of them. Generally this is because they are told that it is not like in UK – but it very much is and more so. When I bought my property I was shocked to find out after (having negotiated a 20% discount) that I could have bought it for €12,000 less than I paid for it, because the agent actually pocketed all of this and more. Remember if you walk away they have no sale – and likely have no body behind you either
a. Unless you push for it you wont get it – So ask and negotiate hard. Offer too low and you will get up to where the seller wants to be – offer too high and you will leave some of your hard earned money on the table.
Beware agents that take you for a ride
Most estate agents in Spain are paid by the seller so there is not much buyers can do to avoid overpaying for a service in this respect. However be aware that some agents in Spain will add an extra commission to the asking price if they think they can get away with it and in some cases this extra charge will be many thousands of Euros. Also some estate agents charge absurdly high commissions, which of course drives up the price you have to pay even though in theory the seller is paying the estate agent.
The best way to avoid paying extra “hidden” or unreasonably high agency charges is to use a recommended estate agent with a reputation for acting professionally and ethically. Several of big foreign-owned-and-run estate agents in Spain are highly unethical and should be avoided at all costs.
Look out for Lawyers who have their own interests at heart
Many foreigners buying property in Spain end up paying 1% – 1.5% or more (plus VAT) of the value of the property in lawyer”s fees.
However in many cases a Spanish property transaction requires no more than around 8 hours of legal work, if this, sometimes considerably less. There are many good (English speaking) Spanish lawyers prepared to work on an hourly basis rather than a percentage fee, or better still will give you a fixed price for the work undertaken.
On an average property of €250,000 this alone can save you around €1,700 – enough to buy a 3 piece suite, or bedroom suite for example. Much better in your pocket than in theirs.
We always recommend that you use a lawyer when buying Spanish property. However what most buyers don”t realise is that many property purchases in Spain can be safely carried out with minimal input from a Spanish lawyer.
In many cases you only need a lawyer to check a couple of relatively straightforward documents and perhaps draft a contract (for instance a private sales contract) that is only slightly adapted from a standard template. In most cases the agents have already carried out most of the checks the lawyer is charging you for, and to add salt to the wounds the lawyer will call the agents and ask what checks they have done – whilst still charging you for it.
So here?s a tip that could save you a lot of money.
1. First ask the lawyer for a breakdown of what his charges include and don’t be afraid to ask for everything.
2. Next ask the agent what they have done already or what they normally carry out.
3. Go back to the lawyer and point out what is covered by the agent and demand he reduce his price accordingly.
4. Leave the saved money in the bank (in order to buy me a beer if you ever meet me)
On the other hand some transactions may be very complicated and require a great deal of legal work. Especially when there is an illegal building (very common in Spain and generally not something to worry too much about) or if the land is rustic and could be subject to LRAU land grab – see article below.
In this latter case it might be better from the buyer”s perspective to use a fixed fee based on the value of the transaction – it all depends upon the particular circumstances of each transaction. Nevertheless many people significantly overpay for legal work on their Spanish property purchase for lack of insight into a fair price for legal work and for not knowing where to find a good Spanish lawyer.
If there is only one point that you take away from this it is that you should NEVER use a lawyer that is pushed by the estate agent you buy from. Mostly the agents receive a commission from the lawyer – so you are paying over the odds again. I once had an instance where another agent brought a client to me. The client bought a property and the agent “Recommended” a solicitor that wasn’t even in his area. When I queried the charges the lawyer would charge (for a very straightforward transaction) I was told it was 1.5% (around €3,200)
I spoke to the client and gave them 3 names of lawyers (2 of whom were friends of mine and Spanish) who would do the same transaction for between €300 – €500. Their transaction went very smoothly and the whole lot cost them €350, including Martin (the lawyer) accompanying them to the Notary.
So my advice is – Beware!!
That cheap mortgage maybe more expensive than you think
Supplied By Mark Stucklin of www.spanishpropertyinsight.com
It is very easy to find expensive and inflexible mortgages in Spain. It is far more difficult to find a flexible and inexpensive mortgage that will benefit you enormously, especially in the long run. If you do not take care to get a good mortgage you can end up paying through the nose for it, and then some if you try to cancel your expensive mortgage at a later date.
A lot of banks will attract you with a low interest rate (2.75% for example) only when you read the small print do you see that in 2 years time it will be 2% above base rate. And if you get out of it early there is a large 2% fee to pay. So be careful and take especial care when selecting a mortgage. Make sure everything is explained to you beforehand.
Buying Euros – your bank is NOT your friend!
Supplied By Mark Stucklin of www.spanishpropertyinsight.com
If you do not have the Euros you need to purchase your Spanish property you will have to buy them.
Most banks will sell you Euros and charge you a small fortune to do so. Currently it is possible to save €5-6,000 on a €200,000 transfer by using a broker. This is enough to buy a car, or carry out some major repair work.
A good currency broker should be able to get you a much more attractive rate and give you a far better service. A standard bank rate could cost you 3% – 5% more than you could get from a good broker. For a broker we use regularly because their service is first class, try currency uk.
Look out Bank charges about!!
People are often unpleasantly surprised to find out how much banks in Spain charge for receiving transfers of funds from abroad and issuing a cheque guaranteed by the bank. These costs can add several thousands of Euros if not more to the cost of your property purchase. It is important to clarify exactly how much your bank will charge you for these services before it is too late (ideally before you even open an account with the bank).
Another good tip when dealing with the banks is if they do charge you, query the charge and ask for it to be dropped. Most banks will do so, but obviously wont tell you this beforehand. So ask – you have nothing to lose.
So in Short if you wish to avoid paying too much for your property – keep your eyes and ears open, ask lots of questions and if something sounds either too good to be true (it probably is) or doesn’t feel right – walk away.
Good luck and enjoy!