Taking advantage of overseas property in Spain
During 2009 the number of distressed sales rose dramatically due to the economic crisis, and buyers experienced difficulties in raising the finance required to make a purchase. This led to huge oversupply in some areas, which meant that to stand a chance of a sale, vendors have had to slash their asking prices. It’s a buyer’s paradise in Spain at the moment, with sale prices 30-40% below their peak.
In order to facilitate as many buyers as possible, agents and developers have launched new schemes. These include rent-to-buy arrangements, where you pay a deposit and rent the property for two years before deciding whether to complete the purchase. If you decide to go ahead, your deposit and rent go towards the pre-agreed purchase price.
Grab an overseas Spanish bargain!
When you want to bag a bargain overseas property in Spain, ensure you can raise the finance and know exactly what your budget is. Many lenders are only willing to loan a maximum of 60% of the asking price, so you’ll have to cover the rest, plus all the associated costs.
When you make an offer you will normally be asked to pay a small holding deposit, whilst your lawyer carries out searches and the sales contract is drawn up. This is a legally binding document and will contain details of the agreed deposit, price, and completion dates.
You will pay a full deposit (normally 10%) upon signing, and if you subsequently breach the contract, you’ll forfeit your deposit. However, if the vendor breaches, they must pay you double your deposit. It is a very fair and secure system, and eliminates worries such as gazumping or cold feet.
Insuring your future in Spain
It is at this point that you should take out a comprehensive property insurance policy on the property, as whatever happens now, you can’t back out!
On top of the purchase price, you will incur costs of around 10-12% in fees, comprising of Legal fees, notary fees, land registry, searches, stamp duty equivalent or in the case of a new build, VAT equivalent and other taxes. Notary and property registration fees are based on a sliding scale depending on the value of the property.