What is the difference between what buying agents do and what an estate agent does?
An estate agent is engaged by the seller to achieve the highest possible price for their property and will only be able to offer those properties on his books, usually in a well defined area. We are engaged by the buyer to find the right property at the lowest possible price and are not restricted to area.
An estate agent wants to sell and will show properties in a favourable light. For example, a selling agent may try to disguise the fact that a property does not enjoy afternoon sun by only showing it in the morning, but we see every property from the buyer’s point of view and make our clients aware of any negative aspects related to the property or its surroundings.
We often find that people are not really sure exactly where they want to be. We are able to offer balanced and impartial advice about a variety of locations and we use our intimate local knowledge to pinpoint the most likely options for each individual’s requirements. After listening to our clients, we have often helped them to buy property many miles from where they originally thought they wanted to be, or even an entirely different style of property.
We are a service company – not a property company. We go that extra mile for our clients.
What is the first step?
We like to arrange a meeting, either in the UK or Spain, at which we take a very detailed brief. Of course it can be done on the phone but we can cover so much more face-to-face. We consider all the issues. What is the purpose of the purchase; relocation, investment, business opportunity, rental income, holiday property? What is the budget? We help people stay focused and realistic; while that dream farmhouse property down a 5km track seems like perfection, getting the children to school on time in driving rain should take priority! Once the potential areas are defined we get to work researching and assessing what is currently available, reporting our findings and short-listing whatever is appropriate. Then, and only then, does our client have to travel. No time is wasted viewing unsuitable properties, meaning the trip can be just a couple of days or less.
How do you source property?
In the more established coastal areas we may use Estate Agents whom we know and trust as well as our extensive network of contacts to see what properties might be available privately, often coming up with properties that are not actually 'for sale'. In the more rural areas we find out who is the local runner, or ‘corredor’ as they are called in Spanish, in that particular area. We scan international as well as local press and have even done targeted mailings to find potential sellers in specific developments where our clients are particularly interested in buying.
But why should I pay you to find a property when I don't have to pay
anything to an Estate Agency?
There is no such thing as a free property finding service. If the fee comes from the seller then the ability to give independent and impartial advice is lost. Because we work exclusively for the buyer, there is no conflict of interest between buyer and seller. And estate agencies will not actively search for a property on your behalf regardless of promises.
In almost every case, our clients find that we save them money. Add up the cost of a few wasted viewing trips, never mind the time it all takes. Best of all, we know how the system works: we know the right people to use and we are convinced we will always be able to negotiate a better price than our client would have been able to achieve on his own. We regularly save our clients considerably more than the value of our fees in this aspect alone.
In Spain, discrepancies in title deeds and the issue of declared values cause most of the problems for buyers and it is not the Estate Agent's responsibility to resolve these issues for the buyer; trying to rectify discrepancies after completion is often difficult or impossible and usually expensive. We do not take the place of a lawyer and always recommend one is used - but we do double check everything and if a problem with the title has been identified we make sure that the strategy to correct it is in place before the contract is signed. The disaster stories given such prominence in the media are always the result of failure to do good research and thorough investigation of all the issues.
How does the buying process go?
In spite of what all the horror stories in the media imply the property buying process in Spain is actually very simple and transparent.
Once you have settled on a particular property the normal practice is to pay a small reserve deposit to ensure the property is taken off the market while legal enquiries are made. This can be as little as 1,000 € in the country areas or as much as 5,000 € in the prime coastal areas. Meanwhile, your lawyer will request the Nota Simple, a shortened version of the Title Deed or escritura, and raise a draft contract. Signing private contracts is not legally required in Spain; in fact, many Spaniards dispense with this stage and go straight to the notary to sign the escritura, but as most overseas property buyers will need time to arrange transfer of funds or organize a Spanish mortgage, it has become the norm in transactions involving a purchaser from abroad for a private contract between the seller and buyer to be signed, usually within 21 days, at which time the buyer pays 10% of the agreed price, less the reserve deposit amount. At this stage, the transaction is binding on both sides; should the buyer subsequently default, the 10% is forfeit while if the seller pulls out Spanish law requires that double the 10% deposit is returned and it is very important for this to be specified in the contract.
All property purchase completions in Spain must take place in front of a notary, with both the seller and purchaser present or represented by means of a power of attorney. The escritura will be signed, the keys and monies will be handed over and that’s it.
Many property buyers from overseas choose to give their lawyer a power of attorney which covers things like applying for the NIE, fiscal identity number which must be issued before completion can take place, and transferring utilities after completion, otherwise you are required to do this in person.
What
are the emerging trends in the property
market in Spain?
Surely everyone even vaguely thinking about buying a property in Spain at the moment must be aware that conditions have changed quite dramatically. After several years of strong growth property prices peaked in Spain in 2004 and have been declining since, albeit at different rates and amounts in the various regions, and it is true to say that there is no such thing as one Spanish property market. While the new-build, off-plan sector is in meltdown in some regions the top-end quality market in the very best prime locations is actually doing rather well. Serious sellers are lowering their expectations and, therefore, their asking prices and serious buyers have entered the market now that it is so weighted in their favour.
For more detailed information about conditions in our specific regions please check out:
Andalucía
Catalonia & Barcelona
Mallorca
If I am non-resident in Spain is
rental income taxable?
Yes, and the Spanish tax authorities, Hacienda,
are determined to stop evasion. The
flat rate is 25% of the gross rental income.
I have heard that there is a change to Capital Gains Tax for non-residents?
Capital Gains Tax is now applied at 18% for all E.U. non-residents and at the same time the current 5% retention will be reduced to 3%. For property owned by non EU individuals or entities, 35% still applies. For resident property owners of any nationality, CGT will go up from 15% to 18%, and the higher rate of 35% for properties sold within 12 months of purchase disappears.
What is the retention for?
The retention is deemed to be a down payment on the CGT due and is calculated as a percentage of the total amount declared in the escritura at the time of sale, not on the perceived capital gain since purchase. If a seller is non-resident in Spain it is the responsibility of the buyer, via their lawyer, to lodge the retention with the tax authorities, Hacienda, within 30 days of signing the escritura in front of the notary. Hacienda then has six months in which to calculate the actual CGT due and to return any overpay. Of course, they can also claim any underpay.
At the same time, changes have been made with regard to money laundering regulations. The one that will most affect property buyers is the obligation to include the method of payment within the escritura. Up to now, buyer and seller simply had to swear to the Notary that the full purchase price has been paid and received. Now they will have to state in the deeds how it has been paid and failure to do so will mean the property cannot be registered in the new owner’s name.
If you have a specific question about buying property in Spain that we haven’t covered here please fill in the form and we’ll get back to you.
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