9 Ways to Avoid Pain When Buying a Property in Spain
Over the last decade there have been numerous horror stories that have featured prominently in the British press regarding families who have invested in Spanish property, only for their purchases to go drastically wrong. These disastrous property investments have, in some cases, ruined the unfortunate buyers financially and must certainly play upon the minds of many people who would otherwise like to invest in a property in sunny Spain. So, we've put together a basic 9 point guide which should help prevent you from becoming the next British investor to feature in a tabloid property horror story.
1 - Research Local Property Prices
Before you take the plunge and invest in a property, ensure that you have viewed a broad range of properties in the local area. You should familiarise yourself with the local region, the different price brackets of properties in that area, and also know what type of property that you want to buy. If you go on an "inspection visit" or "viewing trip", make sure that you have completed your research on all of this, and that you are familiar with the area and properties on offer before deciding to go ahead. Make a list of key features that you are looking for in your property that are non-negotiable before you make your trip to Spain and stick to them.
2 - Research The Local Area
It goes without saying that you will be less familiar with a town in Spain than you would be in the area where you live and work in the UK. So, you should make sure that you research any areas that are of interest to you prior to buying a property. In your home neighbourhood you may instinctively know what an area is like, which areas to avoid, where is noisy, where the local kids party venues are and so on. However, many people buy a property in Spain after seeing it only once, only to realise later that the road in front is where hundreds of teenagers hang out to drink at 3am on Friday nights!
3 - Research Local Schools and Employers
This is obviously an important point, especially if you are going to need to find employment or schools in close vicinity to your property. This is even more advisable if you are looking to purchase a property in a remote or inland area, as it can be more difficult to find work, or for your children to integrate in local schools than in more cosmopolitan areas.
4 - Research The Community
If you are thinking of buying a property where there is a "community of proprietors", make sure that you do your research on the community. Make sure that you know what your community maintenance fees are before you complete the purchase. Your solicitor should contact the administrator of the community where you are intending to buy. It is never pleasant to be landed with massive monthly community fees, that you had not accounted for in your figures! You also want to know if there are any significant problems with a community. For example, have any of the other owners incurred large debts from unpaid fees or are there any problems with the maintenance company and so forth. Take some basic steps, such as speaking with neighbours to see what its really like to live there. Don't be shy when it comes to knocking on those doors! It may save you a big headache in the long term.
5 - Select An Independent Local Solicitor
When selecting a solicitor, make sure that you are happy with their credentials, that they are independent with an extensive knowledge of the area where you are going to purchase your property. Unless you are completely fluent in Spanish, it is essential that your lawyer is fluent in English so that there is nothing lost in translation between you. Your lawyer should make some essential checks on your behalf, regarding the legalities of the property with the local authorities. It is also essential that you solicitor checks that there are no debts associated with the property, as they pass with the title of the property in Spain. They should also co-ordinate the purchase of the property, signed before a qualified public notary, and organise for the relevant parties to be there, which includes the seller (or their legal representative) as well as a representative from the bank who are lending you the mortgage to purchase the property, where this applies.
6 - Take Precautions When Purchasing From a Builder
If you decide to purchase a property directly from a builder, you should be cautious before instructing a solicitor that has been nominated by them. We would always recommend you to select your own, independent solicitor to represent you, because we've heard of some instances where lawyers nominated by developers have failed to protect the purchaser's interests as fully as they should have. You should always be confident that your solicitor is looking out for your best interests, and a good tip for doing this is to check out their credentials online. What are clients who have bought property in the past saying about them? Can the law firm provide you with a reference? Can they give you an example of credible litigation work that they have done in the past that shows that they will fight for your interests? The answer to all of these questions should be a resounding "Yes!"
7 - Avoid The Ex-Timeshare Sharks
Unfortunately, there are still some agents in Spain who employ high pressure sales tactics, many of whom come from notorious sales backgrounds, such as timeshare selling. The golden rule is that if you find yourself in an uncomfortable situation with an agent, politely tell them to back off.
There have been infamous press expose's regarding some of the largest agencies in the Spanish Costa's. Some of them based their businesses on unethical techniques, such as pushing their clients towards going ahead with a property that they did not really want to buy, or giving misleading advice concerning "off-plan" developments. You should take some time to research your agent. Are there negative comments about them on sites such as Eye on Spain and have there been complaints against them in the UK press or with Watchdog? Having said that, one of the good things to come out of the credit crunch is that many such agents have disappeared when the going got tough, as the pickings are not as easy as they used to be.
8 - Account For Added Purchase Costs
There are many more "extras" on top of the purchase price of the property in Spain than in England. Any professional who deals with your property purchase (especially the estate agent & lawyer) should remind you of this, as purchase costs for the property alone are normally at least 10%-11%. If you take out a mortgage when you purchase, there are also arrangement fees & notary fees to consider as well, which can be between 1%-2% of the purchase price, depending upon what the bank charges you. However, the professional fees that a solicitor or a bank charges you, which can vary, are in some cases negotiable.
9 - Money Transfer Costs
When you have finally ticked off all of the points in this article, found your dream property and are ready to go ahead and send funds over from the UK, there is one last thing to consider that many people forget... money transfer costs! If you send money directly to a Spanish bank, you may have a nasty surprise when they charge you fees to receive the money. Then, when you look at your bank statement from your local bank in the UK, you may get a second nasty surprise when they give you an exchange rate which is well below the current rate between Sterling and the Euro. Some may even charge you commission for transferring the funds! Suddenly, a simple case of sending money to Spain has become very expensive. One solution to this is to look for an established currency trading firm, who can often offer you a much more competitive exchange rate than the banks, without costing you in commissions and, in many cases, save you the Spanish bank fees charged for receiving funds. So, it is well worth asking us to recommend a currency broker, or finding a reputable one on the internet.
If you take onboard the advice outlined in these 9 points, it should help you to take some basic steps to avoid common mistakes that can lead to problems with Spanish property investments. But please note that it is a helpful guide to give you a basic idea of what you should do when investing in a property in Spain, but is not meant to replace the need for independent legal advice. Wherever you purchase a property in the world, whether it be in Spain, the UK or anywhere at all, it is essential to use qualified professionals to ensure that your purchase runs smoothly.
