Purchasing A Property
Harry King retired from corporate life in Britain to live in Spain. He would do so all over again if faced with the same decision, and now lives in Alicante. He is the author of a number of books including Going to Live in Spain, Buying a Property in Spain and Buy to Let in Spain.
It is an established fact – in the last 20 years Spanish house prices have risen faster than anywhere else in the world. They have risen by about 18 per cent per year and experts predict this trend will continue for the immediate future.
Irrespective of inflation, it is important to realise that property buying procedures are different in Spain. Forget the traditional approach of putting in an offer, arranging a mortgage and asking a solicitor to sort things out. Prospective buyers must carry out research and ask questions themselves, rather than assuming a solicitor will deal with all these matters. You need to learn about the contract, the escritura and other legal documents. It is also necessary to understand the Spanish conveyancing system from start to finish, as it can trap the unwary in a country where there are many property horror stories.
BACK TO BASICS
When it’s for sale a property located in Spain will be in one of two classifications:
- moveable property (bienes muebles)
- and immovable property (bienes inmuebles).
This is a similar definition to the concept of personal effects and immovable property. Immovable property includes land and buildings, but not the shares in a company owning land and buildings.
Land ownership is freehold. It is possible to own a building or even part of a building separately from land itself, as in the case of apartments which are owned freehold.
Where a building or piece of land is physically divided between a number of people a comunidad de propietarios is formed. The comunidad is divided into privately owned parts such as an individual flat, and communally owned areas such as gardens and swimming pool.
Rights, but not ownership, can exist over land such as caminos, paths, rights of way, tenancies and life interests. They require some formal agreement to ensure their validity.
FINDING A PROPERTY
By virtue of their daily contacts, estate agents know who are buying and selling. The top agents keep files of buyers, sellers and properties. It is not unusual for a good agent, when they learn of a new listing, to sell it within 24 hours to a buyer they know will buy that type of property. An agent, given time and a detailed specification, will always find a property for a determined buyer. They may have to be chased occasionally, but that is part of the process of being determined.
Spanish estate agents have a curious name – inmobiliaria, a word almost suggesting that ‘a person does not move’. Yet in Spain these people are very common – small local estate agents who know their patch well, concentrating mainly on resale properties. They need not be Spanish and indeed many on the Costas are German, Scandinavian or British.
It is a good idea to deal with a registered estate agent. In Spain they belong to the Agente de Propiedad Inmobiliaria, have a certificate of registration and an identification number. They can be sued if anything goes wrong. Dealing with such a registered business gives the purchaser more security and confidence.
There have always been stories in Spain of people losing their life savings because they have dealt with an unscrupulous estate agent. The only real way to avoid this is to deal with a registered agent whose number should be on a sign outside the office, or on a window display, or on the exterior of the building.
The quality of estate agents has vastly improved in the last few years. Selling houses attracts some of the finest people. But it still attracts some of the more unscrupulous characters too, probably because it is possible to earn a handsome income without working too hard. Due to its financial structure the estate agency business opens doors to all types of people some of whom are not completely honest. However most agents aren’t thieves and swindlers, if anything they’re more honest than the average person because they have their business reputations to protect.
Estate agents based outside Spain offer three-day, escorted and highly focused inspection visits. The flights are cheap, there is a hotel booked and entertainment is laid on. Viewing is from the comfort of a mini-bus with only a short stroll to each show house. The ambience of the area is highlighted. From the properties shown most people can decide what is best for their own circumstances. It is however a highly pressurised trip, where time and space to think are at a premium. It does not give freedom to appreciate the bigger picture, or the true ambience of the town or countryside. It is a snapshot at a point in time and far from being an inspection trip it is a highly pressurised sales trip.
Before travelling people are reminded of the currency and deposit arrangements required to reserve a property. This is sales pressure at its highest, for potential purchasers are signing a reservation contract (see later in this chapter) and paying a deposit without the benefit of the contract being checked by an abogado. It can be said, however, that these international agents are quite reliable.
A bank foreclosing on a property can result in a court ordered property auction. On occasions an auction can also be voluntary. Low prices can make auctions attractive. Prices are low because in judicial auctions the process is intended to recover debts and once these and costs have been recovered there is little reason for auctioneers to press for a higher price. Interested in buying a property at an auction? Auctions ordered by a court (subasta) and non-judicial auctions are advertised in the press. While brief details of properties are published, to make any decision a pre-auction inspection is essential.
Get someone to assist on the day of the auction too, someone who will explain precisely what needs to be done at each stage. Set a maximum price to be offered. A refundable deposit is levied by the auctioneer allowing the entry of a bid. Have a ten per cent deposit (less the bidding deposit) to hand when a bid is accepted.
All legal procedures and documents are important. All property purchasing documents are important. Failure to understand one may have serious consequences. Property documents can be broken down into four groupings.
- 1Pre-purchase checks.
- 2Signing a reservation contract or contract.
- 3Pre-escritura for new properties.
- 4Escritura and beyond.
All pre-purchase checks need to be completed before signing anything. Signing a contract signifies this has been done and everything is in order. An escritura merely legalises what has gone before. A contract, signed soon after the start of the buying process, is therefore the most important document in the property buying process. A good contract, correctly worded, is of benefit to both the buyer and seller. Altering a contract is almost impossible. A bad contract creates unnecessary difficulties. Reneging on a contract means losing a deposit.