The Naked Agent Spain

Property issues aside today!   I've just become a father for the first time!  What an incredible experience.  We had the baby at Hospiten in Estepona (Costa del Sol), and they actually let me deliver the baby and then place her on my wife!  I definitely recommend it to any potential dads out there!  Very cool experience! 

I guess for me the fun and the sleepless nights are just beginning! 

Over the last few years, people buying in Spain have been bombarded with the notion of 'under-declaring'.  Thankfully now this practice is being flushed out.  

What is 'under-declaring?
Sorry to state the obvious:   Basically, many people who have bought in the past may have agreed to buy a property for a set price, but on completion were asked to declare on the deeds (escritura) that they were buying it for less - with the difference being paid in 'readies'.  In short this would greatly advantage the sellers, as it would reduce their overall Capital Gains Tax liability (by reducing their declared profit).  

The buyer was sold the story by being told that 'under-declaring' would reduce their purchase costs.  While this was true to a certain extent, what the buyers did not realise was that when it comes to selling in the futrue , they will be lumbered with a much greater Capital Gains Tax bill, as their 'perceived' profit would be deemed to be greater than it actually is.  As most buyers tended not too think this far ahead, many, as sellers, have now been stung with a higher bill to pay than expected as the authorities tighten up. 

In short, under-declaring is illegal, and provides no real no long term benefit to the buyer.  So those of you planning to buy, make sure the price you pay is the price on the deeds - stand your ground and be firm.

Most of you now know the process of how to get the new Spanish (EU) Residency certificate.  Some National police stations seem to be dealing with this pretty quickly, but Marbella Police Station still likes to keep you waiting.  A friend of mine was in the queue for 5 hours earlier this week. He turned up at 8am, collected his queue ticket number, (at 8:30am) and eventually (after various pit-stops across at the coffee shop opposite the police station), got through the door at 12:30 with his filled-in application form.  The officials gave him a tax receipt to pay (about 6.80 Euros) at the nearest bank (cajasur - about a 500m walk), and within 30 minutes he had returned and was given his new Green Certificate of Spanish Residency.  

Watching people's faces as they exit the police station with their new Green Certificate is truly priceless - it's as though they had just become the latest winner of the Golden Ticket to Mr. Wonka's chocolate factory.  (At least that's how I felt when I applied).  The actual process is pretty quick, but why Spain continues with its slow archaic queuing system still defies belief.   Anyhow, I guess it is better than waiting 10 to 12 months to get the old Residencia card.

For those of you about to apply, the application form can be downloaded here together with some tips and guidelines.

Have a good weekend.

We all know that Spanish banks are some of the most profitable banks in the world.  However, for those of you who are in the process of selling your home or those who are about to deposit a Banker's Draft from the proceeds of the sale, take note:

When you deposit a bankers draft in Spain, the bank you deposit it in will probably charge you a commission on the deposit.  Sometimes this may be a flat fee, but often this can range from 0.1% to 1% of the value of the cheque you plan to deposit! So on a cheque of 200000 Euros, it is not uncommon for a bank to charge you 500 Euros or even 1000 Euros for deposting the money with them!!!!! That's a lot of money!!! 

The problem is that in the excitement of the sale, many sellers are excited about receiving the cheque.  After the completion, they run to the bank, deposit the cheque, and wait for the funds to clear.  Only when they really check their bank statement a couple of weeks or months later do they then realise they have been charged a bundle for deposting their own money!!!

The Naked Agent Tip:  Before you deposit the Banker's Draft, ask the bank how much they will charge you for the deposit.  Negotiate with them until you are happy with figure (banks will rarely go to zero, so be a little realistic but be firm).   This tip alone could save you a upto a few hundred euros.  Every penny counts.

Hasta luego

By now most of you are probably aware of the latest news, but for those of you aren't here's the latest installment on the Corruption clampdown on the Costa del Sol.

This morning the mayor of Estepona, Antonio Barrientos, a range of associates in the townhall, other funcionarios and businessmen were arrested by the Spanish National Police on charges of corruption, bribery and possible money laundering.  Most of the charges seem to be for bribes in return for granting building permits/concessions.  How much of this is fact or fiction remains to be seen.  Who knows who has really been pulling the strings?! One thing is for sure, that after the debacle fo the Marbella scandal, the last thing people want to have is a repeat performance.  "Oh no, here we go again".

The main thing is for all the problems and corruption to be stamped out, but the government should do it iin a way which mnimises the effect it has on the everyday person! 

For those of you who read Spanish, click here to get to the full news article on El Pais.

Getting a mortgage in Spain has never really been that easy, and now things have just got a whole lot harder - 1) valuers have been told to tighten up their belts (so on average bank valuations are down about 20% to 30% from last year), and 2) the banks are now looking really closely at your paperwork, to make sure you can afford the mortgage payments.  To be honest, they should have been doing this from day one.

So, for those of you thinking of buying, here are a few tips to working out your own morgage affordability before you even start looking or even think about approaching a bank

MORTGAGE AFFORDABILITY TIPS
1) Work out your real net monthly income (after all taxes, major expenses, exsiting mortgage, loans etc)
2) Divide this by three as the banks in Spain will on average lend you about 1/3 of your net monthly salary for your monthly mortgage payments. 
3) This new figure will be your Real Net Monthly Mortgage Budget.  (Always err on the side of caution so in the event circumstances change and interest rates rise, you know you are covered)

For example, say you are currently renting, and have now decided to buy something instead of continuing to rent.  You earn about 3300 Euros per month (after tax) and say you have a car loan of 250 Euros and other major expenses of 250 Euros. That gives you a real net income of 2800 Euros.  You build in 100 Euros contingency, so lets say your REAL NET MONTHLY INCOME is 2700 Euros. 2700 Euros divdided by 3 is 900 Euros. This is where the fun begins. Using the Naked Agent Mortgage Calculator you can simply enter how much you want to pay per month (eg: 900 Euros), enter the interest rate (eg: 6%) and the mortgage term (eg: 30 years).  

In this case, using the calculator, you know that the banks (providing you have the correct paperwork) should be able to lend you up to about 148000 Euros in total.    If you have 50000 Euros in savings, then you should be able to afford a property of 198000 Euros (including purchase & mortgage costs).  Therefore you ideally need to be looking at final purchase price of around 175000 Euros

Don't forget, that the amount the banks may lend you will not only be based on your affordability but also on the valuation of the property.

However, by going through the 'affordability' process, at least you know where you stand from day 1. You'll know more or less what budget you need to be working to and what price of property you should be looking at.  You can get more details in the new ebook buying guide, but for the moment  have fun with the numbers.

Hasta pronto

Hi. Welcome to the the first posting from the Naked Agent Spain.  The blog is here to give potential buyers, sellers and those taking out a mortgage a few tips along their buying / selling journey.   Also, I'll regularly discuss various issues in the Spanish real estate market.

As we all know the Spanish property market is not in great shape at the moment - bribery, scandals and lawsuits aside, property prices seem to be falling, banks have tightened-up their lending, interest rates are high, some developments have been left unfinished and petrol seems to be running out!!   However, in every market 'crisis' there is always an opportunity.   Years ago when SARS hit Hong Kong, everyone was in a panic, and the property prices crashed.  Those who were bold enough to buy in the Asian crash are now sitting on a very handsome profit.  Those that didn't are ruing the missed opportunity.  The difficulty is in knowing where to look and when to take the plunge!  

Whether it's the right time to look at buying in Spain is anyone's guess.  Some feel prices will fall more, some feel we are near the bottom, and others prefer not to think about it.  But two things are for sure - 1) Spain will always be a popular destination with the fantastic lifestyle it offers and 2) If you do your research, there are some excellent bargains out there at the moment.   

However, if you are planning to buy, there's no point rushing out and spending all your hard earned savings in a hurry.  The secret is to take your time, plan your budget and affordability, get your mortgage in order and then scout around for the deals in an area which you know.    Over the last few years too many people buying in Spain have focused purely on investment, and not enough on the lifestyle which owning a property in Spain can give you!  At the same time, too many buyers have got caught up in the excitement (me included) when buying, and not done enough of the background checks.  The real secret, whether the market is rising or falling, is to do your research and plan within your budget. That way you should have plenty of time (and ideally some money) to enjoy the real the Spain!

I believe Spain are about to kick-off against Russia, so that's where I'll leave it for today.