Is it better to lose my 6,000 Euro deposit than to buy during this credit crunch?

Promedia
If you break the contract due to the fact that you want to re-negotiate the price or buy cheaper loosing 6,000 euros may be one thing as it was a reservation fee.
However does anyone know if the developer can sue once the 30%(in most cases) has been paid for failure to complete a contract at an agreed price now the market has fallen or do you just loose the whole 30%


Just Dan

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It depends a lot on the developer. Many will just take the property back and you loose all deposits, which you cannot claim back if you pull out of a contract. If the developer is late on completion, then it depends if the time scale is mentioned in the contract, and if there are valid bank guarantees in place. After all, the purchase entered into an agreement no matter what the market does in the mean time.

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Hi Robert

Thanks and thats my point.

The seller and the buyer entered into an agreement to carry out a transaction at an agreed price and what if the value of the property falls below the 30% deposit figure.

My concern is that with all of this mess will the developers sue for not completion assuming they have built according to contract or judged to have done so..
If the developer goes bust will the Banks enforce completion or sue
Surely  because the market has fallen the seller cant be expected to take the loss as he only built to order and as per contract.
What about all of the interest he has paid if he wins and the managment fees.
Just looking at the option to walk away should I loose a court case and no good if its going to bite me in the arse down the line as loosing the 30% would be bad enough.

Just Dan

This message was last edited by Just Dan on 7/9/2008.

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Hi, Dan,

First of all, it is important to look carefully at the individual development, as there are many that have not fallen much in value, but kept quit stable depending on their location. If the location is very good, then one should look at the price inicially paid at what stage during the construction, as good ones will bounce back in value when this period is over. In other words, the next up can be expected historically around 2012. 

The developer cannot force you to complete, as you can cancel the contract at any stage, bearing in mind that you will loose all money already invested. If a bank takes over, often it means that the developer has gone over its limit for completion, in which case one has a chance to get the investment back because they defaulted on their contract, not you. And this is the point. If you break a contract, you carry the can, and if they do, likewise.

If you bought through a big real estate agency, the chances are that their commissions where high. (10 - 40%) which the developer passes on to the buyer. This give you a delay in recouperating capital growth, as you first have to wait till the surrounding properties have also gained up to that level. 

In the case that the developer is late or is folding, your bank guarantees are very important.

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Hi Robert
Thanks again and hopefully I will win my case if there is any justice and am not wanting to walk as the deal hasnt turned out be be as financially as good as hoped.
Think however that there  are thousands that are just doing that and using every angle to avoid completing even if they could.
The developer is sound financially and while I do have lots of experience in the Spanish market I dont pretend to know everything so not afraid to ask,thats whats great about forums.
Well can say that this property is in East Marbella so dont know if thats good or bad in the end however thats the area I chose above all others so thats down to me.
Trouble is no L.F.O so completing/selling is one big problem anyway for me and thousands of others.
Thanks again and am sure that this a question that many may wish answered when considering their options.

Thanks Again

Just Dan

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Hi all   forget what may have append in the past ,  this is different to what we have seen before, i think Spanish property prices have got a long way to fall before we see any stability in the market.

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I think you are talking about the Elviria or Las Chapas area? It is quiet simple: No developer can force you to complete without a licencia de primer ocupación. No notary worth his salt will sign the deeds. If the license is delayed, the developer will blame the town hall. That is right, as they gave the developer the license to build in the first place. Once the area of East Marbella is licensed, (Los Patios, los Jardines, Santa Maria Village, Green Hills, Reserva de Marbella etc. etc. )then these will be (depending on the unit and development, as the first named border on a large sewage plant) will be good investments with patience. These are seven year cycles, and we are in the middle of one. In the early nineties it was actually worse than now.

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Hi Robert
Yep yer right and thankfully not near the stink pit.
The situation regarding signing without an L.F.O is much debated and of course that is the right advice.
However depending on which development,/developers financial status and the advice on each individual case the carpet statement may not always apply.
As there are many thousands of properties occupied in this area for many years when the issue of the habitaion licence was not a priority some may have to take an informed chosen decision.of what they stand to loose.(or not loose)
Seems that at the moment the courts are siding with the developersand.bank guarantees are proving pretty useless.
Now with courts saying that L.F.O s have been granted by the admin silence rule and understand that the courts are awarding costs in favour of the developer even down to back dating interests payments to that date.
Seems a case at the moment that yer damned if you do and damned if you dont.
Some may wish they had not listened to advise in the past when the Euro was say 1.47 and mortgages where more available?To complete now may very well be a very costly exercise.
Seems those that are making statements not to complete without an L.F.O are in  the main the same solicitors that were happy to say it was O.K take their fees when it  was all going O.K and are now putting themselves up as noble and profesional and take fees again chasing cases they know they have no chances of winning.

Just my view on this and not intended as contradition of your valuable advice

Just Dan



This message was last edited by Just Dan on 7/9/2008.

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It is murky indeed, as two owners in an Eralia development went to court, one won and the other lost, with exactly the same case. It is also true that for years the solicitors allowed the vague Silencio Administrativo licenses to go ahead, without warning their clients that all this meant was that the licenses were applied for and not refused. (not granted either) so effectively, there is no license in place. So it depends on the court if they view it from the developers side, or the clients. There are also numerous lawyers working in Marbella who are not licensed themselves. Often I came across cases where lawyers from say Fuengirola where involved and they took a different view and actually gave different advice to their clients than their Marbella colleagues. As from about the middle of 2004, property investments for the short term started to be risky, although many agents still sold the off plan investment dream on inflated numbers till much later. However, I have seen properties gone up in the long term on a scale which no other investment can match. This is still and will always be one of the most attractive areas in Europe, compaired to other short term bubbles like Cape Verde, Dubai, Morocco, Turkey etc. It all depends, if completion is possible financially. Renting out is not attractive for the next few years, with very scatty returns. Going to court is a gamble, but maybe with a good lawyer, a possibility.

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Hi Robert
Your clearly well informed and post a well balanced view

Thanks
Just Dan
Think we or I may have taken the thread off track a little but it perhaps shows that for some loosing just 6,000 Euros is small fry as at  least this area is considered one one the better areas for the longer term where some indeed are not.

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You are welcome, anytime.

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We're in the same boat...finding your blog made up our minds. We've just walked away from a 6000E deposit. Put it down on a place in the Mijas mountains a little over a month ago. Agreed with the estate agents that it was subject to affordability & obtaining a mortgage but now they refuse to admit the clause ever existed! 
We've decided to see what happens in the next year or so before searching for our dream holiday home agian.
You live & learn!


This message was last edited by reggie on 8/20/2008.

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Hi!
If your reservation deposit receipt states that the 6000 euros where deposited subject to mortgage etcetera, the agents have to honor this. Normally, Spanish real estate is properly reserved once 10% is paid, which is indeed not refundable, as that is paid to the vendors themselves. For anyone thinking of paying a 6000 euro reservation deposit, pay this into an escrow account with your own lawyer, not the estate agent. That way, you are protected.

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Hi Robert.
They claim it's not been written on the reservation document but it was verbally agreed in the office at the time of signing, in fact we'd been offered a refund once before on the basis of affordability because the numbers weren't adding up. The estate agent now denies this! He tells me that 3000E are going to the vendor with another 3000E in admin fees for them?!?!
Is there anyway of getting even a partial refund out of them?

Regards.

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Reggie and all,

 You can ask for your deposits back. If nothing is in written, agents and developers are obligued to refund that to you. Penalty deposits need to be expressly agreed in written by both parties.

Do you keep receipts of the payment?

Best,

Maria

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Hi Maria, ADH tell me different! The deposit was paid on a credit card on 14-07-08. An offer of a refund was made to us on 15-07-08 on the grounds of affordabilty but after much persuasion we decided to proceed. My other half has now lost her job, other expenses have arisen in th UK that they have been made aware of but they POINT BLANK refuse to return it. Is there anything you can do for us on a professional level?

Regards.


This message was last edited by reggie on 8/21/2008.

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Hi Reggie,

You are, I presume, represented by a Spanish lawyer initially to help you with the purchase? If so, start pushing them into action, by phonecalls, emails etc. The same with ADH itself, do not stop emailing, phoning etc. and posting on the web until you get a proper response.

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There is an Act in the Uk, by which you can get refunds  from the Credit Card Company on payments done by credit card in the international market under 6000 €. Someone sent that to me once... It is a kind of insurance.


This message was last edited by mariadecastro on 8/23/2008.

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If you have commited to buy and now decide to pull out you will most certainly lose your deposit, unless you can persuade a real estate agent to the contrary.

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I have never heard anyone get the deposit back. We paid deposit for a unit and later we changed mind to buy another unit in same development with same builder ..................... with lawyer and agent in the loop we did not get a single cent back. So do not keep any hope on this.

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