Buying a resale property - need my hand held!!

Hi everyone.

Hoping for some advice and reassurance here.

I want to buy a resale house as my permanent residence in the area of Jerez.  We´ve spent 6-8 months casually looking around and about 1 month seriously looking.  Now we know the exact area that we want, and have narrowed it down to one particular urbanisation.  There are about a dozen houses on the development up for sale - have called all the agents and prices vary from 195,000 euros up to 220,000 euros for essentially the same property.   Obviously the one at 195,000 euros interests us most!!

Problem 1 - ALL the sellers want black money in varying amounts (one even asked for 72,000 euros!!!).  We are not happy about paying black money, but it seems we may have to, or go homeless.

Problem 2 - All the agents in this area charge commission to both seller and buyer.  Is that normal?  The agent who has the cheapest house charges 1.5% commission to each party.  Other agents charge 2.5% each or 3% each.  So this makes the cheapest house even more attractive.

Problem 3 - Not really a problem, but I went into this venture thinking it was a buyer´s market and we could haggle sellers down.  Not so.  They are all holding out for their money.  With a bit of luck we might get 5,000 euros off the cheapest house (more off some of the others but not enough to bring the price down to match the cheapest).

We are at the stage now of making the reservation deposit.  I see elsewhere on this forum that you should pay this to the sellers lawyer´s account.  The seller doesn´t have a lawyer, so where should we pay it? 

Also, we want to make the reservation contract SUBJECT TO our chosen bank approving our mortgage application.  Is there anything else that we should make the reservation deposit SUBJECT TO?

I think I´ll have more questions as the process takes its course, but I would be grateful for any pointers received at this stage.

Many thanks.

Anne

Dear Jerezgirl:

I wncourage you to have a deposit contract signed before giving any money  http://www.eyeonspain.com/spain-magazine/deposit-contract.aspx.  And, of course, no black money.

Best regards,

María L. de Castro

Thank you Maria, those are excellent articles.

Maria, I really don´t want to pay black money, but what do you do when the seller insists?  All twelve houses for sale in the area want black money.

In summary:

I have learnt to ask for the Documento Informativo Abreviado from the Real Estate Agent which should provide me with all the reassuring information I need about the property.   I also need a certificate from the seller that all  IBI payments are up do date.  Can I ask for the DIA before or after signing the reservation contract??

The Deposit Contract should contain: ID of both parties, ID of the property, Nota Simple, Price, cleary state who pays what expenses and taxes (the sellers should pay the plus valia, right), deadline for signing the contract and that the deposit should be considered part payment of the full price.  I would also like the deposit contract to state that if my chosen bank doesn´t approve the mortgage I would get the deposit back.

With these two pieces of information I should be on track for the moment.......or is there anything else that I have overlooked??

Thanks for the support Janice.

My husband posts on another forum and has been seeking advice there - but they all insist "DONT pay black money", "it´s a buyers market",  "you can knock the seller down by 20 or 30,000 euros" & "if the seller doesn´t agree, there are plenty of others that will".

I would love all of that to be true, but we really haven´t found that to be the case, and it seems that you didn´t either.  We also feel that we are over a barrel and all the sellers seem to be clubbing together in their stubbornness.

I´ve resigned myself to paying a small amount of black money and have found a property that I love, so we are just trying to get the next step right and protect ourselves as much as possible.

Anne

It is compulsory for them to give to you the DIA  three before paying any money or, if a deposit contract is signed ( over a small amoun of 3k to 6K) , it needs to be stated in the contract that the money is refundable if DIA is not provided three days before the signing of the private contract.

http://www.eyeonspain.com/spain-magazine/documento-informativo.aspx

its a buyers market .......... until you "fall in love" with a property........ then they have you over a barrel and you lose your bargaining power!!!!!!!!!!!!

by the way its nice to see "professional...... advice!!!!" given free gratis..... maria l de castro lawyer.

i'm new to this...... started yesterday....... and think i may have stopped another thread.......................... ( or came to the game to late... he/she may have made a hit) when i queried if "rixxy" (who i presumed to be a "saleman") had an agenda.

still a casual "looker" and  i've seen bargains but thats in the torremolinos/benalmadena area

Thank you Maria for your excellent advice.  I am feeling more confident by the minute!

Jerez Girl you may find that the reason you cannot do a deal on the B Money is because they are Spanish vendors and as this is Jerez it is very likely. Invariably the Spanish wont budge on it as it is a part of their heritage and in their blood. If it is not too serious an amount then there should not be a major problem. However if it is substantial in relation to the purchase price you are opening up a couple of problems. The first is that mortgage lenders will no longer lend above declared price. The second is (hence the first reason) the Land Registry are in communication with Hacienda (tax office) and they notify Hacienda if they become aware of a transaction that seems abnormal. Hacienda will then do their own assessment on the property and if they believe a fraudulent transaction has taken place they will slap a charge on the property which has to be settled for the unpaid capital gains tax by the vendor in addition to a 20% penalty. This charge will also take priority over the mortgage charged on the property and there is a limited time to settle the debt - maria can possibly advise the time scale but I have had two lenders tell me it is a calendar month. Effectively that would mean you taking responsibility for the vendors capital gains tax liability.

The reason for not negotiating on price may also be the same - the Spanish have a perception about their property's value and will be reluctant to consider offers at all. 

Yes Smiley, I think you are right.  They are all Spanish vendors, and this is a town where foreign purchasers are considered a bity of a rarity.

I´m going to try and agree to pay as little black money as possible (preferably none, but that doesn´t seem realistic).  For a property valued at 190,000 euros, what would you say is an "acceptable" amount to pay in black, before you start to attract the attention of the authorities?

Anne

hello again

just camed back to inform you that i have spent a wet sunday trawling "backissues" and it "looks like smiley

 is another helpful link who is not afraid to declare an interest....."

you will find he has provide some very useful information on several topics

If banks will only lend money based on the DECLARED value of the property, then that is going to have implications on how much we can afford.

My maths go as follows:

We have 40,000 euros in cash, and can get a mortgage of 90%.

Assuming the full amount is declared (190,000 euros) then we would only need 19,000 cash and could use  the remaining 21,000 euros for furnishing, expenses, etc.

Now if I assume a declared value of 170,000 euros, the bank will only lend me 90% (153,000 euros).  We would have to pay 17,000 euros in cash and the remaining 20,000 euros in BLACK and would have 3000 euros for furnishings, etc.  NOT ENOUGH!!!

Now I´m starting to panic again.

OK, my twopennorth worth.

I bought some time ago, off plan, and moved in about 4 years ago.  The "black" money was about €23,000, almost a quarter of what we paid.  Because of problems with builders, we do not yet have the escritura and this is being fought by our solicitor.  I have recently been told that he deeds will be issued but at the correct value,  therefore I have to pay 7% IVA on the black money.  My solicitors, on the CB, have told me that no-one should pay "black" money anymore as it has been made illegal (it always was but was built into the folklore and traditions of Spanish property trading).  The developers at my new house have told me that the amount of money I pay has been built into the contract and that this is the price that will be on the escritura of the new house.  No "extra" money will be expected or asked for.  So, I have a good developer (Is this a rarity?), an extra bill for the IVA on my old house but, on the plus side, lower CGT to pay when I do sell. 

I've also been advised that there are now many inspectors checking on the prices paid for property over the last few years and any anomolous prices (ie , very low) will be investigated with a view of charging IVA to buyers and sellers alike. 

I realise this is very difficult if you have set your heart on a particular house and the sellers are asking for money up front, but if you go through a reputable solicitor they should advise you not to pay it and you should avoid it like the plague.  If everyone did that, the sellers would have to accept the "new" rules.

Well, as of tomorrow we plan to start negotiations with the seller, and I will be aiming for zero black money...but I think I already know what his response will be!!

I shall let you know if/when we reach an agreement.......and then I´m sure I´ll be back again for more advice re the next stage.

Many thanks to everyone so far.  This really has been a helpful forum.....even though you don´t always say what I want to hear!!!

Anne


PS - Boboal, I didn´t think you had to pay black money if you were buying from a developer??