Buying second hand properties
If the property is a second hand (i.e. previously owned) your contract will be with the current occupant/owner. The amount of deposit that you are expected to pay varies around Spain. In Ibiza, a 10% deposit is normally required. The property is normally still for sale until that deposit has been received. This can lead to some difficulty, as normally it will take a few days for you to return home and arrange the transfer of such a deposit.
It is a good idea to bring some cash with you when looking for property, as with a temporary deposit of 2,000€ normally the vendor will agree to take the property of the market for long enough for you to arrange the transfer.
There is no gazumping in Spain, as, after accepting your deposit, the seller is legally obliged to sell you the house at the agreed price. If the vendor withdraws for the contract then he will have to return your deposit and match it with another payment for the same amount to you by way of compensation. If the buy (you) withdraw, then you loose your deposit. If the sale cannot proceed for technical reasons (like the search at the land registry or a survey resulting in problems that had not been declared to you) the sale can be declared void, and you receive back you deposit, with no compensation being paid by either party.
Normally, if the vendor is not a resident of Spain, 3% of the contract price will have to be paid by the buyer to the tax office in case the seller forgets to pay his capital gains tax! This is NOT an extra 3%; it is deducted from the money that the vendor gets at the Notary. It merely means that you pay only 97% of the contract price to the seller, and he has to fill out the forms with the tax office to get the other 3% back less his capital gains tax. If this sounds complicated then don’t worry: your solicitor will look after all this for you.
New Properties
If the property is new and under construction, then your contract will be with the promoter who is organizing the building the property. We deal with many builders and promoters; all of them have slightly different terms as to when they would like to receive their staged payments. These terms can be varied a little to suit the individual circumstances of the purchaser if these changes are agreed when the contract is drawn up. Normally, there will be staged payments leading up to the final payment upon completion and signing at the Notary.
Currency Fluctuations
One possible problem that could occur with a contract requiring large amounts of money to be paid at dates far into the future is that whilst the UK remains outside the Euro, there could be a change in the currency rate that means those future payments will be more expensive in pounds sterling than you currently expect (they could also be cheaper). There are ways to prevent this problem. One way would be an early transfer of funds into a Euro account (either in Spain or in the UK) thereby making your money immune to currency fluctuations. Another method would be to book your £/euro transfer at today’s exchange rate. We will be happy to arrange a completely free consultation for you with an expert from Currencies Direct, who will be able to advise you of the options you have and explain the procedures involved.