10 most common mistakes made when buying a property in the Costa del Sol, Spain
Every purchase of a property in Spain (or in any other country) that entails spending a lot of money is a very serious decision which requires appropriate preparation. You should always bear in mind that buying a real estate in Spain you operate outside of your domestic real estate market; therefore you will encounter differences and may be taken by surprise.
Here is our cautionary list of…
10 typical mistakes made when buying a property in the Costa del Sol, Spain:
- Underestimation of the budget and lack of timeframe.You need to know exactly how much money you want and can spend on the property, what your sources of financing will be and when you want to close the transaction.
- Lack of knowledge concerning the transaction costs – you should add about 10-15% to the price of the property in order to cover taxes (ITP or VAT), legal assistance, notary, real estate registration or commissions related to the loan granting if you choose to support yourself with a mortgage.
- Allocating all your savings to the purchase of real estate,without leaving funds for a renovation, furnishings or other unforeseen expenses.
- Ignoring information on the costs of owning property in the Costa del Sol without giving it a second thought. In Spain, as in any other country, as Real Estate Tax (IBI) is to be paid as well as the Rubbish Collection Tax (impuesto de basura), community fees (comunidad), electricity, water, TV, internet, gardener's or cleaner's salary (in case you buy a house), insurance, etc. It is better to know the above costs before the purchase, especially in the case when we operate on a tight budget.
- Not knowing the area and/or housing estate. There are some customers who choose a location solely on the basis of the opinions expressed by other people – we often hear the following argument: “Our friends have a flat in this housing estate, so we also want to.” In such situations, we always say that it is worth to take some time and come to the region of Spain that you chose for an investment. You should go sightseeing there and get to know the area, then you may choose your favourite place (remember that it does not necessarily has to be the exact same place that captivated your friends). Advice from friends is extremely valuable but each of us is different, so it should not determine our choices.
- The conviction Spain undergoes an economic crisis and you may find a “great opportunity” at every turn.Not true. The property prices in Spain have been rising steadily over the last four years as the economic situation has improved, and, while it is true that they are still well below the level of property prices before the crisis, “great deals” disappear quickly as they have been mostly sold out over the last few years.
- The conviction that everything can be done without consulting a specialist.In our opinion using the services of a reliable real estate agency and an attorney are extremely important and beneficial when it comes to buying a property. We live and work in the Costa del Sol and know the reality, mechanisms governing the market and the procedures. We have many years of experience, we know the language and Spanish law to the extent it is necessary for our purpose. Sophisticated investors do not approach any transaction without a good estate agent and an attorney They claim that the fees of a good attorney and agent are their best investment. In the Costa del Sol the majority of international deals are closed through the intermediation of real estate agencies, usually two of them, one representing the buyer and the other representing the sellers. Both agencies share the fee paid by the selling party.
- Signing the loan agreements “in blind”. Many Spanish banks provide mortgage loans and it is worth going to several banks to compare different terms and conditions (you may as well contact us and we can deal with it on your behalf). You have to negotiate with a bank –it is a core principle. At present the banks in Spain grant loans to foreigners in the amount equivalent to 50% - 70% of the real estate valuation.
- You must not forget about fluctuations in the exchange rates.Such a temporary “amnesia” can have a significant impact on the cost of the final transaction, so it is advisable to contact a currency exchange specialist when buying a property in Spain (we can provide you with contact data of relevant companies upon request).
- “It’s different back home…” – repeating this sentence all the time will not help in the process of buying property in Spain. Each market has its specificity; therefore it is best to ask a trusted agent and attorney to familiarize you with the reality and procedures of the market and to allow them to guide you through the entire purchasing process in the most stress-free way possible.
We do not intend to scare you off with this note. Our purpose is to make you aware of the existing risks and assist you in avoiding them so that the purchase of your dream property in Spain may become a real pleasure.