5 common misconceptions when buying a property overseas
It’s easy to get swept up in the excitement when buying a property overseas (we can’t blame you, it’s very exciting!) but purchasing a property abroad is a big decision and one that can have significant financial implications if you don’t take the right steps. Luckily for you, we’re here to answer all your queries and guide you through the process of buying your overseas property smoothly.
Simply give us a call on 01244 478911 or email us on firstname.lastname@example.org and one of our friendly team members will be happy to answer your questions!
In the meantime, here are a few questions answered about some of the common traps that people can fall into when buying property in Europe…
1. My estate agent says their fees include legal services, so why should I pay for an independent lawyer?
We often hear from clients that their estate agent will throw in the legal fees as part of the package or offer a significantly reduced rate. But are ‘free’ services really free?
The reason that you need an independent lawyer is to make sure your interests are fully protected. Estate agents make big commissions on the sale of properties (anywhere between three and five per cent of the property price!). So, it’s in their interest to make sure the sale goes through. Lawyers working alongside the estate agent will often have a conflict of interest between a) advising you of what you need to know and b) potentially jeopardising the sale for the agent.
If the lawyer advises to you of something that might put you off from proceeding with the purchase, they will lose the sale for the agent and therefore their commission (and possibly their own share of the commission too, depending on the arrangement!). You therefore need to instruct a lawyer who is working solely to protect your interests, not just getting the sale through at any cost.
Reduced rates or ‘free’ services are often available because a junior team member is assigned, or even worse a particular lawyer may be chosen who will overlook issues that may delay or lose the sale, to the advantage of the estate agent. You may find out later down the line that necessary checks were not completed thoroughly, or you were not advised properly about potential issues with the property, which could cost you significantly more and cause a big headache. Whilst it may save you money in the short term, essentially you get what you pay for!
And no, it’s not a good idea for the buyer and seller to instruct the same lawyer!
2. I’ve been told that I don’t need a lawyer when buying a property abroad, is this true?
Technically you don’t have to have a lawyer when buying a property abroad in many European countries, including Spain, Portugal, Italy and France, as a public notary can facilitate the transfer of deeds. BUT (and it’s a big but!) it’s strongly recommended that you seek the services of an independent lawyer who can advise you throughout the entire process to make sure your interests are protected.
A notary is an impartial figure, who usually acts for both the buyer and seller. Typically, the notary, does not get involved in the buying process until the final stage, at which point it may be too late to withdraw from a property purchase, if you find out there are issues with land registry or planning permission, for instance!
Find out why Mark Jacobs was glad he took our advice and instructed an independent lawyer against the advice of his estate agent!
3. Will I need to keep travelling back and forth throughout the buying process?
The simple answer is no. Many people mistakenly think they will need to keep visiting the country where they are buying the property to sign paperwork etc. However, another good reason to instruct an independent lawyer is that they can act as your power of attorney, handling everything from obtaining your fiscal number (NIE Number in Spain, NIF number in Portugal and Codice Fiscale Italy) to setting up a bank account for you through to signing all the necessary documents to complete your property purchase.
4. Is it safe to use an independent lawyer recommended by the estate agent, seller or developer?
Many overseas estate agents can be very helpful in offering guidance to their clients on local English-speaking lawyers. However, there will be some estate agents that have commission-based partnerships in place with local property lawyers, so they may not be truly independent – no matter what the estate agent tells you. Don’t forget, estate agents are salespeople and can be very charming, but not all of them will have your best interests at heart.
We always advise instructing a lawyer that is not linked in any way to the estate agent, seller or developer. That way you can be sure that there’s no conflict of interest!
5. Do I have to sign a reservation contract and pay a reservation fee?
In some countries, like Spain, Portugal and Italy, it’s common practice to sign a reservation contract and pay a small deposit to ensure the property is removed from the market. Essentially it is to show that you are a serious buyer and offers the vendor some security that you won’t withdraw from the purchase later down the line, potentially costing them another sale!
Whilst it’s perfectly normal for estate agents to request this, it isn’t mandatory. It’s always advisable to ask your independent lawyer to review a reservation contract before signing it and paying any fees to the estate agent, as this deposit is usually non-refundable or only refundable in certain circumstances.
Find out more about reservation contracts in Spain!
We can also assist with some aspects of the property buying process in Cyprus, Turkey, Greece and more! Contact us on the details above for more information.
Article published: October 29, 2018