Property Guides and Information for the Costa del Sol, Spain

The Seller’s Guide to Spanish Property

Selling your property is all about your strategy and network of contacts, depending on what you choose greatly affects the length of time it takes to sell, and the potential returns you could make.

Establishing your price

The right asking price is the most important factor in selling your property. If your price is too high people will not even bother to view it and it will not sell, conversely if your price is too low you will be giving away part of your assets. Having access to the right market research and experience are essential factors in establishing the correct sales price and this is where an experienced estate agent will help.

When you use an agency you will pay a commission, but the benefits of greater market exposure outweigh the cost. Commissions in a resort area such as Marbella are high because the market for Costa del Sol property is spread out all over Europe and the rest of the world. It’s an expensive process to market property at this level, furthermore, a good agent will have to network your property with other colleagues locally and internationally and share the commission to ensure the best level of exposure and viewings. Agents in Spain accompany the clients on viewings and spend tremendous amounts of time preparing the correct portfolio and matching the right client with the right vendor: so it’s worth forming a team with your agent as their networking is essential to ensure proper market exposure.

When offering your property through an agency it is important that you offer a gross price inclusive of commission and a small negotiation factor. It is more than likely that a potential buyer will want to haggle, so it’s important to have a margin prepared. Furthermore, offering your property at different prices through several agencies is not a viable strategy. A client may revisit your property with another company and become confused and angry if it is offered at a different price.

Selling before completion

If you bought off-plan you can try and resell prior to completion provided your purchase contract allows you to do this. Selling on or ‘flipping’ the purchase contract prior completion avoids taxes and costs. You will not pay the IVA, notaries fees, stamp duty, full lawyers fees or have to think about setting up a mortgage or paying the running costs of the property.

Selling off-plan is harder than selling a resale: an unfinished property does not give the potential purchaser the option to see what they are buying, and the developer will not be interested in marketing your property while he still has his own product to sell. The main opportunity for resale usually occurs when the development is in its final stages of completion, the property and community areas are nearly finished and the developer has very few units left. If you bought early enough, in a choice location (i.e. corner plot, largest plot, best views, best features, biggest build size, etc.) and on desirable development you stand a good chance of reselling. In this case your agent will be your best ally as he will be familiar with the development and your particular unit and will be a likely source of clientele.

‘Flipping’ a purchase contract prior to completion is only as viable as the property’s resale potential so do your research before you invest. Developments with the highest resale potential are those with limited product availability, good features (location, view, etc), a good value per square meter built (this varies from area to area so do your research), in a desirable area and a long build out phase to provide the maximum timeframe in which to resell.

Should you give an exclusive sales agreement to an agent?

By granting sole agency, your agent will be more responsible to you. You have the right to demand more service, communication and effort from a sole agent than by listing your property with several agencies.

Obviously ensure that both you and your agent agree a good sales strategy, and that he advertises your property in the manner agreed such as producing a brochure or networking your property with other agents. It is especially important that he report to you regularly on sales activity. Your sales strategy together with the agencies you use to market your property must result in several viewings per month. If this does not occur then there is something wrong. Finding a buyer for a property is a numbers game: the more people who view the property, the greater the likelihood that someone will negotiate for its purchase. There are some buyers who will negotiate hard, and others who won’t, but it’s easier to refuse a low offer if you are showing your property frequently.

Under-declaration and it implications

It used to be common practice in Spain for the vendor to under declare the property sale price during transfer at the signing of the Escritura Compraventa and demand the real difference in cash (black money). This evaded the true values due on transfer tax paid by the purchaser and capital gains tax paid by the vendor.

For example: You sell your house for 150,000€, and the official price you bought for on your Escritura was 50,000€. You stand to make a gross profit of 100,000€, but instead you only declare the sale at 70,000€ and ask the purchaser to pay the 80,000€ difference in cash. The purchaser then pays 7% transfer tax on the declared 70,000€ and you only pay capital gains on the 20,000€ declared profit.

The Hacienda is looking into property transactions: they have their own tables and values and are empowered to set a higher value on a sale if they judge that an under declaration has occurred that is greater than either 20% or 12,000€. They can apply heavy penalties under the terms of Spain’s 1989 Ley de Tasas. Today’s potential buyers are also aware of this and will usually not be interested in large cash deals. You will be reducing the scope of potential clients for your property and dramatically extending the sales timeframe.

In conclusion, selling a property can be as easy or as complicated as you decide to make it and depending on the advice you receive from the professionals involved in helping you formulate your strategy. Competent, honest, professional help by agents, lawyers and tax advisors can go a long way to help you manage a sale objectively and more easily.

April 21, 2006 | Category: Selling Property