The Seven Levers of Negotiation on Spanish Property Purchase

If you are going to buy a Spanish property then you first need to identify a place you want to buy. Up to there everything is clear. However when coming to an agreement with the seller there are seven levers in the negotiation process, a couple of them peculiar to Spain alone. Take a look Price Declared Price Deposit Time Period Form of Payment Contract Type Furnishings Price Let's start with the price and get the obvious out of the way. If somebody is asking 200k for a property and you initially offer 160k you will come to an agreement somewhere in the middle logically. However that offer could be considered derisory and you may not get into the negotiation process or the owner may well remain rooted to the spot as they feel insulted (never underestimate the power of Spanish machismo pride to make someone really stubborn). The advice here is to offer close to what you are prepared to pay then move a little at a time if the original offer is not accepted. More to come on this negotiation technique next week and news about how the Spanish mind works (which may surprise you a little) Declared Price. You will have heard about the concept of black money probably but maybe you haven't understood what it means. Traditionally Spanish sellers ask for money “under the counter” as it were. This has largely disappeared from many transactions these days but I am still capable of being surprised. Recently a woman wanting to sell her house stated that she would accept 430k on a 500k house but only if the declared price was 250k. That leaves the small matter of 180k in black money. No chance. However you must understand the motivation. When she bought they underdeclared, a lot. She then did a total reform of the house using black money so the difference between her declared purchase price of 150k (it wasnt even close to that apparently) and her sale price 430k is 280k minus costs.she would pay 18% capital gains tax on this. That gives around 50k capital gains tax. If she manages to declare at 250k she will avoid over 30k of that meaning in effect she will sell for the equivalent of 460k allowing her to accept the lower offer. Our advice, don't do it. Simple. Deposit The higher deposit you put down the better the chance of sealing the deal. Remember a deposit is placed and in most types of contract (see below) the owner has to return you double the deposit if they pull out whereas you lose it if you pull out. Both sides are protected. If you put down a small deposit the Spanish mentality is that you are not really committed to the purchase so they leave it on the market. If they then sell it to a better offer you get double your money back but miss out on the property you want to buy. Gazumping still exists. Obviously if you have offered a much lower price and then you only leave a small deposit they will continue to search out a buyer at a higher price. Time Period Normally you place your deposit on a house for sale in Spain then complete after a stipulated time period, usually 30-60 days. However it is an agreement between the two parties so that period can be changed. If you want a lower offer accepted it might be worth telling a seller that you can go for quick completion, however bear in mind hat they may need time for packing, moving out etc... By quick completion I mean within 30 days. The lawyer's conveyancing can be done in just a few days really. Therefore if you are in a position where you have no need for a mortgage you might want to mention this the fact that you can actually complete in a week to ten days and they can have the money in their account and get rid of any mortgage they may have by next week ;-) Form of Payment Again here we are talking about mortgages but not only that. Obviously if you need a mortgage the time period needs to be longer as arranging a mortgage these days can be like pulling teeth. However there are other factors to consider when considering the payment type. If your seller is from the UK and you are too, then you may wish to pay a part of the full payment in pounds sterling. This is slightly more difficult to arrange but is possible at an agreed exchange rate to the sale price. Why would you do this? You save money on money transfers both ways so both parties save a little and you mitigate currency risk of fluctuations in the pound/sterling rates in the intervening time between deposit and sale. Also you may wish to do a rental with option to buy and then there are various considerations. Firstly, the deposit amount which is forfeited in case of non completion. Secondly, the monthly rental to be deducted from the end sale price, and thirdly the final payment. This is a much more complex contract but in the end it can be made simpler if both parties are keen to complete. Contract Type There are two types of contact type if we forget lease options as above, “contrato de arras” and “contrato de compraventa”. The former type “arras” is the type more commonly used. You put a deposit down that if you do not complete you forfeit the deposit. If the owner doesn't complete then they have to pay you double back. A “compraventa” contract means that both parties are tied into the contract. If the other party does not complete they can be taken to court and as a buyer the house will be given over to you. This is a much less well known form of contract often used by builders on off plan property to tie you into completion even when you do not wish to complete because, maybe since you placed your deposit the market has dropped somewhat. Try to get the first type of contact usually unless you don't want the owner to have any chance of dropping out because you are totally 100% certain that there is no way you could not pull out under any circumstances. Furnishings Is the place sold as is? Or will you have to furnish it? We always suggest that it is usually a good idea to get the place furnished as is when it is a resale, if the option is there, because then you can replace furniture and white goods bit by bit as required. However if it is shockingly old furniture, which it often is, turn it around and insist that they take it otherwise you want a discount. So there you have it. The seven points of negotiation on your Spanish property purchase. Is there anything else you might add in? Related Reading 1) Property for sale all over Spain