We posted a very popular post on the Spanish Property Blog last week.Titled “The Four Horsemen of the Spanish Property Apocalypse“. Within it we explained how to get a bargain in Spain without going to a bank for their rather badly located properties. Take a look and if you have any questions just ask.
When you are looking for a property as a buyer you are obviously looking for a bargain that suits your requirements. Those requirements will be exclusive to you, ie different from anyone else, but you can almost guarantee that the property you buy will have many of the characteristics that others are searching for too (This is why we said that there are not actually that many properties really for sale in Spain here) One thing that you are looking for though is summed up in the Spanish Property search mantra “Bueno, Bonito y Barato” (Good, pretty and cheap)
So how do you get these “Bueno Bonito y Barato” properties?
Unfortunately what you are looking for often preys on the misfortunes of others and we call this the “Four Horsemen of the Apocalypse”. In this case they are the “Four Horsemen of the Spanish Property Apocalypse” but they are similar all over the World for giving you a good deal, usually below market value. What are they?
Death, Disease, Divorce and Debt.
There’s a fun combination for you. You just have to take a different viewpoint and say you as a buyer are actually doing the seller a favour in many cases by taking the responsibility for the problem off them.
Let’s look at each in turn.
(It’s always fun to talk about death in a blog post isn’t it!) This is one of the main ways you can get a bargain property in Spain but there are a few provisos. Usually it is the heirs to a property selling and this can cause problems. Firstly, they must all be in agreement to sell and the more of them there are the more difficult it is to get this agreement. This makes it more difficult to negotiate a lower price too. Let’s take an example. If there are four heirs to a property at 100k then in theory they all get 25k out of it on sale. However when you offer 80k although it only 5K off for each heir (That is how it should be framed when making the offer) if one says no then there is no deal. This will cause arguments among the heirs especially from those who need to sell and make it even more difficult to get that agreement.
Next, you have to wait, and sometimes this can be a long time. The process of registering the property in the name of the heirs can take up to two years, so if the inheritance hasn’t yet been registered then there may be problems with a purchase. Make sure that your lawyer checks this out.
One thing to note in inheritances is that you could be doing a huge favour to the owners as they are often asset rich but cash poor and they have a looming inheritance tax bill coming up so they need to sell. If they don’t pay the tax bill then the tax office will embargo the house anyway and they won’t get anything. We have recently had two properties sold at a much lower than market value price due to the inheritance tax demands. Both sets of owners were extremely relieved, thankful and happy despite selling below nominal market value.
(Maybe this one should be called illness not disease as we do not want images of bubonic plague ticks infesting any house that you may want to buy, but then it wouldn’t be four D’s.)
Illness is the cause of many sales (especially by foreign owners as they move back to their own country as they feel the medical treatment they receive closer to home they will be able to understand more easily). The price drops when somebody is ill are often dramatic as a quick sale is needed. However you must be sensitive to the situation of the sellers or they may just cut off any negotiation.
In many cases illness means the owners cut the price to the bone in order to make a very quick sale. Any lowball offers made on this type of property may be considered an insult. If you are playing a numbers game that may not bother you too much but it bothers us so we probably wouldn’t pass on an insult to a client 😉
This is often the most difficult one as oftentimes the two parties who need to agree on the sale are at war and not talking to each other. Usually one of them needs money too and the other is unwilling to bend on price so as to not lend a hand to their ex partner (Hate is such a strong emotion). This has happened recently in the case of a house we had for sale and the end compromise was that one partner sold their half of the property for considerably less than the other party. (For them it may create a tax issue in the future)
Another aspect to consider when there is a divorce is that many times one of the partners is still living in the property and they may be less inclined to sell even if they need to sell. This creates a huge problem of arguments too.
Nevertheless, many times a separation or divorce can mean that the partners agree to cut their losses and sell up at a much lower price so that they no longer have to deal with each other. That is what we hope for when dealing with properties of this type otherwise it is just not worth the phone calls and hassle from one or both parties.
Possibly the most contentious one as you may feel you are totally taking advantage of someone who is in debt, but let me supply you with the release from your guilt complex. In a lot of cases those in debt cannot sell to you at a lower price because their debt is higher than the value of the property and the bank will not do anything to help them knowing that eventually they will be able to get their blood addled claws on the property and have a debtor in hock to them forever more. Therefore helping out those in debt who cannot pay their mortgage for whatever reason by buying the property at mortgage cost or above is actually doing a favour for the debtor even if it means they sell for under market value.
When you get behind on a mortgage in Spain the bank starts repossession processes after three months. The costs of the repo process are between 30-35% of the mortgage value and therefore as a buyer you are saving the current owner a much higher debt by buying their property off them. We have many cases where we have saved the owner falling into a permanent debt trap in this way and they have been unanimously grateful for our help in letting them sell their properties before the banks’ grubby mitts could get hold of them.
There you go then, the Four Horsemen of the Spanish Property Apocalypse and how you as a buyer can benefit from what is happening to others. You will notice we do not use the words “Take advantage of” because we would hope that any purchase made under these conditions would benefit both parties, buyer and seller, as it gets the seller out of a position they may not be comfortable in and the buyer a great deal on a property.
We hope this wasn’t too callous but it had to be said. Unfortunately life isn’t always a bed of roses for house owners, the Spanish Property Apocalypse affects many people.
Remember to let us know what kind of property you are looking for and we’ll find it for you, at the best price …