How are the four horsemen doing?
I wrote a very popular blog post a few years ago about buying property in Spain on the Spanish Property Net page. Entitled “The Four Horsemen Of The Spanish Property Apocolypse” it told you about how to find bargains in the Spanish market as it struggled to recover from the great financial crash, overpricing and oversupply. (Take a look at it and then come back here after)
Things have now changed a bit. Prices are rising timidly in some places and have flatlined in most others, the fall in prices in most places is negligible right now. As I predicted at the time, the absolute no brain bargains have largely disappeared. It now requires more time, investigation and work to find them, and when they appear they are snapped up very very quickly.
So how are the four horsemen working out?
Lovely aren’t they!
Let’s take them in turn.
Firstly the one that you may still be able to find most often if you look hard enough, debt.
The major problem with finding properties that were worth buying in Spain due to debt came down to two main things; firstly, the debt was higher than the value of the property and secondly, Spanish pride.
If the debt is higher than the value then there is literally nothing you can do about it and making a lower offer makes no difference at all. The bank will not do a short sale, the owner will not, and cannot, reduce the asking price and the only option may be to take on the current mortgage which is pointless if the value of the property is lower.
Spanish pride comes into it when the debt owed is lower than the value. Even if the bank are about to repossess their 300k home on which they owe 150k an offer of 200k will be considered an insult and discarded. We have seen so many cases where the bank has repossessed properties in similar circumstances to this after the owner had rejected decent offers for the property that it is just not funny. If there is just one thing I would say to sellers with a debt problem it is “accept the offer made” (Or at least negotiate it). They spend the rest of their days kicking themselves in the backside.
Next the unfortunate circumstances. Firstly divorce, secondly death and finally disease.
Recently many of our best value properties have involved separation or divorce. However it is also true that some of our most frustrating missed sales were due to divorce because the two people involved wanted to seriously piss each other off and therefore could never agree on the terms and conditions of the sale even, in one case, when the price was agreed. So yes, this horseman still exists, this horseman is still active and it is still a good bet for finding a decent deal. Just make sure the couple selling are on speaking terms at least.
Death is another thing that is not going to go away. It happens and when it does circumstances dictate the deal.
Firstly, you must remember that the property needs to be inscribed in the property registry in the name of the heirs and this can take anything up to a couple of years. Nevertheless it can also take a lot longer as sometimes the heirs don’t bother to register the property in their names until they decide to sell it. They put it up for sale with those immortal words “don’t worry, we will get everything sorted beforehand”. Yeah, right! If the process of inscription in the registry isn’t finished then any number of problems and challenges to the inheritance can come up meaning that even if you buy it in a notary you may not be able to inscribe it into your name at the property registry. Therefore, under no circumstances should you buy an inherited property if it is still in the name of the deceased (Unless you don’t mind waiting and you are totally certain there will be no problems with the inscription).
Secondly, the biggest problem is often the number of heirs and not only getting agreement to sell at a certain price but also getting them in the same place at the same time to make the sale. It’s often like herding cats… in the dark… with a whistle… in space.
Nevertheless, an inherited property can often be a good deal as the heirs often want to sell in order to pay their inheritance tax bill and therefore they reduce the price to get a quick sale. Keep an eye out for this type of deal. We recently concluded one for a client and the deal was phenomenal.
Our final horseman is disease or illness of course. Often, as stated in the original post, properties of this type are being sold by British sellers returning to the UK as they understand the language and complexities of the health system in their own language better. There are also cases where the sellers want to sell before they die because of inheritance tax issues (sometimes many years before they even having an illness as they can then gift the money to their children and avoid the tax on inheritance).
Obviously it is prudent to be understanding of the situation of the sellers in these cases as they have usually dropped the price considerably for a quick sale so again, as stated in the original post, lowball offers are not well received in these cases and can often mean you are locked out of the purchase for insulting the seller.
However I am often asked questions about the following, especially by American investors, why can’t you find opportunities like short sales, owner financing, multiple unit purchases and more?
The truth is they don’t actually exist in general so you cannot find them. Occasionally a bank may agree a short sale, I know of one in the last five years. Owner finance? Unheard of. Multiple unit purchase? Nope, buildings are generally split up. Sales of portfolios? Very few. Individual sales will lead to a greater reward usually and properties are not usually held in the name of a company which could change hands instead of the individual sales of each property.
So we are stuck with the four horsemen and they are still there. They are just not as prevalent. When can we help you to find your personal deal?