This isn't going to be an epic long post like some of our recent ones but it is quite important as it explains a concept that we have mentioned in passing before but as it is now becoming more the norm you should know more about it. We are talking here about the concept of the reserve payment to take something off the market while the owner considers an offer. What is the reserve payment and why is it becoming the norm?
Traditionally the process of buying a Spanish property, which you can read more about at the link, was simple, make an offer, wait until it is accepted or negotiated and then put a deposit down in the Arras contract. Things have changed because of the market which is blowing really hot.
The New Stage
The stages now have increased. Now you make an offer but in order for the agency to make the offer in writing to an owner they often take a reserve deposit. Some agencies demand that the reserve is placed into their account whilst others are happy that we have taken a deposit from our client. We hold a client account for this where we hold the deposit and use it to either pay as part of the full Arras contract if the offer is accepted or return to the client if the offer is not accepted. The process once an offer is accepted is the same as before, full deposit contract is then drawn up and completion is within a certain amount of days afterwards.
Why Does The Reserve Contract Exist?
The main reason is because agents are trying to avoid ridiculous offers being made on multiple properties. Now we know that YOU wouldn't do this but other people have been known to make a load of offers of many properties and then not follow through if an offer is accepted because they have already decided to buy another place. Rather than bothering the owners and letting them down when potential buyers disappear (for which the agent will be blamed believe me) the agents demand a refundable deposit to make the offer.
They also claim this concentrates the mind of the seller to see that the buyer "has skin in the game" by having put money down, in other words, it's a serious offer that you have made and not just someone fishing.
How Much Is The Reserve Deposit?
This depends on the agency and the agreement but it often depends on the price of the property. Recently we have held reserve deposits of 1, 2 and 3000 Euros for clients and our clients have paid 2 and 3000 to other agents to make offers. The selling agency supplies a reserve contract which should state the terms and conditions of the reserve, usually that the reserve becomes part of any Arras deposit contract if the offer is accepted by the owner and returned to the buyer if the offer is rejected.
How Long Is The Reserve Valid For?
Again this depends because it may take time for the agent to convince the owner to accept your offer. It may also take time for the deposit contract to be signed after agreement. However the money is only held for a short time if the offer is not accepted. In the terms and conditions it should be stated where the money is to be returned in the case of non-acceptance of the offer. Equally, you may up your offer if the intial amount is rejected and then the reserve already being with the agent means that they will convey your offer onto the seller immediately.
How It Helps You as a Buyer?
I wanna tell you a story!
Last week a client of ours made an offer and it was accepted without a reserve. The agency put together a deposit contract and it was sent to the lawyer of the buyer. Next day they contacted us to say that the owner had accepted a higher offer and provided us with a signed deposit contract (redacted). Needless to say both our client and our agency were livid (And I was because I had made the sale and the buyer is a friend too). This annoyed us so much that we got our trusted lawyer to threaten to sue the owner for incurred costs despite our clients never having paid a deposit (The point where you are officially under contract in Spain) and luckily we won. The threat of the legal action was enough for the owner/agency to retract their (potential) bluff and our client got the property at the agreed price.
Now really this shows why the reseve would have been useful. We don't know whether it was the agency or the owner trying it on (Or whether they did have a higher offer which the potential buyer went back on) but someone blinked. With a reserve contract we wouldn't have got into that situation unless the owner had rejected the offer (And remember that in this case he had accepted their offer)
What You Need To Do If Doubtful
We had a client here last week who was doubtful about this process because this isn't what happens in their country when buying a property. Now you can decide to trust our word as your agent that this is what is happening here or you can ask your nominated lawyer who will confirm that this is what is happening now or you can insist that Spain changes the process of purchase to that which is normal in your own country but I know which of those is more likely.
I'll give the benefit of the doubt to the client as the process of the reserve contract is relatively recent and I haven't really written a full article about it before (I have now) but they almost lost the property they had fallen in love with because of course there was a lot of interest around it. The lesson should be of course, read our blogs, listen to the podcast and if in doubt ask your lawyer! Remember the lawyer won't let you get into a sticky situation as they are working for you. Remember though so are we! We are buyer's agents and work with you, not against you. We are here to hold your hand through the process of buying Valencia Property up to and beyond your purchase. We are here to help you. Remember that always. Your agent is not your enemy.
Property Deal of the Week
"Strange photo to use" I hear you say! Yep it is. That is to show that what you are buying here is a hotel. But even more it's there because the photos we were supplied with were pretty terrible and there was nothing we could do about it.
"Well, this is a bit of a departure from our usual listings and further away than we tend to venture, so how about a super informative description and top quality photo reportage?
Nah, how could I let you down like that? Lets get stuck in.
Heres a bell. Probably the best photo of the lot so its the first one I have used, (note to self, go and take your own photos) so it probably gives you a clue as to its current status as a Rustic Hotel.
Its in Beniarjó, and you might think wheretf is that, because I did. So I looked it up and I actually quite like this little traditional town, 10 minutes to Gandia, 15 minutes to any number of great beaches and 1 hour drive to Valencia.
It has 11! Bedrooms, 6 doubles, 3 singles, and 2 triples, sounds more like a round of drinks in Youghal but that’s a lot of bedrooms. Some have beds with towels on. There's a bathroom with a mirror perfect for your international clientele. Theres a vintage style kitchen, some stairs that go up and down, a chimney fireplace and dining room with lots of tables and orange chairs, and there’s a courtyard, which looks nice and fresh and inviting when it’s 30º outside, which it is today.
Joking aside this is a really interesting and lovely looking building with that’s been renovated and run as business in a nice part of coastal Valencia, the licence and business can be continued or you could use it as base for friends and family, and if you get in contact we will have already been and can tell you a bit more about it. So why not try that bell..." (Ding it to see more bad photos)
This Week's Podcast
This week in the podcast we talked about those things we love (And hate) about Valencia and Spain (Because most things are good or even great but there are minor inconveniences here too). Have a listen below and if you have anything you think we should have included then feel free to contact us on our socials and tell us.
Random Images of the Week
If You Liked This
Then make sure to click on the links below in which we tell you much more about buying property in Valencia.