This is a website for buyers, owners, and sellers of property in Spain, offering reliable information and resources to help you get things done with confidence. It is run by Mark Stücklin, author of the Spanish Property Doctor Column in The Sunday Times (2005-2008), and the book ‘Need to Know: Buying Property in Spain’ published by Collins.
According to data from the NAR (National Association of Realtors), 35% of home sales in the US are closed without any meaningful discount extracted from the vendor. The same cannot be said of Spain, where an estimated 90% of vendors give ground on price before the sale is closed.
Research of the Spanish market by an outfit called the Spanish International Realty Alliance (SIRA) in collaboration with the NAR, finds that a large majority of vendors in Spain admit to having negotiated a significant discount with the buyers. Talking of inflated asking prices, “It’s almost standard practise,” explains Francisco Fernández, a director of SIRA, quoted in the Spanish press. “Vendors take it for granted that they will get a counter offer and start off with an asking price that leaves them room for manoeuvre, in some cases as much as 20% higher.”
If hitting the market with an inflated asking price is common practise in Spain, it comes at a cost to both buyers and sellers, argue the SIRA. “Many house hunters have a budget limit that includes both the property and all the additional costs of the operation.” explains Fernández. “For them, an inflated asking price gets a property excluded from the list of homes to visit on the basis of price.” The result is that inflated asking prices prevent potential deals being done, which is bad for both sides.
Fernández uses the findings to argue for a greater role for estate agents on the sales process. “From our point of view, the greatest transparency in the market is achieved when, as happens in a high percentage in the US market, both buyer and seller accept the target price proposed by their real estate agent, who is the one who definitely knows the sales prices of similar properties.”
But many estate agents don’t want more transparency, as the lack of transparency gives them greater control over price expectations on both sides, and allows get away with higher commissions. The real problem, as I’ve said many times, is the lack of reliable, independent pricing information available to both buyers and vendors in Spain, where actual sales prices are not published online as they are for free in other countries like the USA. When both buyers and vendors know the actual sales prices of similar properties, price expectations are much more aligned, and there is no reason to inflate asking prices.
MarkDavid says:
Another reason why many sellers ask for inflated prices is that they are often compelled to pay around 5% sales commission to estate agents, many of whom are, sadly, ineffective. Agents would work a lot harder and there would be far fewer of them if their rates were more in line with most buyers’ markets of which the U.K. is a good example; rates can be under 1% and are rarely above 2% of the selling price. So come on, agents, be realistic, be more professional and generally pull your socks up!
SurveySpain says:
Since March 2014, the Survey Spain Network of Chartered Surveyors has been providing a Quarterly Report recording the difference between Asking Price and Selling Price as reported by ourper-acquisition Building Survey and Valuation clients. It steadily showed a decline in the difference as the market became stronger and has now plateaued at around 7-8%.
Sourcing this information is extremely difficult, with professionals being prevented by client confidentiality from disclosing the actual sale price. Also, the amount of ‘under the table’ ‘B’ payments have always been a problem in Spain, with that varying from zero to more than 30%. Thankfully, much less of a problem than it was, but it means that even if registrars did release the figures, could they be trusted?
Depending upon estate agents to set the price just doesn’t reflect the real world. Many agents, especially at time like now when a new one appears to set up every day, will suggest a high price just to secure the property listing. Gradually, thereafter, will the exasperated house owner lower their price again and again until it reaches the actual market level it should have been set at in the beginning.
If agents had to be trained and be responsible for their advice and promises, as they are in many other countries, then we would see a more responsible market. Also, with so much new build being priced well above the resale market, when these new owners want to sell, they are going to find, even if the specification is above the resale competitors, that they’ll be brought down to the ‘actual’ market level.
Incidentally, things work the opposite way in Scotland, where the price is set low to draw in interests and then a closing date is set for sealed offers. The highest, cleanest offer on the day is the one that wins the property. And, again like many other countries, a Home Condition Report provided by the seller, is mandatory before a property can be marketed, so everyone offering knows what they are buying.
No system is perfect, but Spain’s could certainly be improved.