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As some of you know I write various columns in the UK press on the subject of Spanish property.
I’m preparing an article that looks at the commissions that estate agents charge in Spain (a hot topic!).
I’d like to talk to any vendors (trying to sell or already sold) who have struggled to find agents who charge a reasonable or fair commission (let’s say 5% or less, which is not to say that 5% is particularly reasonable).
I’d also be interested in talking to any buyers who have a view on this subject.
Send me an email or PM (contact functions below). But bear in mind that I’m looking for people who don’t mind being quoted in the article. Also, I’m in a bit of a hurry so if you can help, then the sooner the better please.
Many thanks
Mark
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I dont think you will find an agent on CDS who charges under 7.5%
They are all a bunch of crooked cowboys and on top of that totally useless. My property was one with the aptly named awful estates since beginning of the year – “apparently” they have shown it 3-4 times in that time with no success.
Now Cluttons are advertising it in SUR, and Viva have shown it at Open Houses, i feel more hopeful but will have to sell at almost the price I bought if for because of the excessive commission charges – 7.5% and tax means you lose best part of 10% of the TOTAL selling price!
Incidentally I bought my new house inland and paid the spanish agent 2% and the seller paid 2%. Which I thought was the law in Spain.?
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Mark, in conjunction with your article there are two important considerations that often get overlooked regarding the excessive commissions.
For the seller: when the agent charges so much to sell an apartment for example, he almost always does not even prepare a customised set of particulars of the property, it’s too often a one sheet general photo and details of what could be any one of the apartments, maybe with an interior shot, it’s a cheap low cost method.
For the buyer: If someone has a budget say of £300,000 they have to be buying something that is only worth about £245,000. The agent will add anything up to 10% to that valuation, adding it on to the cost. Then the buyer has to pay 10-11% completion costs as well. Some 50-60000 extra taken up in commissions and costs which the buyer pays.
If he then wishes to sell later, just to recover his money, he will then have to ask maybe £330,000 and I believe this is where some unscrupulous agents give the impression that your property has risen so much, but with no profit for the vendor, only the agents.
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To Guest:
No, there’s no law regulating the commission that agents can charge. It is still quite common for traditional brokers, especially in rural areas, to charge anything from 1 to 2% to both buyer and seller, but it’s rare to come across this in areas where foreigners buy (for instance the CdS).
Guest, any chance of you getting in touch? If you don’t mind send me a PM or email.
Thanks
To everyone:
A little bit of experience and you soon find out that the ‘investment potential’ of property in high-commission areas such as the CdS takes a pounding from the commission.
Lets look at some quick and dirty numbers.
Let’s say you are a non-resident who buys a resale property on the CdS for 250,000 Euros with no mortgage. The total cost, after taxes, notary, registry and legal fees, would be around 271,400 Euros. Assuming that the agent’s commission is 7.5% plus VAT, then the vendor would get 228,250 Euros before tax – which means that the agent earns 8.2% of the vendor’s before-tax proceeds from the sale! Scandalous, but that’s another story.
Now lets assume that you hold the property for 3 years, that prices increase by 10% every year, and that you then sell through an agent who charges 7.5% plus VAT. The transaction price would be 332,750 Euros, you would earn a profit after tax of 22,620 Euros in 3 years, and the agent would earn 25,000 Euros from the sale – more than you earn in 3 years. If prices only go up by 5% over the same period, you end up loosing money, whilst the agent still makes a whopping 21,700 Euros from the sale.
Any bright ideas on how to minimize or avoid excessive commissions, both from perspective of buyers and sellers?
Mark
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Well, needless to say that’s not exactly what I want to achieve.
What I do want to do is help put pressure on the commissions that estate agents charge, in the hope that 3 to 4% (or less, of course) will become the norm.
I also want to increase awareness amongst buyers of the whole ‘investment’ issue. Too many buyers have relied on estate agents for investment advice, as much as anything due to a lack of other credible sources of information.
Mark
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How do you get it across to the agents? Unless a mass body confronts them face to face , head on, they will continue to take these enormous commissions. They will not log on to forums like these and think ” Oh dear!,people think we are charging too much etc. etc. Let’s all reduce our rates” Even if they were upfront and said exactly what their charges were, would be a start. At least in the UK, when selling property, we negotiate the commission charges from the outset. In my case , O**** E****** have apparently been paid 59,000euros in commission from the 119,000euros we paid as a deposit (30%)to the developers who have failed to build the apartments!!!!!!!!!!!!!!!!!!! What percentage is that?
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A couple of years ago I viewed some properties with an English agent in Albox, he openly advertised his rate as a flat 4,000euros regardless of the price of the property, this seemed pretty fair especially when he showed me a house for 68,000euros and the agent next door to him had the same property in their window for 127,000euros!
He also said that if anybody recomended him and it resulted in a sale he would pay them 1,000euros out of his 4,000. -
Perhaps too simplistic, but as a start surely all you have to do as a seller is ask a potential selling agent how much commission they intend to stick on top of your desired price (I have a neighbour who is selling a house from abroad and who doesn’t even know how much the agents have the house on the market for, which I find unbelievable).
And, as a potential buyer, also ask the estate agent who wants to show you their properties how much commission they make on a sale (of course you don’t know if they’re telling the truth or not but you could ask for proof to put them on the spot).
Get it out into the open. Why are we all too embarrassed to discuss estate agents’ extortionate commissions anywhere except in the bar or on forums?!
An estate agent (big, inland) once dropped a document in a friend’s car unfortunately (for the agent) showing the agreed price to the vendor and the selling price on 10 houses. Commission to agent between 10 and 50%!!! -
now you are being overly simplistic! – You underestimate two things – particularly as a seller.
1. Most of the UK Big agents lie through their teeth – I also have “accidentely” seen the before and after contracts from Agents and you are right the mark-ups are unbelievable!! certainly more than 7.5% – but if you agree to allow them to sell your house you have ZERO say in the price they advertise it for. You contract states, PRICE TO VENDOR…….. its not until you see the advert that you know how much it is being advertised for – yes its a ridiculous position- but basically they sell it for what the market will bear and keep the difference. The tell you its 7.5% PLUS tax – so basically its 10% off your profit, plus whatever they can trouser off the buyer without telling you. When you complain – its “what are you going to do about it mate” – its 75% of what you expected or 100% of nothing!!
2. Most of the bigger agents work off a computer network, I believe there are 3, thats why all the web pages look similar and the houses share the same reference number. – Therefore you get into a position where you have to register with one Agent from each network, to ensure maximum coverage to sell your house. If you phone any of the agents on these networks they only offer 7.5% because they are in a position of power, and on top of that they DONT actually want to sell your resale house! They only want to shift off-plan new developments.!! Ifs easier and there are no chains involved.
The whole market is over priced by the agents, the buyers are NOT receiving the high prices the houses are advertised for, that goes in the agents pocket.
The best way to avoid agents is to knock on the doors with SE VENDE signs on the doors – thats how you buy at a realistic price, and avoid off-plan “investment” apartments. Buy from the first phase where the owners are desperate to sell their “investment” properties. I’ve seen apartments in the paper where owners are selling at what they paid for it 2-3 years ago just to shift the “investment” guaranteed by the agents. So instead of 30% growth a year its actually selling at a loss just to dump a property that beens on the market for couple of years. Yes it really is Buyer BEWARE on the Costa del Sol!! If you want a holiday home for the next 10 years then go ahead, if you think you are going to get a bargain and make 30% profit in a year or so – just FORGET IT – its not going to happen…..
I applaud Marks efforts to get them to reduce their comissions but as there is soo much property for sale (due to overdevelopment of 2bed/2bath offplan many of them are illegal by the way) that buyers are desperate to offload at any price.
I think the only way out is if a new agent sets up for resale or a brilliant new website offers 2%. I heard that Awful estates in PBanus turns over (allegedly) one BILLION euros in a couple of good years, theres no way anyone honest can compete with that amount of power and infulence.
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I agree with Guest regarding scope for a new kind of agency in Spain that charges nearer 2%, concentrates on re-sales, gives ‘honest’ advice, provides proper particulars for individual properties, and who is not hand in glove with lawyers or developers.
Unlike Awful Estates and others!
Totally agree with Claire too. There must be a way of getting through to Spain and it’s regulators to clean up their act and remove the crooks from the property market. Unfortunately the crooks will have long feathered their personal nests moving funds out of reach, and they will target purchasers in so called new investment countries.
Be warned ‘Old Macdonald had a firm not farm’ ah that was a good rhyme.
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dear claire,
see the amount of money allegedly turned over by just ONE agent, presumbably they paid tax on that! imagine the amount of cash sloshing around in Marbella area, to shops, townhall, restararants, hairdressers, doctors etc etc.
Its not in the Governments interest to intervene, CDS is probably funding the rest of Spain~Q!
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don’t forget that most of the people being ripped off are NOT spanish! most of the buyers on CDS are other europeans – german, dutch, irish, English and dont forget russians.
Actual Spanish people dont get ripped off by the UK agents. When I bought my current house I was totally in the Spanish system with local people. I paid 2% commisson, received real accurate details and floor plans, wasnt lied to, infact when I queried one of the agent’s statements, everyone in the room was horrified that I should question the validity of the statement…. opps/.
There is also the Spanish perception that only ” foreign criminals” live on the CDS so its not their problem, that plus the large number of “cash” purchases might deter people from lobbying their government.
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But you know, it’s British people in Spain ripping their fellow countrymen off too. They are what I would quickly scrape off of the sole of my shoe if I had the misfortune to step in it! I don’t know how these people live with themselves….I am too honest to believe there are people like this around. Our whole awful experience has made us very untrusting now.
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yes you had a very bad experience and I feel for you. I very nearly was shafted on a new off-plan experience with same company, it only fell apart when they coundn’t get an appointment that day with Del valle (white whale lawyer) and I found another independant lawyer on my own who advised me not to touch any new off-plan. In his opinion much of it was overpriced, illegal – no license – and badly built as well. He represented a number of german clients – who, in his opinion, rarely got ripped off because they did a greater number of background checks and refused to pay marked price. He did feel that too many Brits believed all the ballshit from the Agents, I did explain to him that our culture in UK, means that we don’t expect an Agent to blatently lie because in UK we would have some legal comeback.
You’re quite right I don’t know how they sleep at night either! It does seem that Marbella area attracts the scum of UK who exist on scams and get rich quick schemes on innocent normal people. It horrifies me that they could target those who can least afford to take out second mortgages etc.
Hopefully your situation will resolve itself next October when the guarantee kicks in.
an Idea – what about a public protest outside the office of the offending agents???
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” I did explain to him that our culture in UK, means that we don’t expect an Agent to blatently lie because in UK we would have some legal comeback.”
Your quote above is so true, and I think that is a problem when British people go to buy in Spain.
We actually went to O**** E****** office last May. What I think will be of more clout would be to make our voices heard at some of their many roadshows that are just starting now. That way we hit the estate agent, lawyer & developer in one hit. It is SOO against our nature to do things like that, but…. treat fire with fire.
What My husband & I would REALLY like to happen is this. To sit face to face with the developer & their lawyer and ask “WHY WON’T YOU RETURN OUR MONEY TO US?” They will not do that. The lawyers in Marbella are bottom of the manure pile and will be dealt with too. I just wish we could get together with others who have been caught up in this section of the Greenhills development.
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banushouse, I think your posting was spot-on, we Brits are too trusting of UK agents based in Spain, and the C del Sol is where many UK scammers go for easy pickings. They don’t call it the Costa del Crime for nothing.
Excellent idea about a public protest outside their offices in Spain, or exhibitions in the UK with banners and plenty of Press and photographers.
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Hi Claire
I just read this post “Perhaps lobbying the European Parliament is the only way??”
I am currently writing an article about LRAU land grab law and in doing the research for this there are some very scary things which may answer yours and many other peoples questions – why dont the government do anything about it.
The tourist and construction industry are now the two prevalent industries in Spain. In Valencia more so than anywhere else in Spain (yes even more the the CdS). The LRAU land grab law which I believe a version of has been implemented in Andalucia, allows town halls to Steal Land for development. Cases are now being brought before the European Courts – after nearly 3 years. It is a long winded process and it is only being allowed because it is an emergency – people are losing their homes and being left destitute.
The European Courts will only hear a case IF it has been exhausted through the Local, Regional and National courts.
Now then why dont the Spanish Government do something about it. As I stated earlier the Spanish Economy is a macro economy relying on two industries. All the traditional industries (Agriculture, Shipping, Fishing, Ceramics and metals) have all but disappeared in most regions. So they have to rely on construction for their income. And tied to construction are estate agents – some big, some small.
The larger agents are paying a lot of money into the government coffers in the form of taxes – not to mention the transfer taxes and IVA. So with this as their cash cow do you think they are going to upset the apple cart.
After all as many have stated in this post alone – it isn’t the Spanish who are ripping anyone off it is the foreigners – and they aren’t ripping the Spanish off they are ripping off other foreigners.
The Spanish Government are in a lot of debt – in Valencia alone it is €10bn and growing at 500M per annum. Think of this for a moment
– this is more than the UK spend on Defence and the NHS combined. This is for a max of 2.5M residents which works out at a regional debt of €50,000 per head.Their old method of getting out of debt – devaluing the peseta is no longer valid so they try to print more Euros. This alone has serious consequences.
However Europe will soon be removing a lot of the grants that Madrid currently receives. They are also being threatened with Economic and Political sanctions by Europe over LRAU – but so far have refused to even comment let alone take action.
So look at it from their point of view
The Government has little income outside of construction
They will be losing substantial chunks from Europe soon
They cannot rely on other industries because they are in recession
Lots of house sales = lots of property taxes
Estate agents turning over big bucks = lots of corporate taxes and IVAGiven this backdrop they are hardly going to upset the apple cart by trying to regulate the market. Lets say they decided to reduce the commission agents could charge from a supposed 7.5% to 3%. Already they have reduced by more than 50% their direct income from IVA and by the same again with corprate taxes. Actually probably more so because the cost of sale for these companies will be the same so they will be able to offset more against these taxes.
Now if there were more Spanish involved in the buying from foreigners they may think twice – after all most of the Spanish buyers are their voters – and lets face it politicians generally dont care about anything excpet catching voters
There is an awful lot more and the actual article so far is about 25 pages and is pretty damning (but factual) and this is only the tip of the iceberg. But hopefully you can start to see why the Spanish Giovernment probably wont change the status quo. They arent even bothered that people are losing their homes (LRAU) so they are even less likely to worry about people losing a few thousand euros
If anyone wants a copy of the article when it is finsihed drop me a line at vbtudor@spanishproperty-direct.com and I will send it on to you when it is finished.
Regards
Vince
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vbtutor,
I totally agree with what your saying, your post makes interesting reading and complete sense as to whats happening here. Sadly it’s also a double edged sword and what the Spanish authorities don’t seem to see is that by robbing Peter to pay Paul, they are pushing many Foreign owners into hating the system and making many wish to sell up and leave.
Having worked in the tourist sector here for a few years I’ve also spoken to many many holidaymakers who have vowed never to return to Spain SAYING it’s become ugly, expensive and totaly over developed (if I’d had a € for everyone who has said this in the past 5 years I’d be very wealthy) my point being that if tourism is one of Spains main source’s of income, if they carry on regardless, foreign tourists will vote with there feet!!!!!!!!!!! and where will the income , come from then? -
Hi Guest
Yep I think that is currently the government attitude. As i said they pay very little regard to the fact that people are losing their property which they have legally bought and paid for, because they are needed for development. They also dont seemto believe or care that Europe will place economic or Political Sanctions.
Already tourism in Valencia Region (including Benidorm) has dropped off significantly this year although it recovered in August (0.1% up on last year which was down heavily from the year before).
Where will they go afterwards – well I think the answer lies in the new laws being drafted – The Golf Law which basically gives the government the right to expropriate Land for golf courses. What does that tell you about the Governments plans for the future
For me it speaks volumes.
Vince
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Vbtudor,
My VIEW of tourism is that is definately in decline, I have a lovely Spanish Lady friend who has had a gift shop and car hire company for the past 20 years, almost all her business relies upon foreign tourists ( as Spanish tourists, do not spend!!) she has had several bad years in a row now. She refuses to accept that tourism is changing and puts it all down to the normal cycle of business that CDS has experienced previously. I hope for her sake it is but I suspect she’s wrong.
What are the changes to legislation regarding golf?? I live next to 2 established courses and they have just this past month brought the diggers in to the valley close by to start a 3rd!!
Spanish golf is yet another sore point with visitors, as it’s incredibly expensive to play here, everywhere you look there’s a new course springing up, I can’t see who is going to be playing on them all, my husband loves golf but it’s considered more of a luxury or treat than a hobby!! -
Hi Guest – the Golf Law basically gives the Regional Government Carte Blanche to grant licences to build Golf Courses – considered by Madrid to be more beneficial than Agriculture. In effect it means that the town halls can use expropriation powers to force landowners to give away their property – even protected areas are no longer protected under the new law. It currently only applies to rustic areas
It is another law which rides roughshod over the rights of property owners in Spain – even the White Farmers in Zimbabwe have mroe rights than we do here.
Regards
Vince
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Vbtudor,
thanks for the reply, it just all adds to my desire to get away from here!! Spain seems to be in some sort of self destruct mode. The corrrupt decision makers don’t care, all they seem to care about is (get rich quick and get out and to hell with what mess THEY’RE creating for the future)!!!! You can’t trust anyone here these days. I’ve lost count of the people I’ve seen lose there life savings by being lied to and ill advised (by lawyers) who have encouraged naive Brits to buy illegal land and property in the campo, it’s terribly sad. -
Hi Vince,
I too read your post with interest,even tho’ it was very late when I picked it up! It seems we foreigners are on a lose/lose situation on the most part. I said to my husband at the week-end, I feel that I do not want to go to Spain for a holiday anymore.They have enough of our money! It has become expensive, and it is corrupt. The government is greedy. If we are not able to feel that as foreigners we cannot expect to be protected by the law and that these laws will not be upheld in court..then why make ourselves vulnerable to being ripped off. In the UK, we seem to bend over backwards to ensure that foreigners here have their Human Rights upheld. Why is there an EU? Just so that these “poorer” countries can have their infrastructure put into place. the new mediterranean auto route in southern Spain, for example. The more I read, the sadder it becomes.
Regional Governments seem to make up the rules as they go along, willy nilly!
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Vince, what do you mean when you mention a land grab law in Andalucia? I mean, I know one exists – it does in the UK and every other country too – but the owner of the property must be compensated at market value and the land is used for public infrastructure works, unlike in Valencia.
I have heard rumours of land grab in Andalucia, but I’ve never heard of a case that didn’t seem justified in the greater scheme of things. Do you know of any?
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Hi Bert
I am not sure of the details but apparently Andalucia passed a very similar law, The new Andalucian land law which went into effect on January 20th 2003- similar in content structure and wording – basically LRAU by any other name.
You would of course think that being a part of Europe any such law would compensate owners for the land they lose at market value – but it most certainly does not. And LRAU is not the same as compulsory purchase it gives Town Halls powers of expropriation – ie taking it off you. If they do compensate you at all it is minimal – I know of one case where a friend was comensated €0.1/M – even the most rustic agricultural land here has a value of €8 per m
To add salt to the wounds they then charge urbanisation fees which can amount to hundreds of thousands of euros.
Their answer to this isthat the land left is worth considerably more than before and so this comensates for the fees to be paid.
However one urbanisation in Benissa has left owners destitute and in some cases with not even enugh to pay their mortgages off. one lady had 1000m they took 700M off her. The value of the land was about 750€ perM and she was then presented with an urbanisation bill of €200,000. You do the maths here – that gives her a plot of land worth €225,000 – but she needa a minimum of 800m to KEEP her house. She would have to pay an additional €375,000 to buy back the land she lost inorder to keep her hosue.
So now she will if she is lucky be left with €25,000 and nothing else. However thats if she can find a buyer for her land – who would buy 300M when you cant build on it. More likely a developer would buy it off her but would certainly not pay the full price because he would know she would never be able to sell it to anyone else.
And this is potentially what could happen in Andalucia. All it takes is a few unscrupulous developers and it appears there are more in CdS than in CB, and some corrupt Town Halls – need I say more.
There are cases going before the European Courts of Human Rights but as with anything European it is a slow old beast. The wheels do not move fast in Europe.
The Spanish Giovernment have passed it off as a regional thing because they dont want to get involved. But both laws are illegal according to Spanish Constitution (article 33 which gives owners the right to own property) and the European Law as well as the Geneva conventionon human rights.
We are not talking about the white farmers in Zimbabwe here – this is supposed to be a civilised country. The EU have threatened sanctions against Spain unless they govt do somethng about the abuses – and they are pretty serious about it. The Spanish Giovernment have been incredible in their reaction – a big fat zero – it is a Valencia problem.
It will soon be very much more than a Valencia problem. The New Golf Law makes it very attractive for everyone – imagine being able to say to land owners – we need your land to build a golf course – and there is nothing you can do about it.
Anyway I will get off my high horse on this subject – it is emotive because I have seen first hand the effects on poeples lives and canonly imagine what problems it must bring.
So if anyone out there is an estate agent or developer then for goodness sakes do not EVER sell anyone a plot of rustic land. That is the nub of the problem.
Regards
Vince
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Vince, I’ve been going on for ages about the fact that Spain have too much to lose to upset the ‘property’ apple cart and you are quite right in what you say. The property taxes and revenues are enormous.
Even if you contact any of their Government offices, any of their Embassy/Consulate offices, their Chamber of Commerce about this situation they completely ignore you and the issues. It is my opinion only that they are as guilty (I’d like to say something stronger) as the dodgy agents, developers and lawyers.
They just won’t weed out the crooks!
The situation is likely to continue until someone ‘honest’ in their system speaks up.
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Interesting letter in the S. Times yesterday about a couple who have owned a villa for 25 years, overlooking a fairway on a golf course on the C. del Sol, unobstructed views for life they thought.
Now the new owners of the golf course are re-styling the course and have applied for permit to build right in front of them on the fairway they overlook.
The couple can’t do anything to stop it, and they have to sell quickly or see the value of their villa drop dramatically.
In my opinion only, Spain’s property laws appear to be corrupt to allow these situations to occur, no-one is safe it seems from development, loss of views, overbuild, etc etc, and certain agents will always hide these facts.
Virtually all the coastal strip for a couple of miles or more inland is being ruined by urbanisations, cranes, noise pollution, lack of water supplies and the huge property bubble will surely burst big time as people shy away from the mess.
What are they doing to their landscape, all in the name of financial gain and greed?
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Hello all. We just bought an apartment recently near Estepona and I had heard lots of scare stories too so was a bit nervous. As far as commission is concerned we just came right out and asked our agent, after all, we might need to sell our house one day and wanted to know what to expect to pay. Although it’s the vendor who pays the commission this is of course added on to the price of the house so really it’s the buyer who is ‘stung’. Our agent charged 5%, which I thought was quite a lot, but I have to say they really earned their money and I suppose that’s the difference. There are agents out there who charge 5% (which seems to be the minimum) and who really do work for it. Our agent organised absolutely everything for us and we didn’t have to worry about a thing which made a huge difference. They also did so many extra things (spent two whole days shopping with me for example!). In my opininion, if you get excellent, personalised service, you don’t mind paying for that.
By the way, the agent is . It’s a small company but they really look after you and we had a very positive experience and have a lovely new house!
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Opps, sorry! If anyone would like details of the agent who looked after us you can email me: stephaniemildenhall@yahoo.co.uk. Trying to find a reliable agent is not an easy thing! when you do find someone who isn’t trying to rip you off and will give you good service they are worth recommending!
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