[Vicki]

Hi,

I have a question that I’m hoping someone can answer!

I am in the final stages of completing on a property near Murcia, which was bought off-plan with an agreement a year ago that CAM bank would provide a mortgage of 80%. I have read through some of the posts here regarding CAM banks change of policy to only offer 70% now to non-residents which backs up the conversation I have just had with my agent in Spain about their reasons for this which is to do with losing money on repossessed homes on people who default on their mortgages.

After pushing CAM Bank to honour their 80% agreement with me which apparently they said yes to, they have now come back with a lower valuation than expected which has effectively under-valued the property in the region of 7-10k euros. Which I gather is their tactic of saying yes to 80%, but in reality offering closer to the 70% (I suppose its @ the 75% mark). So I have been asked to make up the difference – fortunately I have the money in the bank, but I am concerned over the implications of the value of the property.

If I accept the banks valuation at 80% does this mean I am buying a property that is not worth what I agreed to pay for it?
Or is it the case that the bank valuation does not reflect the true market value of the property, as I have had happen to property I owned in the UK?

This is a reputable developer and builder, in a good location on the Mar Menor( I know we cannot mention names here) and I am confident that I have not overpaid for the property and that it is a good investment.

Does anyone have any advice? I have advised the agent that I may well consider a switch to another lender at 70% as I’m quite hacked off with the bank, and also to find an independant valuer to value the property at market value for my own peace of mind.

But I am concerned that if I accept the bank’s valuation at the 80% level I could somehow compromise myself financially if I wanted to sell the property, or use the equity in the property in the future.

TIA, hope this makes sense…..

Vicki

[Anonymous]

I think bank valuatioins are often quite subjective
If all the properties are sold in your development and at simlliar prices to yours I would challenge the valuation it can’t so any harm (use info on sale prices from devloper if they will help)
Valuations are usually based on a willing buyer and willing seller > if there is lots of evidence you may be able to push up the valuation of if not at least give youreslf peace of mind on the value of your investment>
All the above is based on my knowledge of UK market
It could be as you say bank not comfortable at 80% in current market and therefore being ultra cautious

[Anonymous]

Hi Vicki

A couple of things to consider, does the developer have an existing mortgage in place, if he does it may be worth considering having the mortgage transfered to you it will save circa 1% as an arrangement fee.

If you are not happy with CAM then shop around the banks are still keen for business and you will propably find better terms.

Sorry but to my knowledge the banks do not accept independant valuations, there are a handful of companies that carry out valuations for all the banks, each having their prefered companies.

I know you may be ticked of with CAM but consider the whole picture, apart from the valuation issue are the other terms competetive, consider arangement fees, rates etc. and remember another bank will probably ask you to pay for a new valuation.

Jim

[Fuengi (Andrew)]

Hi Vicky.
If your not happy with the valuation, you could always try another bank. Take the valuation with you and tell the other bank that you require a valuation of X amount. See what they say.

Although i would take the valuation with a pinch of salt(different companies can give different valuations). Get the bank to explain to you why it was valued at said amount.
In my opinion the valuation should always be higher than the selling price. They take into account square meterage, layout, amount of rooms/bathrooms, communities gardens/pools, views, whether theres a lift, etc…

A story
When i bought my property I paid 200.000€. I needed the full 80% for the mortgage, which was not a problem being a resident. Anyway i went first to Bank1. They arranged a valuation, which they arranged, delt with, etc..
the property was valued at 207.000€.
As my funds were limited, i went for the expense of getting a a second valuation with bank2. I asked to be present for the valuation. The bloke came round, showed him the property. Asked him if he knew the area (yes very popular with spanish), did he notice the huge new miramar shopping centre on the other side of the motorway, the new stripmall, the new corte ingles being built, had he read about the Mijas townhall master plan, the commercial parks they were going to build nearby, etc…
He was very impressed and i got a valuation of 242.000€ 8) , which meant at 80% i got 193.000€. only had to put in 7.000€ plus taxes.

[Anonymous]

Hi Vicky

the bank have only one motive in mind (when undertaking the valuation of a asset that they are going to secure a debt against) that is to have a performing loan book as opposed to bad debts. Due to many factors the Spanish property market looks very different today, as opposed to 18 months ago. The bank knows prices in Spain are stagnant and falling, it is simply building in more safety marging into the deal, and by definition transferring more risk to you.

When looking at a realistic market value (in any market where there’s a lot of mulit phase, off plan, new build going on e.g. Florida, Spain Uk city centre luxury 2 bed BTL investor appartments) it’s folly to compare what someone paid a year ago (say phase 1) with what the developer is currently marketing like for like properties at via their sales machine.

To get a realistic ‘market value’ check what ‘like for like’ re-sale properties are achiveing on the open market (as opposed to asking).

Don’t forget prioperties in Spain are expensive to buy, expensive to run and expensive and sometimes troublesome to sell. Basicaly you need to make 20% equity inflation just to break even. This among other reasons is why so many Brits not only catch a cold but get Spanish Flu.

Good luck and as the others advise shop arround.

Pablo Silver or Lead?

[Anonymous]

Hi Vicky

Just to add salt to the wounds not only can different bans get different valuations from different companies – the same valuer can give different valuations for the bank. I had a situation recently where an owner was being repossessed and dropped her price from 280,000 to 190,000. The buyer used their own bank to get a mortgage and they valued at 197,000. However they were not happy with this so went to another bank who used the same company and the SAME VALUER – who came back with a valuation of 267,000 – in the space of two weeks the value had shot up by some 29%.

When questioned the valuer said the discrepancy was down to the banks policies – ie one was very tight the other one fairly loose.

However also bear in mind that 18 months ago banks were pretty much free, now they have to send valuations to Madrid for approval (which is why they take 2 weeks now rather than 2 days) in most cases. If the value is outside a certain band for a particular area they will reduce the valuation.

Also it is impossible to value a property that isn’t built and banks will not do it. They can only value what is already there and don’t take into account what will be there in the future. Therefore they may well have agreed to give an 80% mortgage at the time based on the expected value, but now it is built it may not be quite what was expected. For example if there are lots of properties around unsold – this will affect the perception of the value.

Finally valuations are very subjective – you can very easily get 10 people to value the house and they will give ten different valuations. A lot of valuers don’t even come from the area – I have frequently seen valuers from valencia valuing a property in Oliva – an hour away – and they bring lots of agents details to guide him to the value. Scary or what?

If you aren’t happy with the valuation you have you are free to use any bank you wish, And as Jim rightly pointed out many banks still want your business and will offer good LTV mortgages – Cajamar for example offer upto 95% depending on circumstances and as far as I can remember they offer this rate to foreigners and residents alike – though I am sure someone will put me right on that score.

So there are options.

Regards

Vince

[Vicki]

Thanks everyone for the replies. I feel somewhat calmer and reassured having had a few days to mull this over.

At the end of the day, I’m buying a holiday home rather than a pure investment property and it will be a long while before I would need / want to sell this property to realise any equity in it.

I’m also well in favour of borrowing less from the bank and clearing the mortgage quickly so I’ve come the the conclusion that whilst I think the bank’s tactics are annoying they are the ones who will lose out on the interest.

I’m not happy though with the way the bank has acted though and this is my main objection now in that I’m not sure I want to deal with anyone I don’t trust.

However, my advisor over there has said that when they present the final figures if we don’t like it he has made investigations with another bank already just in case soI’ll see when I speak to him in a few days.

Cajamar is the bank my IFA over here used, so I might investigate them myself.

Once again, thanks for the advice.

Vicki

[Anonymous]

@vbtudor wrote:

When questioned the valuer said the discrepancy was down to the banks policies – ie one was very tight the other one fairly loose.

Your comment on the valuation policies followed by individual banks has intrigued me, as this is an issue I will be confronting very soon.

Does anyone have any experience of dealing with Banco Halifax in this respect i.e. do they operate a ‘tight’ or ‘loose’ policy on valuations?

Thanks for any advice you can give.

Regards,

Gary.

[Anonymous]

Sorry Gary I cant say I have ever dealt with them. Usually you will findthat the bigger banks tend to be more conservative and the cajas or building societies are a bit more liberal in their attitudes.

I know up here for example Banesto ar every tight in their LTV ratio – 60% to foreigners, and pretty tight on their valuations, Sol bank tend to be tight also whereas Bankinter are a bit liberal.

However it also depends very much on the bank director as each branch and area have different policies and see other branches of the same bank as competitors – so it could be that one branch is loose and antoher one tight. I know this doesnt help you but there it is.

Regards

Vince

[Anonymous]

Check out Barclays at Sotogrande.

Their mortgage rate is about the most competative around. The fees are in line with other lenders (and when pushed I managed to get them to negotiate downwards)
The manager seemed very amenable and they lend 70% to non residents.

I would definitely check out their latest offers at
http://www.mortgagefornonresidents.barclays.es/

Best of luck

Michael

[Author]

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