February 26, 2007 at 4:21 pm #52677
Hi everyone, thought I’d share these gems with you!!
I am helping a friend here look for a flat to buy and on Saturday we went to one of the larger estate agents here and had a fairly bizzare conversation.
My friend was interested in an attic apartment and whilst the estate agent was showing us the details i noticed the comment ’70m, pero segun escitura 50′ (70m but according to the escitura 50m). We then questioned the estate agent about this who carefully explained that it was quite normal for the escitura and actual details to disagree, especially with the catastral plan and it didn’t matter, they probably hadn’t counted all the terrace on the escitura.
Having followed the forum, I remembered someone else having real problems with a purchase like this as the bank would only mortgage the amount shown on the escitura and not the physical amount brought, and I think it had ended up that the terrace was illegal.
So we then questioned them about whether this would effect getting a mortgage…of course not, no problems, it was quite normal for houses not to even have an escitura so for them to differ from reality was nothing. The slightly bizzare thing was that the estate agent then went on to say that the/any sellers would probably under declare the value on the escitura, to which point my friend pointed out it was fraud and the estate agent agreed but insisted it would happen!!
Exactly how is the Spanish government trying to stop this type of fraud? Does the estate agent face any kind of penalty if properties are found to be under declared? Maybe if not, this is the change that is needed!!
We are still going to see the property, as my friend wants to, but with big warning alerts flashing…hopefully its a dump!!
Anyway, good luck to everyone working out Spanish law !! And thank you to everyone for sharing your stories and stopping others meeting the same problems you had.
February 26, 2007 at 5:38 pm #69679
Well this is a conoudrum and from an agents point of view it is difficult. Heres a few pointers for you
1. It is not obligatory to have a proeprty registered at notary – you can still buy off a compra venta (like a private document ie car logbook) and its only if you want to register it or have to take a mortgage that the notary is involved.
2. Very common to have less metres on the escritura than real. You can actually still get finance on the whole lot. We have gone through this with a client and basically the valuer gives 2 values – one based on escritura and the other based on real. Then at notary the extra metres are put on., the mortgage is raised and everything is fine – there is a cost and either the vendor pays or it is split between you. This will be based on the extras being added legally, so ensure that is correct otherwise you get the problems later down the line.
3. The escritura price is decided between both parties and the agent is best to stay out of it. It is illegal but still very common to do this. Even the actual banks know about the underdeclaration and any excess on the mortgage amount is now put down as furnishings!
4. The majority of spanish sellers underdeclared in the first place so dont want to be caught. The problem comes in if you sell on as you will end up paying the capital gains!
5. The Notaries now have to ensure all payments are registered and shown and explained but in reality if cash has passed hands theres really no way of knowing about it.
Hope this helps and good luck with it
February 26, 2007 at 9:58 pm #69686
I had exactly the same experience when I bought my house a couple of years ago.
Just few comments on Inez answer:
1) In Spain what gives of proof ownership is the inscription in the land register. In other words you have to register it (unless you want to live dangerously).
2) If you sign a private contract, by law, you have 30 days to pay the transfer tax. Not doing that will incur a fine.
3) You could theoretically do without the notary… but practically 300Euro notary fees will prevents many headaches in the future.
4) Putting the extra square meters at the notary is not as straightforward as it looks You will need a certified report from an architect.
5) Most banks will give the mortgage under the condition that the size of the property is fixed by the vendor in the land register. This prior of any transaction.
My piece of advice is: do everything strictly according to the law. The day you will face problem or will you have to pay a fine… the real estate agent will be already very far away.
February 27, 2007 at 9:48 am #69687
Although “black money” does still happen, it is nowhere near what was happening years ago. In previous years up to a mind boggling 70% of the property value could be paid in cash and only 30% declared on the escritura. In todays market the vendor will be lucky to get 5% of the property value in cash as no buyers now want to pay in cash.
Very Simple Black Money explanation:
What happens is you buy a property for 100 €, you declare 50 € and pay 50 € in cash. You pay 10% purchase costs so you end up paying 5 € instead of 10 €. But when you come to sell it, if you sell it at 150 € your declared capital gains tax (CGT) is based on 100 € gains instead of the actual 50 € gains.
At 18% CGT you end up paying 18 € instead of 9 €
So in the long run you save some € when you buy with black money but end up paying a lot more € than you saved when you sell. All this while running the risk of getting caught doing something illegal. Just doesn’t make much sense and buyers are starting to catch on. Unfortunately many paid the hefty black money when buying and now literally can’t afford to sell and declare the full amount because they would lose money.
And while it was and is still going on a lot, at least on the CDS it is frowned on and the more serious agents will refuse to have anything to do with it.
February 28, 2007 at 8:06 pm #69719
Am I right that under declaration on the escritura is not really an issue for new builds or off plan, just resales?
March 1, 2007 at 9:58 am #69724
Black money is illegal and the benefits are short-term.
Having said that I will add that if you intend buying property from a Spanish seller then he will almost certainly expect black money – in the same unspoken way that you expect him to clean the property before giving you the keys.
Asserting your intention to buy with no black money will be felt as almost a physical aggression. This is especially true for older Spaniards.
Of course, this is wrong. But this is the way it is – at least, in Valencia, and I suspect, all of Spain.
Your best defence is to plead absolute poverty and claim that the bank is financing all of your purchase and that everything must be registered. This defence often works with the more naive sellers – although you may have to suffer looks of pity and compassion when signing at the notary.
March 1, 2007 at 11:37 am #69729
And yes developers selling off plans have been known to request black money. Very naughty since they also pocket the IVA.
I had clients selling who found this out a few years after owning the property that they had paid over iva and the full price wasntdeclared! They had the capital gains to pay on the profit!
March 2, 2007 at 11:01 am #69743
I’m maybe naive, but I prefer paying my holiday home without going to the dark side. As a matter of fact I already politely declined the offers of several estate agents because the transaction was involving black money… If there is no other way… I wont buy a home, as simple as that.
March 2, 2007 at 11:08 am #69744
Good for you! Most owners prefer to deal legally and with all the clamp downs its the only way to go!
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