Hi everyone – 12.5% seems a high price for commissions. I know 3 developers here in Oliva/Piles personally and we have some of their developments for sale. One of them is offering 1.5% on the houses in town as they operate on tight margins, however he also offers 5% on some new apartments he is building on the golf course – two different markets.
I have never come across a developer that offers 12.5% locally.
One of the developers has shown me his calculations for a development. (mainly because we worked with him from an early time before the project came to fruition) In total he makes 20% profit – but it is his own money he is putting down (not the banks) so at 5% commission an agent would be getting 25% of the money he earns – for absolutely no risk except a bit of marketing.
So on a typical small development of 15 apartments where he is putting up about 2.2 Million euros he would earn 540,000 in two years and out of this an agent at 5% would get 135,000 of this – without putting his money in.
No wonder he isn’t keen using agents. However he also doesn’t need to because most of his developments sell quickly to the Spanish (high quality good price and good location) so perhaps that is why the developers here don’t pay agents that much.
In general I think they pay about 3% – some pay more at 5-6% but then you have to sell a fair few of their property for this level. Once we were offered a property at 10% commission because it was the last one and he wanted it sold quickly, But most of the developers here are fairly small fry compared to CDS – a typical size development would be 15-50 apartments or about 15-25 townhouses.
So I cannot see how at 20% margin (and I am sure that isn’t too far out either as a typical plot of land is 90,000 -110,000 repercussion (that’s the price of the land per dwelling) and a typical build cost for a standard 2 bed apartment is 45,000 and a typical sales price for such an apartment would be 180-200,000, it doesn’t leave a huge amount of room for maneuver. How a developer could possibly make any money with 12.5% commissions He could get 7.5% if he stuck his money into a bank account on high interest. – and I cant believe that land in Costa Del Sol is so much cheaper than up here that the developer can build cheaper therefore being able to give better commissions to agents unless the land was bought many years ago.
As for paying up front – most developers pay a percentage up front – with some it is the percentage that the buyer pays – so if they pay 30% you get 30% of the commission.
Others will pay up front but with claw back if the client cancels.
One important though. If the deposits are taken before a license is issued then they are held in an escrow account which neither the developer or the buyer can touch until the licenses are in place.
I believe this is standard practice up here (I could be wrong and am sure someone will put me right on it) but I certainly wouldn’t advise anyone give their deposit direct to the developer until he had proof the licenses were in place.
Perhaps if people buying off plan insisted on this (and their is no risk to the developer unless he doesn’t get a license) it would certainly stop the practice that has caused so much bother before to a lot of people on this forum.
Escrow is an International safety mechanism used throughout the world when there are any doubts about either party – ie the sellers ability to complete and the buyers ability to pay. It provides the buyer with a guarantee if things go wrong and provides the seller with a guarantee if things go right. Win win I think they call that. So anyone looking in on this make sure you get your lawyer to insist on escrow.