Four Property-Buying Rules & How typical Purchase Starts
I’m Mark Carr, the owner of Spain Advisors. I’m an attorney from California and a long-term resident of Barcelona. I’ve been helping non-Spaniards find and purchase property in the Barcelona area for seven years. Clients hire me to help find a property, make an offer, negotiate the price, and manage the purchase. Below are four basic rules, then an example of how a typical property purchase in Barcelona begins.
Four Basic Property-Buying Rules Rules
- Talk to your bank about a mortgage before you start visiting properties. It might take some time and agents seldom wait. Once you find the property you’ll have to move fast.
- The agent has a very limited duty to reveal property defects. Some follow a “don’t ask, don’t tell” policy. You have to ask a lot of questions and hire an architect inspection if in doubt.
- Play the reluctant buyer. If the agent knows you want the property, they probably won’t negotiate. Thus, it’s best not to discuss price with the agent until you have the property documents and are aware of all defects.
- Don’t sign a contract, or any agency document, unless you fully understand it. Acting without full knowledge is the main cause of buyer mistakes. Agents are good at applying pressure.
How a typical property purchase in Barcelona begins
My client Ed calls me. “Mark, I just saw the perfect flat and want to make an offer. The agent says a lot of buyers are interested. I’m in her office now. Can you come?”
“OK. But don’t sign anything or say anything positive. Play the reluctant buyer, if it’s not too late.” (Sometimes it is).
I’m at the agent’s office and speak to Ed in private.
“Tell me about the property.” “It’s on a quiet street, nice layout, near the children’s school. I love it. Can you help me close? I’m tired of looking.”
“Did you say any of this to the agent?” I ask. “Well, I said I liked it.”
“What’s the price?” “300,000€,” I explain that it will cost about 335,000€ with the 10% sales tax, legal and closing fees. Ed says he can afford it with a mortgage.
“What would you like to offer?” “I think 285,000€ is fair.”
“OK, BUT If another buyer offers the asking price, 300k€, you’ll lose it. The agent will not notify you or allow you to match the offer. If another buyer offers more than 285k€ but less than 300k€, they will probably give you a chance to offer more. It’s hard to say.”
Now I’m talking to the agent in the flat: “Is the price negotiable? “Depends. What’s your offer?” I’m not sure yet. I have to do some research.” “OK, but you’ll have to put your offer in writing on a reserve contract and pay a 1% deposit of 3,000€.”
“What if the seller rejects the offer?” “Then we’ll return the deposit.”
“What if the seller accepts the offer?” “Then we sign the arras contract within seven days, and the buyer pays a non-refundable deposit of 10% of the purchase price.”
“What if my client decides not to sign the arras contract?” “Then they lose the 1% deposit.”
I tell Ed, and he says, “So I pay 3,000€ with the offer. That’s not bad. “Yes, and if they accept your offer, you have seven days to pay another 27,000€. It’s not refundable. If you don’t buy the property, you lose it. Do you have your money ready?” “Yes, the bank just needs to assess the property.”
(This can be a deal killer. If the buyer does not have the mortgage ready, the agent might sell it to someone else).
Before making an offer, I compare the flat’s price to similar apartments on the market, what other clients paid, and other methods we’ve developed.
Then I conduct due diligence: collect property documents, request an architect inspection, if needed, etc. Next, I amend the reserve to ensure the flat is blocked in my client’s name while we wait for the owner to respond to the offer. I also write that the deal is off, and the deposit is returned if my due diligence uncovers any property defect.
After that, I advise Ed on an offer, and we put it on the reserve agreement. If I’m satisfied with the conditions in the reserve, I recommend Ed to sign and pay the deposit. It usually takes one hour to one week to get a response from the owner. Meanwhile, we ask the bank to assess the property as soon as possible.
As you can see, correctly negotiating and drafting the reserve is very important to ensure you’re protected and the purchase goes smoothly. Thanks for reading. If you have any questions, let me know in the contact form.