How to avoid Overpaying when you buy Real Estate in Spain...

Many foreigners pay more than is necessary when buying property and property related services in Spain. Being on unfamiliar ground they find it difficult to judge if they are being charged reasonable prices. This in turn motivates companies to exploit the opportunity. So do yourself a favour and swot up on the main ways you risk paying more than is necessary.  Read on ...

Prices for Spanish property are at historical highs after the last few years of increases (for more information see the latest Spanish property market report). However that doesn't justify all 'high' prices, and the asking price of any property should be evaluated in terms of its market context and in comparison to other similar properties in the area (referred to as 'comparables').
Many properties for sale to foreigners in Spain are actually overpriced in terms of their market context and comparables. This is especially true of the resale market where individual sellers largely decide the asking price, but can also be true of new developments. Estate agents often allow sellers to 'name their price' rather than give them a professional evaluation of the true market price.
There are various reasons why a property might be overpriced. Vendors sometimes set an unrealistically high asking price in the hope that

a) someone might actually pay it and b) that it will give them a stronger negotiating position at the start and ensure that final transaction price is higher than it would have been had they started with a lower asking price. Another reason is because some sellers have unrealistic expectations as to what their property is actually worth. A further reason is because agents and / or developers sometimes increase the price if they think that foreign buyers are and will remain 'ignorant' of market values. This is more likely in those cases when the agent 'controls' the entire visit of the buyer thus preventing them from finding out what comparable properties are worth.
To say that a property is overpriced is not the same as saying that it won't sell at that price. The great tragedy is that people do actually buy overpriced properties on a regular basis. This is bad for the overall market as word often gets around, driving up the expectations of sellers and reinforcing the suspicion that foreign buyers will pay any price.

So how do you avoid overpaying for a property in Spain?

1) Gain market insight
Do your research and look around. Try to get a feel for market prices in the area you are interested in. The internet is a useful tool for basic research but it is no substitute for going to visit different properties and talking to impartial people with a good understanding of the Spanish property market. Take notes of the key features (size, location, condition, views, price etc) of different properties and compare then in a table. No two properties are exactly alike, especially in the resale market, and there is no such thing as a mathematically-proven correct price. Nevertheless by doing your research and approaching it in a rational way you should be able to identify if a property is more or less correctly priced given its market context.

2) Use a good real estate agent in Spain
Spanish real estate agents spend their professional lives looking at properties and witnessing how much they sell for. If they are competent they should have a better idea than anyone else as to the fair market price for a property. If they have high professional and ethical standards they should help both buyer and seller agree on a fair market price (notwithstanding the fact that they are paid by the seller). It is crucial to use a good estate agent with high professional and ethical standards if you are to avoid overpaying or even more serious problems.

3) Take into consideration all factors
Even the price of the most basic goods such as commodities change frequently in response to many different factors. The same is true of property in Spain or anywhere for that matter. The price that the seller will agree to exchange at (rather than the initial asking price) could be influenced by many things that might not be obvious at first glance. The time of year, the length of time that the property has been on the market, local market conditions, political developments, the attractiveness of the property in comparison to comparables, the age and other personal circumstances of the seller (not always easy to find out), to name but a few. The more information you can find out about a property, its vendor, and the local market the greater your insight and hence negotiating power.

4) Don't be afraid of robust negotiations
In the Spanish real estate business German buyers are famous for demanding high quality construction and finishings and the Dutch are famous for being very tough negotiators when it comes to price. British buyers, on the other hand, are famous for not saying what they really think about a property and for kicking up remarkably little fuss about price. Needless to say in general the British pay more for Spanish property than the Dutch and don't get the quality that the Germans do. Unless you push for something you are unlikely to get it, so cast aside your traditional British reserve and negotiate hard. Having said that knowing how to negotiate skillfully is equally important and will produce the best results

© Mark Stucklin of Spanish Property Insight – Everything you need to know about Spanish property