WHENEVER a property is bought or sold, sooner or later price becomes a pretty significant part of the equation. This week, we’ll take a look at how valuations are calculated, who needs them, and how they can help you.
After a decade in business, I can honestly say (and you don’t hear an estate agent say, and mean, that often) the old dictum is true: every property sells. Even places I never imagined would get a visit, find a new owner, eventually. Even at the very top end of the market, where money is no subject, let alone an object, for debate what really makes a property sell is the right price.
Knowing the correct answer to the inevitable question of ‘how much?’ is not only important to buyers and sellers, but also to tax authorities that demand a share of the sale, lawyers dealing with probate and matrimonial disputes, and, first and foremost, the financial institutions that often put up – for a price of their own – much of the cash.
“Banks require, in effect, a ‘risk assessment’ to provide an opinion on value and an overview of the property for lending purposes,” confirms Paul Gibson, a member of RICS (the Royal Institution of Chartered Surveyors) and one half of Gibson Gale Ltd., a Gibraltar-based valuation firm that has served clients on the Rock and across southern Spain for a decade and a half.
In Spain, Paul explains, the process involves:
- 1) Obtaining copies of the deeds, via a nota simple (information extract) or, preferably, escritura (public deeds), and the cadastral entry
- 2) Inspecting the property – “looking at location, type, and quality,” he says – including a full, measured survey of the building and, sometimes, the land
- 3) Comparing relevant sales and talking to reputable agents
- 4) Calculating value and, if required, insurable sums via build costs; 5) producing a report, including any photography and other documentation
“The basis of valuation is almost always comparison,” Paul point out. “We compare recent sales of similar properties and others for sale, often on a square-metre basis. Where there are no comparable sales or a property is unique, we use our experience and knowledge, [so it is] more subjective. A valuation only reflects conditions on a particular date, which is why lenders arrange updates to reassess the value of their security.”
Juan Áviles, a bank manager for 32 years on the Costa del Sol and now an independent mortgage advisor at his Paseo de las Limas Gestores, reckons the market has undergone huge changes because of ‘la crisis’, especially in the last three to four years. Previously, some risk-taking savings banks lent more than the most optimistic valuations, thinking the bubble would never burst. It did and so did they. Since then, those that survived “simply closed the tap,” he says.
Now, Juan says, banks typically offer loans of 50-60% of current market values, rather than 80%-plus of speculative future gains some offered before, and demand to see exactly how much is changing hands on the escritura before opening their purse strings.
Both experts agree that, sometimes, sellers are well-advised to invest in an independent valuation – “usually where an owner has been given a wide variation of values by local agents,” says Paul, or “because we all think our house is the best, but an official document is more reliable,” notes Juan – to determine the right price to put their property on the market, rather than relying on banks that act on behalf of the buyer.
Costs vary, depending on the size and value of the property in question, but start from as little as €250 and can climb “to well over €1,000 for larger units,” Paul says, adding that the process usually takes 3-4 days from instruction to the production of the valuation report. That’s not much to pay to know what your home is worth.
Adam Neale is completely wrong or just misleading people by saying ‘every property sells’ when referring to Spanish property. More estate agent tripe! he says he’s been in business 10 years, so he’s still a novice.
Regarding his 10 years in this messy business which has fooled so many unfortunate people, I know properties in Spain that have been on the market for over 10 years and despite falling in price by over 50% there are still no signs of selling.
Why is this? Because the properties I refer to are on well known developments which quite frankly are cr4p build that no-one should touch with a barge-pole and people know it.
Adam Neale is referred to as an ‘expert’, after 10 years in the business? Don’t make me laugh! Many agents became ‘expert’ in mis-selling and it’s starting again, this is all about their exorbitant commissions!
not quite the whole story .People buying individual properties inland,often unique in the property and situation value tyheir property in a different way .It is the seller who puts the property on the market at a certain price ,often ignoring the advice of the agent .Many properties have problems with registration of size and other things that can take months to sort out ,and agents work hard to make these sales go through Exorbitant ,i dont think so ,as we often work with buyers helping them far beyond the sale.
Of course Spanish agents’ commissions are exorbitant mary beker, they always have been, in the bad old days the now defunct Ocean Estates used to charge up to 30% on a sale meaning unfortunate buyers were immediately in negative equity whilst the wide sales boys and girls were swilling champagne in Banus having mugged off another poor victim.
You know very well you are talking from an unregulated property market, nothing has changed other than a mighty crash, a lot of naive buyers have been burned by agents.
BTW how much commission do you charge and do you tell buyers how much of that is included in the advertised price, or should I say you add on to your valuation price???
Any property anywhere is worth as much as someone is prepared to pay for it and I already mentioned in another thread a scumbag agent in Guadix who priced property at how much he thought a particular prospect would ,an exception, I don’t think so.
For those who don’t know a favourite trick of Spanish (I mean agents selling in Spain) agents is to ask “how much are you looking to spend” – none of your bloody business, lets’ see the prices of the properties on your books.
Congratulations to Paul and Adam for an accurate article. Angie is ill-informed, bitter and doesn’t even give her name so that we can know where she has gained all her experience. Professionals are working and thinking on property 24/7 and have to deal with real ethics and not just the casual random thought of know-it-alls. Agents have to get a good fee because of all the background and ‘hand holding’ work they do with the risk that months of time spent with potential buyers can be wasted when the buyer just decides not to buy after all or the seller decides not to sell. Building surveyors/valuers have saved many solicitors, agents and buyers from expensive mistakes as they not only look at the legal papers, but they also inspect the property, thus making sure that the papers’ description is accurate. Paul, there are thousands of properties out there so some price parameter has to be given. If you are not happy with agents, don’t use them. Go find the place by yourself. With the internet and a car its perfectly possible, but it means you’ll have to do all the work that they have already done.
Might have guessed you would resort to name calling whoever is posting under the name SurveySpain.com, you just cannot bear people telling some home truths. As for my experience of the coast, compared to Adam Neale,longer by 5-6 years. I stand by what I say in my 2 previous posts, and I’ve helped a lot of distressed buyers who’ve been misled by many agents, of whom lots fortunately went out of business, or re-invented themselves under other names, or started the Spanish mis-selling model in other countries.
Explain why should agents’ fees in Spain be much higher than in the UK where ‘hand holding’ is also done, I have 1st hand experience of the rip-off commission of old which sometimes amounted to 30%, and what’s more I will continue to tell potential buyers the truths, including the pitfalls.
Don’t forget buyers that with 11% purchase transaction costs, a 20-25% depreciation in exchange rate from those boom/bust days, and at least 5-7% selling costs, your bargain in the sun may have to rise over 20% just to break even should you need to sell.
Now, notice I haven’t said that the Surveyspain poster is ‘ill-informed and Bitter’that would be mean of me!
What is interesting is that both people trying to “justify” the fees Spanish agents charge use the time/service spent helping the buyer.
This illustrates the way in which agents often see buyers as their clients more so than the people that actually appoint them (the seller). Why not charge the buyers a fee if you are helping them so much rather than asking the vendors to pay for it!
Try selling privately and buying privately and just make sure you use a good quality lawyer and get a survey done. It would avoid much of the heartache that we see so regularly in southern Spain.
What is a “good quality” lawyer? Thousands of people used lawyers and ended up with retrospectively illegal and irregular homes. SurveySpain.com cannot definitively help you buy a legal property – the issue is far more complex and this entire article is just an advertorial. Calling someone “bitter” for telling the actual reality is very revealing indeed. I am so bored of Campbell Fergusons nonsense on here.
I had to laugh when Surveyspain said ‘Angie doesn’t even give her name’, hellooooo SurveySpain what don’t you understand about the name Angie? SurveySpain is a very strange name to christen a baby, unless of course you really are Campbell Ferguson or one of your team of three!!!
BTW valuations of Spanish property many of which were ludicrous and plain deception in order to obtain high LTV mortgages is what put Spanish property in the mess it is, and why many cannot even begin to market their properties because these mortgages are for more than their properties are valued Campbell Ferguson! Lol
keep on giving good advice. How many of these ‘agents’ have any knowledge at all of construction. Can they advise on the sub strata, so important to know what your house/apartment block has been built on – no I thought not.
What I’ve never understood is why in any country people who have zero knowledge of construction never bother to use the net to find out what the craic is, after all it is the biggest purchase most people will make in their lives.
With the i/net there is absolutely no reason to be uninformed and very easy to catch the clueless/could’nt care less agents out – so why does’nt everyone do this – don’t rely on others, they are only after your money – caveat emptor
Stuart, Some more advice for the unwary.
Have been informed that Viva the large chain agents on the CDS are selling in certain cases the same properties as other agents are. However, they are at a higher price which makes a nonsense of this article’s headline, ‘what should you pay for’ your property in Spain. Surveys might mean zilch in these cases.
This means that people could head to their larger yet more colourful offices thinking that they will be well advised, but end up paying considerably more than they should or could have. Is this because Viva charge more commission than the smaller agents?
It’s a nightmare out there for the unwary purchasers.
18 years experience of selling in spanish markets and i still am disgusted by what i see with agents, thankfully i dont have to deal with the fallout anymore.
I feel sorry for anyone venturing into the Spanish property market right now. Yes there is a lot more info’ on the internet than there used to be but most of it is MIS-information. As Fred said it is mainly advertorials. I doubt if there is an independent property website/forum, all are full of adverts from real estate agents or developers or people with vested interests pretending to be ordinary posters. Many of the properties they advertise are illegal. Read in between the lines on forums about the terrible problems owners are having, if the site owner hasn’t deleted them!
I would recommend having a survey before buying. Although you may never find anything suitable. 99% are poorly built.
Caveat emptor is all I have to say, and trust nobody, especially not the seller, agent, surveyor, lawyer, notary or even the bank manager (if you’re getting a mortgage).