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5 Common Mistakes When Buying Overseas Property Martin Roberts- TV Property Expert, Author and presenter of ‘Homes under the Hammer’ offers advice and guidance on all things property related As we battle our way through the ravages of winter, now is the time when many people turn their mind to summer holidays. For some people, this means visiting a holiday home abroad and whilst the euphoric rise in the number of people purchasing property abroad that we were experiencing a few years ago has waned considerably in the aftermath of the credit crunch, that's not to say that it is still an appealing venture for many UK investors wanting to have a holiday home abroad. However, following numerous 'scandals' and plenty of stories of unsuspecting buyers coming unstuck, the overseas property buyer of 2010 is a far more diligent animal. Forewarned is forearmed - protect your purchase by avoiding these common buyer mistakes. 1. Not using an independent lawyer This has to be number one on the list! Your lawyer is an invaluable asset in the buying process and it is important to enlist one that is on YOUR side. They will not only act as facilitator, but often as an interpreter between sellers, buyers, banks, agents and notary offices. It is important therefore that they are completely independent from your developer or agent, with no financial interest in your property purchase. Many people have made the mistake of thinking that the notary included in their purchase cost is a suitable substitute for hiring a lawyer. But notaries perform a very different role than that of a lawyer. They will be working for the government and will legally oversee the property transaction from start to finish to ensure that everything is done within the state's guidelines - they won't warn you about unfair clauses in the contract or advise you in any way. Don't be pushed in to appointing the 'chosen' lawyer of the developer or agent. Whilst there is the argument that this lawyer may already be familiar with the property, it is unlikely that they will be on your side completely. Having an independent lawyer not only provides you with legally binding security, it also ensures that your best interests are being protected. 2. Signing Contracts too Early You may come under pressure to sign the Preliminary Contract in respect of your purchase - particularly if you are buying a new build property from a developer who may have strict rules on the amount of time you are allowed between expressing interest in a property (and effectively taking it off the market) and signing contracts. Don't confuse the Preliminary Contract with the reservation agreement. This is something that you will be asked to sign early on in the process when you want to put your name down against a particular property. It is quite common for the Reservation Agreement to be signed whilst still in the UK or during an Inspection Trip and it is there to provide assurance to the developer that you are seriously interested in the property. It is usual to pay a holding deposit at the time of signing the Reservation Agreement (typically around £2000) but you should be clear about under what conditions this deposit may be refundable - very often it isn't! When you sign the Preliminary Contract, you will usually pay the deposit (typically10% to 40%) and since you are at this point committed to buy, this is not returnable. You should always check the terms of any refund policy on the Reservation Agreement and only sign the Preliminary Contract once it has been thoroughly checked out by your independent lawyer. 3. Developer in Breach of Contract If the terms of your contract have been broken - for example, if your property is finished later than expected - then you may be entitled to compensation. However, even if you know the work will not be completed by the agreed date, you will have to wait until after this to make a claim. The amount of protection you have in this type of situation depends on the terms of your contract - and specifications in contracts can be quite vague. Make sure your lawyer checks through the contract thoroughly and that you understand the full implications of a breach in the contract before you sign it. Another scenario that British buyers have faced when buying abroad, is the developer actually going bankrupt before completing your property. If this happens, your course of action will depend on the type of guarantee stated in the contract. You should get your lawyer to check through contracts fully and any guarantees that they come with before you sign. 4. Unrealistic Budgeting Leveraging can be a great strategy in a rising market but it is important that you are aware of the risks and don't over-leverage your investment. Taking out a mortgage that is the limit of what you can afford could be dangerous if property prices fall. In this situation, you could end up in negative equity, or even lose your investment. Don't assume that if a mortgage is mentioned, that you will get it - lending criteria in other countries can be more restrictive than here in the UK. Buying a property abroad has numerous additional costs, which are easily forgotten by buyers when considering their budget. There are fees for agents, lawyers and notaries as well as purchase taxes which can add another 10- 15% onto the purchase price of the property. 5. Whose House Is It? With agents and multiple companies involved in overseas house sales, it can be a challenge to work out who the 'seller' actually is. Agents can often seem like they are selling a property, when in fact they are doing so for a third party. Due to this, unsuspecting buyers could end up paying for a property that ultimately they don't own. This situation could be avoided by getting a lawyer to check through the paperwork and contract before you sign. If the seller doesn't in fact own the property or the land, a lawyer can inform you of this and the reasons for it. For more information about buying abroad contact the Association of Independent Property Professionals (www.AIPP.org.uk) If you have a problem or confusion from the property world, Email your questions to askmartin@martinroberts.co.uk . Individual questions may not be answered personally, but could appear in this column To find out more about Martin Roberts and for property advice visit www.martinroberts.co.uk |
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