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How to be smart when buying a property in Valencia

Sometimes the customs and habits of the Spanish property market are surprising when compared not only with other countries but also within Spain itself.

Obviously, real estate agents have to make a profit from the purchase in order to get paid for their services.  In most of Spain, the agents tend to charge a commission to the seller, which varies according to the price of the property and the agent himself… as the main reasons.

In Madrid, an agent can charge the seller between 3% and 5% depending on the property price, as is the case in some parts of the Costa del Sol where even some developers are ready to give away directly a 5% as long as they sell units quickly. In Cantabria always seems to be a 3%

But in Valencia city the usual process is to charge the seller and the buyer… Yes! Charging directly to the buyer! To you!!! This generates debate even among agents and professionals in Valencia. Some agents from other parts of Spain find just ridiculous to charge both: seller and buyer. In our case, please read the 10 COMMANDMENTS OF THE SPANISH BRICK about which property finder policy works for your interest as a buyer and investor

There is a variety of opinions. “In Madrid they charge all the commission to the seller but here in Valencia we are doing things differently and we share the charges between the seller and the buyer” says Nicolás from Casamagna Real Estate.

Four different scenarios and reactions

As an overseas client (buyer or investor) there are four scenarios to keep into account and the subsequent immediate reaction:

    1. When the agent tells the buyer that they will be charged and the buyers think: Are you going to charge me? I don’t want to go along with that!
    2. When the agent does not say anything at the beginning and after all the viewings the client places an offer and at the time of paying a deposit (with the “contrato de arras”) there is a charge of 3% to be paid. So the buyer first gets shock and after hesitates because he has already made up his mind with a property and now has to evaluate the unexpected charge.
    3. Accept that as a part of the game in Valencia.
    4. Try to shop arounf to find an agent who you do not have to pay directly any commission, which will narrow your options dramatically since a conventional agent is interested in selling properties from their own portfolio.

A real case that show how charges come from the buyer’s pocket

WE HAVE FOUND AN EXTREME REAL CASE (AND CONTROVERSIAL) to show to what extend all the fees could be paid with the buyer’s monies.

THIS WAS THE CASE: A good property passed from parents to 3 new owners as an inheritance. They wanted to sell straight away.  Legally, the new owners’ name was not changed in the title deed during the viewings.  Then, just a few days before the “exchange,” the name is legally (and finally) changed on the title deed, while at the same time, was paid with the deposit that the buyer paid with the reservation.  EVERYTHING COMES FROM THE BUYER’S POCKET (even the notary fee for the new title deed from parents to new “bridge” owners)… especially now that in Spain sellers are wearing thin.

Confronted points of view

FROM OUR POINT OF VIEW, even if the seller earns less (due to the prices crash) that he was expecting when considering to put the property in the market, the buyer (the “cash provider”) pay all the fees. The buyer always pays everything because the buyer is the one who comes with the money. The buyer also pays the whole agent fee even if the buyer charges the seller.

Do you think that the seller is paying money from his pocket even now? The seller probably will end up in negative equity because he is selling cheaper that when he bought… but in the transaction itself he is not really paying the agent fee at all because the payment is done with the money of the property purchase.

BUT NOT EVERYBODY SHARES OUR POINT OF VIEW. For Trini Martínez, freelancer property finder in Valencia working for The Spanish Brick, says, “in the “good” times, when prices were rising and there was a lot of cash, prices were made up in order to make the buyer pay everything at 100%. Now, the seller really needs to sell and he is sacrificing price (revenue) in order to get the buyer with him and get the transaction completed. From my point of view, the seller has now liabilities and expenses in the selling process”.

As a buyer, sometimes it is difficult to know what goes on

In reality, many times overseas buyers do not really know what is going on, especially because the truth about how much of the commission is coming from the seller is covered up from the agent and the extent to which the numbers have been made up could be also easily hidden.

A clever option is probably to pay to a professional who works for you rather than to pay a fee to someone who is also getting paid by the other side of the game.

In the end, a good deal is a good deal regardless of how much the commission to be paid is, as long as the deal is finally yours. That is why the best thing to do is accept what happens and try to make the agent and property finders work just for you.

 

THE SPANISHBRICK WORK with investors who pay a fee directly to us and we negotiated everything for them and, believe us, they know everything, how much they pay, they understand where the money goes in detail, the property status, etc.. Additionally, we believe that the best deals are always for the investors who want to work close to us rather than flying around many agents at the same time.

Other articles of interest

Should I pay a Finder Fee to source a bargain for me?

Dealing with distressed sellers II and Bargain Killers

Be clear about your goals before buying

4 thoughts on “How to be smart when buying a property in Valencia

  1. Andy Ward

    I dont think the statement “The buyer always pays everything because the buyer comes with the money” is true and here´s why:
    5 one bedroom apartments for sale on the same complex, similar positions, standards etc. All around the 80,000€ mark and none of them selling.
    Another owner wants to sell his so lists it at 75,000€ (thus having the best price and hopefully getting himself a sale.) When it sells he pays the agency 5% of whatever he sells for. In no way is the buyer contributing to this. He is forced to lower his price to 75k because his property will not sell higher than this. So he accepts the market price and pays the associated fees. Buyer pays the price (75,000€) plus notary fees and taxes. It shouldnt matter to them one jot what the owner has paid to the agency.

    Personally I am not convinced about charging buyers – there are too many agents arouns and nomally I´d expect a buyer to simply use an agent who does not charge.

    On the subject of commission, I have been offered well in excess of 5% on several properties this year if I can sell them as some people are desperate to sell. I also have the opposite where for some reason sellers think in this market, agents should be accepting less commission – contra to my own opinion!

    If as a seller, you can find an agent who has people who will buy your property then surely that is the perfect scenario for you and you should be happy to pay 5% and get a sale.

    Or you muck around trying to find an agent who charges less (3% for example) put your property with them and then comp`lain to them every month because they havent had any viewings because they probably arent doing very well (hence they think dropping commission to 3% will bring in some much needed business.)

    Take it from me – all the agents I know who are doing well right now will charge 5% and will not negotiate on this. They are the people you want marketing your property!

    Reply
    1. DT&K

      Hi Andy, thanks for the comment. At the end the seller pays his commission to the agent after the sale from the €75K that the buyers pays.

      What I do not think is good idea is to charge both: seller and buyer… specially in the current market climate. In Valencia the standard is to charge 3% each.

      In Spain the best and more extended model is to charge just the seller, but there are different sort of buyers and some of them are happy to pay a commission (an even a small upfront) as long as they get the property and/or the investment that they want at the right price. The point probably is which sort of service that the agent provides.

      I believe that the cool buyer is the one who goes with the agent who has the property that he wants in terms of price, location and specifications.

      5% sounds the right number… you are not the first one I have heard that from recently. Nevertheless, 5% on which amount?

      In Valencia it is getting more extended to set a flat fee of €3K for any under €100K property sold… and that is applicable to both seller and buyer.

      Interesting topic.

      Reply
  2. EusaConsult

    A global standard for commission fees is that the seller pays all fees to the broker or agent, simply because the seller signed and (exclusive) agreement with the broker/agent to do work for him, searching by all means a buyer for its property. The broker/agent has to make expenses such as advertising etc. to find buyers. All other combinations are basically illegal, except in those countries were the percentages of commissions and the way and by whom they are paid are established by a governmental decision. We notice that an average commission on the sales of housing is 3% and calculated within the sales price. Other figures are possible in function of the kind of property and the sales value, e.g. selling a house is not comparable with selling an hotel.
    The off-size fees of 6%, 10% or even more, payable by both seller and buyer is simply fraud.
    This reaction is based upon the sales of property, thus not including complementary works requested by one or other party.

    Reply
  3. Ane

    As somebody who had a property in Spain and now is looking to buy again, I would like to know exactly what money I will be paying out. In England one agrees a figure to sell your property so you know before you start the sale of your house.
    I thought Spain was trying to shift a lot of property. This is not encouraging buyers when you do not know exactly what you are going to pay on top of the selling price. With Spain’s property market taking such a crash with people not being able to pay there mortgages, surely it is of prime importance that one knows exactly what monies one is going to pay. Has Spain learn’t nothing !

    Reply

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