We left off at that part of our continuing story about Janet and John when they decided to look around the local area having placed an offer on their first dream home in Spain.
They found a street café in a village just north of Gandia. John ordered refreshing drinks in his best Spanish, and they settled in their chairs as the thoughts and dreams jumbled in their heads. It had been a very long day and a state of confusion was certainly in the air. Janet was just starting to realise that John had actually bid on a Spanish Property! She had definitely wanted it and had even suggested he used his Amex card to secure a reserve with the owner. Now the logic began to creep back into her well ordered life as the Tonic and Gin seeped into her bloodstream and she became quite pleased with John. The latter was an unusual feeling, poor John. Her husband was not normally well known for making snap decisions and turning the tables on enthusiastic salesmen; but he had done it, he had made a counter offer which was serious enough to stop both the owner and the agent in their tracks.
“Where did that all come from” Janet asked John, John replied eagerly giving Janet details of a website he had been relying on for information where he had found so much useful information for buyers that he had now become an expert himself! He explained that the website was one of many he had looked at from Home but this was his real favourite as it appeared to act as an independent source of information and had formed its agents all over Europe into an Association. In fact Jose Miguel had also been introduced by the same website and was an accredited agent to their association. He had one regret, and that was he had found the site late and could have saved them both a lot of problems. However here they were, the potential owners of their place in the sun.
“How will we afford it John” the Villa was 55K over their original 200K budget. John had offered 225K. “Well I can probably arrange a top up mortgage with a local Spanish bank”.
With the amount of savings John had allocated any reputable local lender would be happy to offer them a up to 80% of the bank valuation which allowing for valuers to be miserable in their valuations for bank purposes, then as a rule of thumb Janet and John could expect a mortgage for up to 50% of their purchase price. John was now considering the added costs which he had been advised could be an additional 10% on top of the purchase price. Then there were the improvements he might undertake to the property. Furniture to be bought, a re-wiring project might be necessary and moving costs. As his Gin seeped quietly into his system he calculated that an additional 75K mortgage would be comfortable and affordable at the low rate he could achieve in Spain. Now they felt more relaxed.
Janet and John drove around their potential home village and surrounding environs and discovered to their delight a Doctor’s surgery, a pharmacy a railway station and a sign for a local hospital. So far so good.
The next morning the agent called. Jose Miguel had secured an agreement with the owner and 225K would be acceptable. Janet and John were delighted and a big hug ensued. Jose Miguel offered the services of a local English speaking solicitor and asked John to come into the office as soon as possible with the 6000 reserve to finally clinch the deal. Aah! Here comes that word Reserve again.
John consulted his favourite website where he had seen previously that there were Property Pals to help and guide you through the potentially painful learning curve of purchasing overseas property. He clicked through to the Pal page and sent an email to the local Pal in Gandia.
Dear Andy, this is my situation…….what shall I do now?
Janet and John went to see the solicitor who acted independently from a different office to the agent. He spelt out all the legal implications and costs that were involved and promised to look into the legality of the property as soon as possible. John was advised to apply for his NIE number (Spanish National Insurance identity number) and to go and open a bank account. The solicitor Raphael said he was happy to help in that respect but John wisely decided to paddle his own canoe for a while.
When he returned to the Hotel after an excellent lunch he was delighted to have received an answer from Andy his local Property Pal. Andy confirmed that the agent was accredited to the MyPropertyPal Association of Overseas Property Agents and that the solicitor he had recommended was known to Andy and could be trusted. Phew! What a relief, Andy also mentioned that he could give the reserve to the solicitor who would confirm to the agent that he had received it and subject to the searches being successfully carried out it would be released to the agent or solicitor acting for the owner. In this way Janet and John would be acting in accordance with acceptable Spanish process and could secure their property. Once the deposit had been paid, Andy had said owners rarely de-faulted on the deal done as by law they would have to return a double deposit to the purchaser as compensation!
Janet and John decided to go back to the property for a long hard look in the cooler light of the next morning.
All in all another good day for our intrepid pair until the phone rang whilst John was in the shower. Janet took the call. When John came out of the shower he found a crestfallen Janet. What was the problem? Apparently the agent had rung to confirm that the owner needed to be paid 150K in hard cash (Under the bed money) and this needed to be brought to the Notary’s office on the completion date. How could they arrange this? Did they have the money? Was this the fly in the ointment? Did John have the answer to this problem or could Andy help?
Well, what Janet did not know was that this is fairly normal in many Mediterranean countries where owners seek to mitigate capital gains tax. However there are ways for buyers to solve the associated problems of paying in part cash.
Read part 5 and find out how Janet and John cope with this new development