Once you have found the property you wish to purchase and you are ready to go ahead and buy a property in Tenerife, the process should go something like this:
- Hire an independent lawyer
- Speak to a mortgage broker
- Place a reservation fee
- Lawyer checks the property
- Pay a deposit
- Bank checks the property and valuation report
- Transfer funds to Tenerife for the purchase
- Completion day
Hiring an Independent lawyer/gestor for conveyance
It is essential that you hire an independent lawyer or a qualified gestor for your property conveyance. You need to do this pretty early on as you will need an independent third party to transfer your deposit to (we do not handle client deposits!) Many agents will offer to do the legal work for you in house, don´t let them! This is the single easiest way to allow a crooked agent to rip you off. If you know a good legal representative, then use them. If not we can provide you with a list of lawyers who have provided a good service to former clients at a reasonable price and who speak English. Not all lawyers are equal! Ensure you aren´t overpaying. 1,500€ is about the average cost for a lawyer. You also need to ask if this includes the transfer of utilities or if this is billed separately. Also check if the fee quoted includes tax.
Arranging a mortgage
If you require a mortgage then before you hand over any money, you should employ the services of Spanish mortgage broker who should be able to discuss with you what you are able to borrow and what documentation you will be required to produce. Be careful letting the agency do this, they will likely tell you the mortgage is sorted after only a day or two and then pressure you into handing money over. If the mortgage eventually turns out to be different from what you were promised it will be too late. Insist that you have written into a reservation contract and the deposit contract the amount you require a mortgage in order to purchase the property. Add a clause stipulating your money is refunded IN FULL should you not be successful with your mortgage application. We do this as a matter of course for all clients, many agencies unfortunately do not.
Placing a reservation fee
In order to show you are committed to purchasing and to take the property off the market a reservation fee is usually paid. This is paid to wither the agency or to your own lawyer. Reservation fees are generally non-refundable so best to try and negotiate this down as much as possible. 2,000€ would tell me a buyer is serious but some agents ask for more. Your decision but look after your own interest here, 2,000€ really is enough. A preliminary sales contract is drawn up at this point which details the price and terms and conditions of the sale. If you are taking a Spanish mortgage, again we STRONGLY recommend a clause is added to this contract to the effect that the deposit you are going to pay is subject to a satisfactory mortgage offer being made. If you cannot negotiate this point then you run a strong risk of losing a deposit should you not be able to obtain a mortgage. Once a reservation fee is paid you will usually have a set amount of time to pay a 10% deposit. It is up to you to negotiate as much time as you think you will need to transfer the money to your legal representative.
Your lawyer should now carry out all the necessary checks on the property title and order a “Nota Simple” which costs about 12€ and details any charges against the property (outstanding debts including mortgages etc.)
Paying a deposit
A deposit of 10% is the standard amount asked for a Tenerife Property purchase. However, it is not set in stone and is entirely up to the buyer and seller to negotiate what they are happy with. Most sellers will want 10% unless you have a good reason for paying less. A deposit must only ever be paid across to your legal representative. Never, ever pay this to an estate agent under any circumstances. At the point of paying a deposit you will agree a set amount of time within which you will go to the notary and complete your property purchase. If you are taking a mortgage this is why you need the mortgage clause detailed above: Spanish banks can move very slowly, there may be complications, some mortgages just take a long time. If you don´t have this clause you may find yourself under immense pressure to take a sub-standard mortgage with poor terms and high interest rate as you can no longer wait due to the deadline approaching. However, if your clause is in place you can invoke it but rather than taking your money back and canceling the deal, simply tell them to either give you more time or cancel the sale and return your money. This way you get as much time as is required to get yourself a good mortgage.
More property checks and mortgage offer
If you are taking a mortgage the bank will now carry out their own checks on the property once they have made you a mortgage offer. If they are happy to lend on the property they will order a valuation from an independent surveyor. The valuation report will be sent to the bank and so long as nothing has shown up on that report which they are not happy with (bad title, boundary disputes etc) then they will issue a final mortgage offer based on the valuation figure. This final mortgage offer will be sent to your lawyer and they will draw up a “provision of funds” detailing all the costs involved in the purchase, how much you have already paid, how much the mortgage will cover and any outstanding amount which will need transferred to your lawyer prior to completion.
Transfer funds to Tenerife
Once you have the provision of funds you should know exactly how much you need to send across to your lawyer for completion. We would recommend sending 2 or 3 months mortgage and community fee payments at the same time and always maintaining a surplus in your account for any account or card charges. It makes sense to employ the services of a Currency Specialist at this point who may be able to save you up to 4% on exchange rates and fees. We use and highly recommend Currencies Index
On the day of signing, everyone required to attend will meet at the notary public. If there is a mortgage on the property it will be canceled or transferred to the buyer (a process called subrogation.) If the buyer is taking a new mortgage, a representative from the new bank will be there. You can attend in person or sign power of attorney across to your legal representative to attend on your behalf. If flying over from the UK or Ireland to attend signing it is probably a good idea to have a power of attorney arranged anyways as signings can and are sometimes delayed, put back a week etc and if you are only here for a few days you won´t have to reschedule your flights.
Congratulations on a successful property purchase!