With banks offering thousands of distressed properties in Spain, the opportunity is present more than ever to acquire a potential property below its market value. Many investors are eyeing on distressed properties and thinking about benefiting from this bargained price.
However, to really benefit from a distressed property & real estate investments, there are 3 tips you need to know:
1. Find a property consultant who is specialised in purchasing distressed real-estate and have close contacts with the banks.
Purchasing distressed real-estate is an art of its own, so you need a property consultant with the right set of skills and expertise in this arena. Distressed properties, in some cases, could involve complex paperworks, and a seasoned consultant who is already familiar with the subject will come in handy.
Experienced consultants working with distressed property also has close contacts with the banks, and you need this contacts to get the best deals and updates before it it released to the public. Banks are changing prices and adding special offers from time to time, aiming to release the property as soon as possible; and getting first-hand information on such development is essential.
An experienced consultant can also guide you to ensure that your distressed property purchase will eventually increase in value. They will already have a plan in mind on the best investment strategy that suits your new property.
2. Inspect closely the additional investment needed to raise the value of the property.
Most distressed property are in need of improvements. Although it came across as a bargain, purchasing a distressed property also involves setting aside some funds to hire contractors and improving the condition. As a buyer of a distressed property, you will be responsible for the necessary repairs upon the signing of the contract.
Spanish banks sell distressed properties as cuerpo cierto, which means ‘purchased as stands’ According to this term, the parties involved agreed that the buyer knows and accepts the physical and legal condition of the property. Buyer cannot complain about the property after the purchase.
Thus, an experienced consultant would have conducted a proper home inspection on a distressed property for you. This is to ensure that you know full well about the real condition of the property you’re buying. They will also draw some plans on the financing part for future repairs and improvements; providing you with an outlook of your additional investment and how to make it profitable in the long run.
3. Find a good lawyer who understands Spain’s property law.
When purchasing a distressed property in Spain, you will be dealing with the bank as the seller. The bank will work with their lawyers, trying to use every loopholes in Spanish law to strike a deal that will benefit them. Hiring a Spanish lawyer–who speaks and understands Spanish and Spanish law (verbally and non-verbally) is a necessity.
An experienced property consultant would encourage you to work with a local lawyer who has closed a purchase for distressed property. Usually, the lawyer’s fee would only be around 1% – 1.5% of the sale price, and he will save your time, energy, and money to deal with legal complications in purchasing a distressed property.
Buying a distressed property is indeed a bargain, and it is always a good option to consider; especially if you are a serious buyer ready with cash. However, make sure you have weighed the 3 tips above before buying a distressed property in Spain–and remember: all that glitters is not gold.
If you are interested in Spain’s distressed properties, feel free to contact us to discuss your options with one of our consultants with an expertise in that area.