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Old Apr 24th 2012, 2:06 am   #1
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Question spanish bank valuation vs. sale price. A Mousetrap?

hi,

I am wondering if anyone here has any ideas on the current situation of spanish banks valuing property sales at pre-2007 levels for their accounts but - at the same time - permitting sales with vendors at a far lower price.

I have been looking at two separate properties in N. Costa Blanca. I can settle either in cash but in both cases the vendors are underwater after the sale by around 50%. So the sale can occur - though not for cash, only via 100% mortgage - but then I am informed that the 'bank valuation' is nearly 50% higher. Is this a common practice in Spain? Spain also seems to have very draconian debt laws - no walking away and posting keys - so how is this situation anything other debt re-assignment for many current purchasers? Added to which, Notaires in Spain do not have unlimited negligence liability like France/Italy, if there was anything untoward in such contracts.

As of this point, I am going to pull out while seeking opinions of an independent avocat from a different region to try and make sense of this. But gut feeling? This feels like another sort of subprime/endownment type scam looming down the road for some unwary buyers into the current market. Or is there a good explanation for how such a system would work in a buyers best interests?

Cheers!
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Old Apr 24th 2012, 5:37 am   #2
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Default Re: spanish bank valuation vs. sale price. A Mousetrap?

As Concierge for the Spanish section of BE I would like to say hello and welcome.

BE is a very large expat website, so if you have problems finding your way around we have concierges who will try to direct you. The moderators for the Spanish forums are Mitzyboy and Fred James, moderators are there to ensure that the site runs smoothly within the rules of BE. Problems and complaints should always be addressed to a moderador who will look into the matter and deal with it efficiently and fairly. Our members who post in the Spain Forums are friendly and helpful with a wealth of knowledge of the issues of living in Spain. At the top of the page you will find a quirkily named thread called Free Beer which is full of important and useful information. Hope you enjoy your time participating in the forums.

Please let me know if you need any further help.

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Old Apr 24th 2012, 8:56 am   #3
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Default Re: spanish bank valuation vs. sale price. A Mousetrap?

I do not really understand your concern. Why should you worry what value the bank has on their books?

If you have funds or can get a mortgage to cover the cost, why would you be concerned that the valuation is (or should that be was?) 50% higher? Surely that only shows you are getting a good deal?

A valuations is only what one "expert" thinks a property is worth. The valuation by your lender is all that should concern you. Nothing to stop you getting a.n.other valuations and comparing the price for similar properties in the area just as a prudent buyer would do in the UK.

The notary does not give you advice, so why do you think he could be held liable for negligence? I think you may mean "solicitor" rather than "notary"? Who told you solicitors (i.e. abogados) in spain do not have professional liability insurance? In any event, it is very difficult to obtain redress against a solicitor for negligence in ANY country.
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Old Apr 24th 2012, 12:20 pm   #4
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Default Re: spanish bank valuation vs. sale price. A Mousetrap?

Quote:
Originally Posted by Fabulous Frank View Post
hi,

I am wondering if anyone here has any ideas on the current situation of spanish banks valuing property sales at pre-2007 levels for their accounts but - at the same time - permitting sales with vendors at a far lower price.

I have been looking at two separate properties in N. Costa Blanca. I can settle either in cash but in both cases the vendors are underwater after the sale by around 50%. So the sale can occur - though not for cash, only via 100% mortgage - but then I am informed that the 'bank valuation' is nearly 50% higher. Is this a common practice in Spain? Spain also seems to have very draconian debt laws - no walking away and posting keys - so how is this situation anything other debt re-assignment for many current purchasers? Added to which, Notaires in Spain do not have unlimited negligence liability like France/Italy, if there was anything untoward in such contracts.

As of this point, I am going to pull out while seeking opinions of an independent avocat from a different region to try and make sense of this. But gut feeling? This feels like another sort of subprime/endownment type scam looming down the road for some unwary buyers into the current market. Or is there a good explanation for how such a system would work in a buyers best interests?

Cheers!
You should be delighted that the bank valuation is so high! It should only be a concern if the bank valuation is lower than the actual sale price.

Banks can lend a max of 80% of valor tasacion/bank valuation. Can you now see why it is kept higher?!

Another point of note.........if at any time during the duration of a mortgage, the valor tasacion at a given time should not drop below 80% of the outstanding mortgage (standard terms). If it happens (and it has happened a lot in recent years) the borrower can be asked to reimburse the bank with the difference. this is now quite common, particularly for self-employed who may have provided collateral at the time of securing the mortgage.

Debt laws - not draconian in my view; But agreement has been made between the government and most of the Spanish banks to change the system. It's only a case of getting the actual law through parliament. When done, many people will be able to initially renegotiate with their bank, eventually handing back keys, free of debt if after a period they still can't afford the mortgage. Too complicatged to go into the actual detail here, but the terms have been finalised.

Notaries - They do have accountability. The government had plans to force them to check for illegalities etc., making them responsible for the transaction. But the Notaries got there first and decided on some sort of self regulation. If this fails, I'm sure the Government will make it mandatory.
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Old Apr 24th 2012, 12:44 pm   #5
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Default Re: spanish bank valuation vs. sale price. A Mousetrap?

If you bought a property for a much lower price than the bank valuation, would you not be putting yourself in the position where Hacienda would send you a bill for additional transfer tax as it has been reported they have done in quite a few cases?
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Old Apr 24th 2012, 1:37 pm   #6
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Default Re: spanish bank valuation vs. sale price. A Mousetrap?

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Originally Posted by Lynn R View Post
If you bought a property for a much lower price than the bank valuation, would you not be putting yourself in the position where Hacienda would send you a bill for additional transfer tax as it has been reported they have done in quite a few cases?
True, it happened to us during the last recession. Even though we had bought from a bank and paid the exact price stated (no black money), Hacienda came back to us about 3 months later as they had their own valuation and wouldn't budge. Was a bit of a blow having to payout another few thousand but we did get a bargain even adding this extra tax.

Just to add, it is now possible to get the figure that hacienda has before purchase.

Last edited by jackytoo; Apr 24th 2012 at 1:40 pm.
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Old Apr 25th 2012, 7:22 am   #7
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Default Re: spanish bank valuation vs. sale price. A Mousetrap?

Quote:
Originally Posted by Fabulous Frank View Post
hi,

I am wondering if anyone here has any ideas on the current situation of spanish banks valuing property sales at pre-2007 levels for their accounts but - at the same time - permitting sales with vendors at a far lower price.

I have been looking at two separate properties in N. Costa Blanca. I can settle either in cash but in both cases the vendors are underwater after the sale by around 50%. So the sale can occur - though not for cash, only via 100% mortgage - but then I am informed that the 'bank valuation' is nearly 50% higher. Is this a common practice in Spain? Spain also seems to have very draconian debt laws - no walking away and posting keys - so how is this situation anything other debt re-assignment for many current purchasers? Added to which, Notaires in Spain do not have unlimited negligence liability like France/Italy, if there was anything untoward in such contracts.

As of this point, I am going to pull out while seeking opinions of an independent avocat from a different region to try and make sense of this. But gut feeling? This feels like another sort of subprime/endownment type scam looming down the road for some unwary buyers into the current market. Or is there a good explanation for how such a system would work in a buyers best interests?

Cheers!
If I am reading the post correctly, it seem that the bank will sell to you at a bargain price, but only if you take on a 100per cent mortgage with them.

I am sure that if you really want the property and hang out for a cash transaction, they will give in to you.

It seems that they are trying to recover some of their loss, trying to force the mortgage issue will give them interest and enable them to save something from the situation, as they will have you by the S and Cs for the foreseeale future.

Stand your ground, argue the toss, tell them that you dont want to be paying interest for the next X number of years, and to effectively take a hike, it you want the property.

Tell them that you are a cash buyer and you will not allow them to tie you up paying interest on a mortgage when it will only be to their advantage, as they interest you would earn by investing your money would be nowhere near as high as what you would be paying, if you accepted the "generous" offer of a loan.

Ask them if they want to sell the property on not, and if they do, to cut the crap, remind them that cash is king.



I cannot see them losing a sale when then have so many repossessed houses on their books.

Go for it, do what is best for you, not them, and above all be vocal about it.
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