Spanish Bank Repossession – Beware of the hidden costs….

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In the past few years the Spanish market has been flooded with properties repossessed by banks. Although those might look like real opportunities to the bargain seekers, caution needs to be exercised as many properties can have hidden costs due to the simple fact that they are repossessed. Costs that are not always disclosed by the banks, so it is highly recommended to undertake a thorough check as Beatriz, lawyer at My Advocate Spain explains below:
‘Firstly, every property in Spain has an assigned fiscal value which is considered to be the minimum value that may be declared when any fiscal operation is undertaken – for example, a property conveyance. (This value is determined as a result of the ‘catastral’ value – a notional value used for the calculation of taxes – and the region in which the property is located).
Minimum Fiscal Value
Sometimes, the market value of the property, which is ultimately declared on the property deeds, is below the minimum fiscal value, as determined by the competent fiscal authority. This can be the case of properties embargoed by banks that wish to reduce their stock as quickly as possible.
In such cases, it is possible for the buyer to find themselves in the strange position that, having paid the government stamp duty on the basis of the price paid and declared on the property deeds, they receive an additional bill from the tax authority, for the additional tax payable on any difference between the price declared on the deeds and the minimum fiscal value.
Options
To avoid this outcome, it is necessary to check the minimum fiscal value before going ahead with the purchase. If this value is above the agreed price for the property, there are two options:
1) Calculate the payment of stamp duty on the minimum fiscal value, regardless of the actual purchase price of the property,
2) Calculate the payment of stamp duty based on the actual price paid and try to appeal the additional tax demand that the tax authority will send. In this scenario, it is important, if there has been any deterioration in the property, to take photos of the state of the property and keep hold of the receipts connected with any repairs (as opposed to improvements) carried-out so that you can include them with the appeal and thereby try to justify the lower price paid for the property.
Other Potential Hidden Charges
Additionally, many banks do not take responsibility for costs incurred while they are temporary owners. Accordingly, it is particularly important when considering the purchase of a repossessed property to know the current amount of outstanding charges that relate to the property (property management fees, rates etc) and to be sure that the seller has paid any municipal capital gains tax (plusvalía) since any amounts that are outstanding will become the responsibility of the purchaser of the property. In particular this latter tax can be significant.’
Spanish Bank Repossession.
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Galleon Property Search Ltd. Buyer’s agent specialised in the search and acquisition of properties in Spain for private individuals and property investors. Spanish property | Mallorca property | Ibiza property | Valencia Property | Murcia property | Almeria property