EXPLAINED: OVERSEAS PROPERTY
W
hen the overseas property juggernaut came to a grinding halt in 2008, the property world changed overnight — hopefully, for the
better. Out went the hard sell and the bulk- buying, the 100 per cent mortgages and the fl y-by-night developers peddling empty promises. Now, the re-emerging markets are dominated by savvier, oſt en cash-rich, buyers, agents who have weathered past peaks and troughs and developers who can fi nance their schemes without relying entirely on banks or pre-sales. We look beneath the bonnet of the
overseas property market to fi nd out just what is going on...
The role of the agent Agents exist to sell property for a client — whether a private vendor or a developer — and, in return, they receive a commission. T at commission will vary wildly, depending on the country and whether the property is resale or new-build. As Marc Pritchard from Taylor Wimpey
España explains: “I’s much easier selling for a developer. Resales usually involve far more work for the agent.” T e commissions are also higher than in
the UK. In Spain, for example, the average commission is 5 per cent. Some agents during the boom were charging up to 20 per cent. “Buyers need to ask what the agent will do
for them,” says Xavier Wiggins from the EcoHouse Group. “Some people think that if any agent is
getting a high commission, they will take responsibility if things go wrong. It’s not the case.” Good agents should carry out their
own due diligence before agreeing to sell a property. T e bad ones will leave the buyer (or their solicitor) to fi nd out whether the property is legal or legitimately owned. “To push the sale along, the agent may
off er other services, such as obtaining tax numbers, opening a bank account or introducing the buyer to mortgage advisers, but their basic role is to sell a property. T ey are not there to give legal advice or act for the buyer,” says Peter Esders, a solicitor at Judicare (
judicaregroup.com). Reputable agents should also explain
to buyers what their role is, where their obligations stop and what their exact relationship is with the seller. In some cases, the agent is the sales arm of the developer, but set up as a separate company.
The role of the developer T e developer owns the land, obtains the relevant building licences and planning permission and then builds the project. T at’s the ideal. T ere are plenty of examples of developers who did none of those things but continued to take the buyers’ money. T ey may stick around and continue to
“Some people think that if any agent is getting a high commission, they will take
responsibility if things go wrong. It’s not the case.”
manage the resort for owners — or they may move on to the next project aſt er the fi nal brick is laid. T ey may also be the agent for their project — and that can be an advantage for buyers, as it cuts out the middleman. Taylor Wimpey has been building resorts
in Spain for decades, and has onsite sales consultants. “T at way, our agents know everything is 100 per cent clear and clean,” says Pritchard. “If an agent starts selling for a developer,
they need to make sure the developer has all the building licences, fi nance is in place and payments are secured by bank guarantees.”
Robin Barrasford, from Barrasford and
Bird, also acts as agent and developer on some projects he sells, including Halcyon Retreat, in Limousin, France, “to ensure we are building a product we want to sell. Otherwise, developers can get it very wrong, building something that’s nowhere near an airport, for example”, he says. “Also, if there are problems — such as the
kitchen tiles aren’t the ones the buyer was promised — we can sort it out directly rather than struggling to deal with the developer.” When buying a new property, buyers
should question everything that the developer claims. “If they say they’ve sold 300 properties,
returns are 20 per cent and they’ll pay back in a year, ask them to prove everything. Don’t be afraid to ask basic questions, such as ‘how is my money being protected?’, and ‘how is the escrow account operated?’, ” says Wiggins. Also bear in mind, says Esders, that “the
purchase contract is between the buyer and the seller. T erefore, any action by the buyer for failure to complete is against the seller — the developer — rather than the agent”. Buyers need to know what will happen in
the worst-case scenario that the developer goes bust. To get an idea of the developer’s past projects and reputation, look at online forums. “Be aware they are easy to manipulate,
positively or negatively, but it can be a useful way to see what other investors think,” says Wiggins.
The lawyer “Make sure you use an independent lawyer” is the mantra — and it’s a crucial one. Too many buyers have come unstuck because they used the lawyer recommended by the agent or developer (who turned out to be his brother on kickbacks). T en they encounter a confl ict of interest,
sheer unprofessionalism or possibly — as many buyers in Spain found a few years ago — deep-rooted corruption. Either fi nd a lawyer yourself or by
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