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The dos and don'ts of buying property abroad

Rachel Wait
by Lovemoney Staff Rachel Wait on 16 March 2011  |  Comments 4 comments

If you're hoping to buy a property overseas, check out these top tips...

The dos and don'ts of buying property abroad

It’s no secret that we Brits like to moan. Whether it’s about the government, the weather, or the high cost of living, there’s usually something to whinge about.

As a result, the thought of moving abroad has probably crossed your mind once or twice – or maybe more. Perhaps you’ve considered buying a holiday home overseas so you can escape every now and then.

But if you were to head to warmer climes overseas, where would you go?

Most popular countries

A recent survey from the Post Office has revealed the five most popular countries to move to. They are as follows:

1. France

2. Spain

3. United States

4. Australia

5. Thailand.

Of course, moving abroad isn’t a decision that should be taken lightly. After all, you don’t want to set up a new home overseas only to realise you were happier back in Blighty. And although 70% of the people surveyed by the Post Office said they were happy with their new life abroad, there are still certain aspects about the British lifestyle that they miss.

Aside from the countryside and family members, the most commonly missed items include an array of food and drink, with the top five as follows:

1. Fish and chips

2. A pint of ‘proper beer’

3. Sunday lunch in local pub/restaurant

4. British chocolate

5. English breakfast tea.

Top tips for moving abroad

So whether you’re happy to pack up your bags and kiss goodbye to your favourite pint and your precious cuppa, or if you’d prefer to simply buy a holiday home abroad, here are some top tips for buying a property overseas:

John Fitzsimons looks at what you should always do if you fancy buying a property overseas

DO take your time

Buying property is something that should never be rushed, but particularly if you’re buying in an unfamiliar location.

Make sure you spend time in the area in which you want to buy, both during and after holiday season. Do some research about local facilities and transport. Are there good links to the airport? Is the beach close by? Are there any good restaurants in the area?

It’s also a good idea to talk to some of the locals about the area so that you get a real feel for it. That way, you’ll be able to decide whether this is really the area for you. And if you’re moving out there for good, talk to other expats to find out more about living in the area.

Once you start viewing properties, make sure you view them at different times of the day and don’t forget to check the outside of the property as well as inside!

DON’T buy more than you can afford

Make sure you draw up a budget before you start looking for properties so that you know what you can realistically afford. Once you’ve done this, make sure you don’t go over your budget.

Don’t be tempted to buy more than one property with the idea of renting the properties out unless you can guarantee you’ll get tenants and this is an affordable option.

DO get an agreement in principle

Leading on from this, make sure you get an ‘agreement in principle’ for your mortgage before signing on the dotted line for your property. If you’re moving abroad for good, it’s worth shopping around and finding a mortgage broker in the country you’re moving to because you’re likely to get a better deal.

DON’T be too hasty with your deposit

If you see a property you really like, take a step back and give it some serious consideration before you hand over your deposit.

DO seek specialist advice

Always seek advice from independent solicitors and surveyors before you buy a property abroad. They should be able to tell you about the laws in the country you’re buying in and let you know everything you need to know about buying overseas.

When seeking legal advice, it’s also worth using a local and international, English-speaking legal firm. The Law Society has a list of lawyers who specialise in buying property abroad.

DON’T forget about tax

It’s a good idea to check the inheritance and capital gains tax laws in your chosen country because they will differ from those in the UK. For example, in France, the inheritance laws mean your property will automatically be inherited by your children, bypassing your spouse!

So make sure you fully understand these laws and if necessary, make appropriate adjustments to your Will. 

Related how-to guide

Write a will

Find out why you need to make a will and how to do it.

DO keep your options open

If you’re moving abroad permanently, it can be a good idea to keep a property back home and initially rent out a place in your chosen location. That way you can assess whether you will be truly comfortable moving overseas for good, or whether you would be better off simply having a holiday home out there.

DON’T underestimate the costs

Don’t forget about extra costs – legal fees, valuation fees, taxes, insurance - all of these can vary from country to country. So make sure you’ve looked into this well in advance so you can plan your budget.

And remember that if you’re planning to rent out your property, you will have to pay income tax.

Many banks in the UK will also charge commission if you have to transfer money abroad, as well as a transfer fee, so make sure you keep this in mind.

DO set up a foreign bank account

It’s a good idea to set up a bank account in the country you’re buying in before you make an offer on a property. It’s also worth setting up standing orders to pay for local bills and taxes.

DON’T forget about fluctuating exchange rates

Fluctuating exchange rates can significantly impact your property’s value. After all, you may have found your perfect home in line with your budget of £100,000, but if Sterling weakens against that particular currency, you may quickly find the property is no longer affordable. So it’s a good idea to try and secure your rate of exchange as soon as possible.

Don’t forget that exchange rates can also affect your mortgage.

DO learn the language

Whether you’re only using your property as a holiday home, or you’re planning to live there permanently, it’s well worth learning the local language beforehand. That way you’ll settle in far more quickly and it may also help when you are negotiating with sellers and solicitors.

DON’T inherit a debt on the property

You should ensure the property you intend to buy has a ‘clear title’. This means that the owner is actually in the position to sell. And make sure you don’t inherit a debt on the property – your solicitor should be able to check this for you.

So all that leaves me to say is, good luck!

More: Get a marvellous mortgage | Mortgage affordability at 10-year high | The best and worst celebrity neighbours

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Comments (4)

  • Marcia9
    Love rating 5
    Marcia9 said

    I bought in German (Investment) and Italy (love and 2nd home) and must say although I researched well my heart ruled my head when it came to the non-commercial purchase.

    The German investment has turned out well and I am lucky to have the local estate agent i bought through also manage the flats for me and over the years we have developed a good and trusted relationship and in fact I haven't been back for 3 years. I understood the costs involved and everything worked with Germanic precision (and honesty).

    With Italy I bought with my heart; too far from the airport, too large for my needs, in the centro storico part of the village so a pain to get furniture etc delivered and of course don't even think of going there unless you are able bodied! Yet the locals walk by the lanes in their nineties without problems. Must be all the Vitamin D contributing to good bones.

    Similar to Berlinjn the declared price was less than I paid (may be an issue if I tried to sell before the allotted number of years required to avoid capital gains tax. Banking costs in Italy so I closed the account and now use a Euro card which is terrific, even pay some of my utilities via this card online.

    The renovation cost more than I envisaged (in retrospect it would have been so much cheaper to buy a new-build( but then I wanted character and got it.

    And the most annoying of all .... it gets cold in winter!!! Snow in southern Italy by the coast this year for the first time in many years so forget breaks from November to March and the houses simply don't have central heating in most cases ... if it is sun you want choose the Canaries. May not be as exciting but the weather is guaranteed.

    Prices of food have risen considerably in Italy as well so it is not necessarily a cheap holiday and there is only so much you can drink of the local vino before you fall on the many steps everythere. (joke). Still love the place; good health facilities as well; the local chemist can give you an injection and they are more hands-on.

    Some friends have bitten off more than they can chew with properties abroad. Check everything, get a good solicitor (many omit that) and visit a few times before buying. Remember ultimately maintenance and upkeep cost as much, if not more, than an annual holiday in a region would so unless you have a large family and intend to use it a lot, why not just rent! Of course if you have loads of money then I suppose property never depreciates in the long-term and I expect I will be leaving it to the younger family members who I hope will benefit from a lovely home in years to come.

    Report on 19 March 2011  |  Love thisLove  0 loves
  • Stoniewearer
    Love rating 1
    Stoniewearer said

    I brought my first place in Gran Canaria (which is under Spanish rule) when I was 24,six years ago and I don't regret a day as for the buying process I had a amazing brief who made it easy for me there are however some words of advice you need to know one thing I will say is all those idiots who go on TV saying they are building a motorway through my Spanish dream clearly did get a decent solicitor I mean come on you would buy a place here with out a brief so why would you abroad !!!

    Manila envelopes stuffed with cash, under-the-table payments and high-and mighty notaries charging hefty fees for a perfunctory reading of the deeds -there's no denying that buying a home in Spain can have its moments of exotic drama.

    The overall objectives of the completion process in Spain are exactly the same as in the UK: ensuring that the vendor gets paid, that the buyer gets their title deeds and that the government gets its taxes.

    As a buyer, your objective is to get your title inscribed in the Registro de la Propiedad, Spain's equivalent of the Land Register. This is the only truly secure form of property ownership in Spain.

    You can't inscribe your title until the deeds of sale have been signed by all parties in the presence of a public notary (notario). Though they earn their fees from private individuals and companies, notaries are essentially public officials who play a neutral role in witnessing and drafting many types of contract.

    The notary's signature is required to "elevate" the private contract between buyer and seller into a public contract, the escritura, which can then be inscribed in the register. No notary's signature means no title deeds.

    British buyers do not always realise how important it is to withhold full payment until the deeds are signed in front of the notary. They might think that once they've signed private contracts and paid in full, they own the property outright.

    However, vendors who have received full payment have no incentive to sign the deeds of sale before a notary. Consequently, there are hundreds, if not thousands, of Brits who have bought, paid in full and even occupied the property, who have no title deeds to show for it.

    The notary and the lawyer

    If the completion process in the UK works without notaries, you could be forgiven for asking what value they add in Spain. The short answer is "not much". It's true they run some basic checks on the vendor's title before the deeds are signed. But you must use a qualified, independent lawyer both to ensure due diligence and to accompany you to the signing of the deeds.

    Notaries are paid (in fees set by the government but normally paid by the buyer) not to take sides -and so, in theory, they should be beyond reproach. In the vast majority of cases, notaries are squeaky clean, though there are rumours that some may have turned a blind eye to infractions by developers. In Operation White Whale, the recent money-laundering bust on the Costa del Sol, three notaries were detained.

    Many property transactions in Spain involve under-the-table cash payments that aren't declared in the deeds. Albeit in gradual decline, the practice is still widespread, and 10%-20% of the value of the transaction is common. This enables vendors to dodge capital-gains tax.

    The cash is usually handed over in the notary's office, so in a delicious irony, one of Spain's most common fiscal misdemeanours takes place under the very nose of a quasi-government official responsible for ensuring that taxes are paid.

    This is a fraud that could land you with liability for the vendor's capital gains tax (or worse), so you are strongly advised to try to persuade the seller to do without it. However, in many areas of the country, vendors will insist.

    Spanish notaries know what is going on, but they don't like to witness the grubby side of a property deal. If you want the property so badly that you agree to it, keep the manila envelope in your pocket until the deeds have been signed and the official has left you alone with the vendor in his office. At that point, pass the money to the vendor, who will no doubt count it out in front of you.

    Notaries' fees are set by the Spanish government according to the number of clauses in the deeds and the declared value of the property. As a rough guide, they range from 0.1% of the selling price for properties valued at E400,000 (Pounds 277,000) or more to about 0.4% for properties under E100,000 (Pounds 69,000). If you take out a mortgage, then you will have to pay notary fees on those deeds as well. Property Registry fees are calculated on a sliding scale reflecting the declared price of the property, but you can estimate them at about 0.1% of the price for expensive properties, and up to to 0.3% for cheaper ones.

    All I can say is GET A SOLICITOR !!!!!

    Report on 20 March 2011  |  Love thisLove  0 loves

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