Fail #1 Failing to instruct an independent lawyer
Instructing an independent lawyer ie a lawyer who is completely separate from the estate agent, developer or seller is one of the most important parts of the over the overseas property buying process. In order to protect you and your investment, you need to ensure that you receive proper advice in relation to the property, seller and the legal documentation from an impartial, independent lawyer who is acting only in your interests. Politely decline any offer of a lawyer from the estate agent or developer however temping their (unbelievably) good price may be and source your own!
Fail #2 Agreeing to pay a part of the purchase price “under the table”
Never agree to pay a part of the purchase price directly to the seller and understate the purchase price in the legal documentation. Ignore any suggestion from either the seller or the estate agent that “under the table” payments (also known as “black money”) are common practice. The reason why under the table or black money payments are suggested is usually in an attempt to reduce the purchase taxes for the buyer and capital gains taxes for the seller. You will however be required to make a declaration confirming that the price stated in the deed is the full price and a breach of this can lead to substantial tax penalties. Payment such as these are unlawful and usually only result in further costs/ problems buyer further down the line when you come to sell the property if not before! Don’t do it.
Fail #3 Failing to budget for the additional costs of buying an overseas property
Ensure that you understand the total cost of buying abroad including the costs that will be incurred in addition to the sale price such as the legal fees, taxes, notary fees, land registry fees etc. These additional costs will vary from transaction to transaction. You should ensure that you understand exactly what these costs will be in your particular situation and that you can afford them as well as the property purchase price before you make an offer so that you can factor these into your budget.
Fail #4 Signing documentation that you don’t understand
If you do not fully understand the content of a legal document, if it is a language you don’t understand or if you are not completely satisfied that you understand and are happy with what you are signing, don’t sign! You should get advice from your independent English-speaking lawyer before you sign anything and before you pay over any money.
Fail #5 Underestimating the effect of currency fluctuations on the purchase
Underestimating the effect of currency fluctuations on your purchase whether you are buying cash or with a mortgage can cause a lot of unnecessary expense and heartache.
You should consider the rate of exchange not only on the day you agree the purchase price but what the rate might be when you complete the purchase weeks/ months later. If the exchange rate has moved against you, you may that all of a sudden you have a shortfall between the amount you now have and the amount you have agreed to pay for the property. To avoid falling fowl of this pitfall, get in touch with a recommended currency specialist as soon as possible who will be able to advise you as to the best way to protect you from such currency fluctuations. You may be surprised about how much they can do and how much you can save.
If you are buying with the help of a foreign currency mortgage, ensure you can still afford to make the mortgage repayments should the currency rate fluctuate. Again seek advise from a currency specialist.
If you would like any further information about how to avoid the pitfalls of buying a property overseas contact Worldwide Lawyers on 01244 470 339 or at email@example.com or via our Contact Form. We will be happy to assist you by providing details of a recommended law firm or other professionals to assist you with your property purchase and to ensure you get the advice you need.