Sunday, 26 November 2006

How to Avoid the Pitfalls of Buying Property Abroad

The media thrives on the horror stories of people that have adopted a casual go-it-alone approach to buying property abroad. Too often what has been intended to be a retirement home or an investment has ended in complete disaster because the unsuspecting buyer has lost money or worse still, has had their home seized by the authorities over a serious breach of a local law.

If you are contemplating investing your money in overseas property in makes sense to do your homework thoroughly before making any kind of commitment. Then, once you have found out the kind of things that can go wrong, it is essential to hire the services of an expert in the overseas property market who will guide you painlessly through the procedures.

It is of course an attractive proposition to escape our damp winters to a place in the sun. If you intend to buy a property the first thing to remember is that foreign laws are different to ours and that they don’t always offer you protection. It never pays to take short cuts and the simple motto will always be buyer beware!

It is worth considering involving friends or family members in your project who could commit resources in order to jointly buy a bigger, better property. By involving other people who you trust could make all the difference between buying a small apartment or a villa with a swimming pool.

If you find a property that interests you it can be a foolish move to commit to buying too early. If you require any kind of finance for the purchase you will need to ensure that this is in place, or at least you’ll need a legal written guarantee that your funding will be available by the time you intend to complete the deal. This should be organised before you commit to signing contracts, even before you put down a deposit. There are many pitfalls that could be hidden from immediate view with re-sale properties. From the outset you should consider hiring a reliable local lawyer in the country where you intend to buy who will advise and protect your interests. This should be somebody who specialises in property law rather than a general solicitor. You will need to know, for example, whether there is any outstanding debt attached to the property that could pass on to an unsuspecting new owner. This can arise if the vendor has raised money to have the property built then allocated this as additional security to the developer’s bank. Similarly there may be an ongoing dispute over land boundaries or planning applications that you could become party to if you fail to have such things checked. It s no good relying on second hand information or on what a developer tells you; always have your lawyer check things. Never commit without having a full independent valuation carried out because this could reveal serious hidden problems such as damp, subsidence or wiring defects. Only when you are completely satisfied that everything is sound about your intended property should you consider becoming involved in a contract. Once you feel confident that everything is in order, your overseas lawyer can be instructed to proceed. Insists on a opt out clause without penalties should your finance not materialise or if something unexpected should be found with the contract or the property to your detriment.

Remember that contracts and other documentation will be written in a foreign language and will comply with the specific country’s laws. It is no good trying to understand what has been written unless you are fluent in the mother tongue of the country; even then it will pay you to ensure that any specialists such as surveyors, lawyers and architects employed locally are fluent in English so to minimise the risk of a breakdown in communication. Never, ever sign what you don’t understand. Believe it or not, many people either think that they understand a contract or make a guess about what they think has been written. This can only lead to costly problems later on.

You will also need to set up a bank account at a recognised bank in the country where you intend to buy your property. Financial details should be arranged in the local currency and you will need to have a thorough understanding of the exchange rates that are prevalent throughout your negotiations. If you are exporting funds into a foreign land you will need to obtain a Certificate of Importation and need to check the current legal implications about moving money to your chosen country. Taxes will need to be paid as well as utility and other bills once you have purchased the property so you will need to organise standing orders locally in order to pay any charges on time. In some countries, France, Spain and Portugal in particular, if taxes aren’t paid you can be fined or even have your property seized by the authorities. It makes sense what Government taxes will apply to you in advance of committing yourself to a move overseas. Don’t forget to set sufficient funds aside to pay insurance, lawyers and the fees of other professionals that you may hire.

The pitfalls of home ownership overseas may sound horrendous and they can be for those that are unprepared to do things properly. In the long run it is always cost efficient to employ a reputable firm that specialises in overseas sales because they will be fully conversant with the various issues involved. They can also put you in touch with accredited experts such as banks, financial advisors, lawyers, architects and surveyors. If you do your homework thoroughly and comply with the expert advice you are given, then there is no reason to suspect that buying your dream home overseas will be anything less than pleasurable.

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