The Ultimate Checklist for Buying a Property Abroad Safely

Deciding to purchase real estate overseas is often a decision in which the fun and excitement of the lifestyle come long before the legal and financial formalities. Most people will spend weeks pouring over floor-plans and brochures, and months dreaming of the view from their terrace – and somewhere in the mix, they miss a few vital steps that could end up costing them dearly.

This isn’t about where you should buy – rather, it’s about how to go about it without getting hurt.

Verify Ownership Before You Fall In Love With The Property

The first document that your solicitor should get is an extract from the local land registry, but there’s an equivalent of this document in every serious property market. This extract will inform you of who the legal owner is, if there are any outstanding mortgages, and if there are any legal embargos or charges attached to the property.

Not all of this information will be offered to you by the seller. Some of it they might not even know. A clean extract from the land registry is a must before any money changes hands – this includes handing over a holding deposit.

You’ll also want to check out the cadastral value – the value the property is registered as having for administrative purposes. It won’t match the value the property is going for, but it is the value that local property taxes are calculated on, so it’s good to have a clear idea of it from the get-go.

Choose Developments With Built-In Protections Where Possible

One of the most practical answers is simply to put yourself in the safest environment you can. That’s as true for property investment as anywhere else.

And property law is a complex, ever-changing world. The legal systems in many European countries can be particularly labyrinthine for non-citizens to navigate, and buying in the wrong development at the wrong time could see you swept up in years of litigation.

The only really effective strategy is therefore to eliminate as much legal risk as possible before you buy. Built property is lower risk than off-plan because the local planning legislation has already been passed, the structure has already passed building inspections, and the utilities have already been connected.

One of the best ways to reduce your exposure to legal risk is to focus on established, master-planned communities. Properties For Sale La Reserva, Spain in Sotogrande represent this kind of environment – a gated community with defined ownership structures and existing infrastructure, where the underlying legal framework is already in place rather than still being assembled around you.

Hire Your Own Solicitor – Not The Developer’s

This is exactly where buyers keep stubbing their toes. A lot of developers and selling agents will propose to put you in touch with one of their preferred solicitors. A handful of those recommendations are innocuous. A bunch set you up with dual representation. The proposed solicitor, while maybe operating out of a separate conference room, has effectively been retained by the opposing team.

Hire your very own independent solicitor. They should be fluent in both the local language and yours, in good standing with the local bar association, and have no prior relationship with the developer or seller. Their job is to look for problems, not cheerlead the deal through.

In most jurisdictions a notary public will also be in the room when it comes time to sign the paperwork. The notary is there to witness the transfer and assure legality. They are independent, neutral, and not your attorney. Your solicitor is your attorney.

Run A Structural Survey Before Paying Any Deposit

Let the buyer beware – that is the general rule in many property markets worldwide. Once you’ve made a deposit, you’ve shown your intentions, and backing out is costly. A structural survey conducted before that stage will actually give you some real chips to play with. If it shows up some issues, you can re-negotiate, perhaps get the vendor to do the repairs, or just leave.

After the deposit, the same issues are your issues. This goes double for old building stock or places where regulations have not been very strict over the years. Title insurance might be something to think about too. It isn’t usual in every market, but it covers you for any loss due to title defects – such as a claim over a boundary or an undisclosed mortgage – that may not have been discovered during the due diligence process, but come out of the woodwork after you’ve finalised the sale.

Set Up Local Financial Infrastructure Early

Before you get to the completion stage, you should have opened a local bank account anyway. You’ll need one to pay local taxes, utility deposits, community fees, and any purchase-related costs that must be settled in local currency in the run-up to that day. Plus, it’s a good idea to take independent advice and negotiate the best deal on the mortgage itself.

The same applies for paying one outright: an international transfer will be more expensive than using a bank account to which a local euro transfer clears instantly. Most banks now charge for international transfers and, depending on the two banks’ processes, it could take several days for the payment to reach the seller.

Don’t Ignore What Happens After You Buy

Local inheritance laws, and the capital gains tax you may incur when you eventually sell, are two issues that regularly wrong-foot buyers. Many countries have forced heirship rules that determine how your property is shared out on death whatever your local will says. Get legal advice on how a foreign property fits into your estate plan before completion, not afterwards.

Find out how a foreign property is treated by your existing will. Will it have to go through the local legal system on top of probate in the UK? Get a local lawyer to explain how inheritance tax works locally. What other reliefs or exemptions are you entitled to locally on capital gains tax when you sell? It may depend on how much time you spend living there.

More than 20% of overseas owners told the Association of International Property Professionals that they had faced stealth costs they had not budgeted for in the first year of ownership. Most could have been foreseen.