SPANISH ESTATE AGENTS – THE DANGERS OF A BUYER’S PREMIUM

A while ago, I commented on sales commissions for estate agents in Spain. At the time, what I had no space for was a critical warning to any buyer of Spanish property to be very careful about ‘buyer’s premiums’.

‘Buyer’s premiums’, over the years, have been nothing if not contentious - not least because invariably they have taken unwary foreign buyers by surprise. Indeed, as far as surprises go - few can be as unpleasant as finding that you are unknowingly liable to pay a ‘buyer’s premium’. These can be substantial and can badly destabalise your finances, particularly if you are stretching your budget to buy a property in Spain. Certainly, any benefit derived from the low prices produced by the Spanish property crash could be quickly lost...

So far as I know, ‘buyer’s premiums’ are unknown within conventional UK estate agency although they are commonly used in auctions. In effect, a ‘buyer’s premium’ is an amount that a buyer pays to a broker or auctioneer when he purchases something. Normally, at the same time, the seller will also pay the broker or auctioneer a fee – the two sums amounting to the broker or auctioneer’s full sales commission on a transaction.

In Spain, it is not uncommon to find that you could be liable for a ‘buyer’s premium’ when you purchase a Spanish property. Spanish buyers, particularly in urban areas, are used to paying 1.5% commission to a Spanish estate agent if they buy a property - knowing that the seller will also pay the agent 1.5%. There is nothing wrong with this and both parties are invariably fully aware of this deal and accept it as a matter of course.

The problem is that foreign buyers are sometimes ‘tricked’ into paying a ‘buyer’s premium’. Worse still, the ‘buyer’s premiums’ can be a good deal more than 1.5% and, in my experience, can reach 5% of a Spanish property purchase price. Of course, 5% on a 300,000 Euros property is 15,000 Euros – a lot of money!

I say ‘tricked’ because for a ‘buyer’s premium’ to be enforceable there must be written evidence that a buyer willingly agreed to pay the ‘premium’ to the Spanish estate agent concerned. However, invariably this evidence does exist, is available in written form and signed by a buyer.

So, you may ask, what is the problem?

Well, it is the classic one of foreign buyers (or people generally) signing a form/contract that they either did not read properly or did not fully understand.

In the case of ‘buyer’s premiums’ the agreement concerned is most often in the shape of a ‘standard’ form. This form, in essence, commits a buyer to purchase a particular property (if the buyer decides he wants the property!) only from the agent who shows him that property first. This is fair and protects an agent from showing a client a property in Spain which the client then buys from another agent - or directly from the owner (thus cutting out the ‘primary’ agent).

The trouble is that this ‘standard’ form/agreement can sometimes have a clause in it that states that if you (the buyer) purchase a property in Spain from the agent concerned - then you also agree to pay a ‘buyer’s commisssion’ of x% to the agent concerned.

Unfortunately, frequently this very important clause is ‘hidden’ within the depths of the ‘buy only from the agent concerned’ agreement. In fact, I have been shown an example by an agent (an Englishman working for a Spanish inland agency) who proudly explained how the English translation of this clause was deliberately poorly translated - so as to ‘effectively’ conceal its true meaning.

Certainly, the last thing that you expect in any mundane, ‘fair-looking’ agreement is a clause of real importance half-way through the contract. So, almost understandably, potential buyers have a habit of signing this type of agreement with their ‘friendly’ agent without a second thought.

Needless to say, every single person I have met who has paid a buyer’s commission in Spain (100% of them) only realised thier liability when they were ‘reminded’ (clearly and unequivocably) of their liability to ‘their’ agent – after they had already paid a 10% deposit for their desired property to the sellers.

As a buyer you are then faced with only two options: lose your 10% deposit and walk away from the property you are buying or pay (say) 5% in ‘buyer’s commission’ and keep the validity of your 10% deposit and your on-going purchase?

In my experience, everyone liable for a ‘buyer’s commission’ paid it - albeit through hate-filled, gritted teeth!!

The answer, of course, is devastatingly simple. Never, ever sign anything whatsoever (irrespective of the pressure) without your Spanish lawyer present and having read a full and proper translation of any document that you have been asked to sign. If you break this cardinal rule – then, frankly, you deserve everything you get.

I should qualify the above, as I do in my 'Move Safely' book, by saying that the majority of estate agents in Spain do not charge ‘buyer’s premiums’. However, there are certainly those that do – so be very careful if an estate agent in Spain asks you to sign something!!!1