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Buying a Foreign Property? Take the time to speak to an advisor and get it done right!

Foreign Property

It can be an exciting prospect to buy a property, overseas. It can also be fraught with difficulties ranging from arranging finance, to getting legal assistance, negotiating contracts and arranging insurance

Things to be wary of:

  • Contracts
  • Arranging Finance
  • Advice
  • Valuation
  • New Build
  • Title
  • Location, Location, Location
  • Money
  • Additional charges
  • Tax

1. Contracts

Always read a contract and make sure you understand it; under no circumstance should you sign a contract you do not understand. This applies if you are buying in the UK, of course, but can be especially problematic abroad, particularly if you are not fluent in the language. If you can get an English translation, ask your solicitor to confirm the English version is a true translation.

I can't emphasis to highly that you undestand fully the terms and conditions before you agree to them. In particular, you need to know:

. How much deposit is needed? When is it payable, is it refundable and under what circumstances?

. If this is a new-build property, what are the stage payments and when will they be due?

. What are you actually getting for your money and what is the cost of any extras?

. When is the completion date due? What happens if the property is not ready or you do not have funds in place at the right time?

2. Arranging Finance

If you require mortgage finance, obtain an 'Agreement in Principle' for your mortgage before agreeing to purchase the property, or before signing any contracts and paying a deposit. Otherwise you may find you have committed to the purchase but be unable to complete.

If you are arranging finance on the property, ensure that this is stated in any contract and, where possible, make 'dependent on mortgage finance' a condition of the purchase to ensure a refund of any deposit paid if the loan is refused.

The mortgage may be in the local currency and, if you intend to let the property, this may not be an issue. However, you should consider the impact of exchange rates. Fluctuations could be critical if the property is being funded from earned income in a different currency to the mortgage.

3. Advice

Specialist advice is an absolute must when purchasing overseas. Independent solicitors, valuers, architects and surveyors who are proficient in your chosen country's laws and processes will be key to a successful venture. But they must confirm to you that all required permissions, licences and planning consents have been obtained.

4. Valuation

Make sure you get an independent survey of the property. This should identify any problems with the property - e.g. subsidence, damp, wiring defects - and could also highlight any possible boundary disputes. Your chosen solicitor or attorney would then need to advise on your options.

5. New Build

We all have heard of those fantastic deals on new-build properties. Do not take a developer at face value. They may well be completely honest and above-board but, then again, they might be something else! Check their track record and how long they have been trading. Can you get references from previous buyers? Check similar properties in the area and se what prices have been asked for on them or how much has been obtained for re-sales by the same developer.

If the developer talks about 'rental returns', what do they base their projections on? Is anyone else on the same development getting these? What about saturation of the market? Will there be enough ongoing demand?

After checking everything over, take time out to think about it. Ask yourself "What if?" questions to make sure that you can meet all the costs and that the deal is still right for you.

6. Title

In some jurisdictions, when you purchase a property, you also inherit any debt that goes with it, especially if the developer had allocated the debts he incurred in building the site against each plot. Make sure that the developer or seller has full title to the land or property. Get your solicitor to ensure you do not inherit a debt on the property before you purchase.

7. Location, Location, Location

You may well be looking for a place that has great seasonal attractions, is near to an airport or a beach, or similar. But what happens off-season? There are no guarantees that cheap flights will continue indefinitely in one location. Proximity to basic facilities like restaurants and shops is also important.

Talk to people who already live there or own property in the area. They will give a better understanding of what it's like to live there.

8. Money

Open a bank account in your chosen country and, where relevant, ensure you obtain a Certificate of Importation for the money you bring in from your home country.

Set up standing orders in your local bank account to meet local bills and taxes as failure to pay on time could cause the authorities in those countries to take action against you.

9. Additional charges

The cost of purchasing in foreign countries is often considerably more than you might expect. You may be used to the Stamp Duty rates in the UK; these don't apply overseas but lawyer's fees, local and national taxes, insurance, etc. must all be met in your host country and can often add at least a further10% or more to your cost. Ensure you are fully aware of the costs charged by the legal and government authorities for purchasing a property in your chosen country, before you commit.

10. Tax

Check the inheritance and capital gains tax laws of the country where you are buying. These differ from country to country and will supercede the laws of the UK for property in your chosen country. You may need to compile a separate will to ensure your wishes are complied with.

If you rent out your property you will be liable for income tax, just as in the UK

So, think everything through, challenge any assumptions, do your home work and, if you have satisfied yourself about the sanity and benefits of your choices, buy and enjoy your new foreign property.