The New versus Resale Properties Debate

Introduction

As an experienced Estate Agency we at MiroDali Properties have heard a wide variety of horror stories and misfortunes from several buyers over the years. These are not unique to either type of purchase, and the combined efforts of a professional Estate Agent and a good lawyer would have avoided the existence of such unfortunate circumstances.

The following sections summarize the most important advantages and disadvantages provided by either type of purchase. Although not an exhaustive list, it is based on our experience with several private buyers and sellers and several developers, builders and promoters in the Region of Murcia. We offer it as a guidance rather than an absolute rule to help you understand the main differences.

Investment Factor

On off-plan properties the investment value is highly dependent on when you buy during the development process. Usually, it is an excellent investment when you purchase early in the construction phase or even before the construction has started. Initially the prices are set below market value to attract investments, which help the promoter finance the construction. Therefore, the earlier you buy in the process, the higher the potential return, but also, the higher the risks involved.

Having said the above, if you purchase at an early stage it is also possible to choose the best properties i.e. with the best views, penthouse, corner etc. However, if you buy a property under construction in the final phase, the investment value will be significantly lower than an early purchase and the best properties will have been sold.

In conclusion, unless your primary objective for the purchase is to invest and you are prepared to take the risks as well as the potential associated with very early purchase, then there are no real advantages in buying an off plan property as opposed to a good resale property in the right location for the right price.

Guarantee

New buildings include a 10 year guarantee for main failures in the structure, roof, etc.

On resale properties however, there are no guarantee. This means that if there are any damages to the property after you have bought it you will be reliable to fix it. As for hidden defects, you have 6 months from the date of purchase to identify to the previous owner a major problem that he had not identified to you prior to selling it. However, this only applies to items that you could not possibly see by inspecting the property, and you need to demonstrate that the owner himself was fully aware of the problem and purposely tried to hide it from you.

House Design and Finishing Flexibility

With off-plan properties you will be the first to occupy the property and can therefore personalize it as you wish sometimes even during construction. In most cases you can choose your material (tiles, colours, etc. within the same specifications at no additional cost, and upgrades are available at minimum extra cost given that the builder will only charge you the difference in price for the material. Additionally, it is sometimes possible to change the distribution layout at extra charges if discussed with the builder well ahead of time. For example, a dividing wall between a 4 th bedroom and a living room could be removed to allow for a more spacious living room and converting the house into a 3 bedrooms property. This however is not something that all builder will accept and it need to be clearly identified in the initial purchase contract with the builder if you were told it was possible.

Also, because you will not be able to see the final product until the completion of the construction, when buying off plan you need to pay close attention to the distribution floor plans and measurements of each room if you want to avoid deceptions at delivery time. Later during the construction, the builder might have a Show Home open to the public so you can appreciate the specifications and quality of the material being use. In all cases though you need to know that the initial design of the house when you bought may change during the construction phase because the architect needs to comply with all the new requirements being approved.

On resale properties what you see is what you get! It is possible to visit the actual property (and more than once if necessary) to make sure that it is the right property for you and to go through and inspect all details. Most owners of resale properties will try to accommodate you if you want to take measurements or consult with a builder or architect even before you make a final decision on the property.

Variety of Choice

Although there is a large volume of off-plan property developments at the moment, the majority of them tend to offer very few different models and not a lot of flexibility which leaves the impression of a "robotized manufacturing line". This is the reason why so many buyers will refer to these developments as an "urbanization". This impression is stronger at the beginning when the first buyers start to move in and slowly disappear with time as the area gain maturity and personality through the different cultural background of its inhabitants.

The availability in second hand properties is more varied than off-plan developments. You can find everything from old properties (fincas, apartments, townhouses etc.) that needs complete renovation to furnished and ready to move into properties. Furthermore there are many areas (i.e. the city centre, the country etc.) where the only option is a second hand property as it is very difficult or impossible to find new developments because of lack of space or restrictions towards building.

Finally, as second hand properties are all different from one another it normally takes a longer time and more viewings to different properties to find the right one.

Price

The prices for new promotions are set by professional developers that have a strong knowledge of the market value. Therefore, you are not likely to find major variations in prices for off-plan properties for the same standard. The difference in price is normally driven by other factors such as the building specifications for the development, the location, views, size, included features, etc..

The prices on second hand properties are set directly by the owners and there could be a great variation from property to property even within the same standard or area. Although the MiroDali Properties' listing consultants will provide advices to the seller, in many cases the owners have already decided upon the price before contacting us. To get a better understanding of how well a property is priced, compare it with several other similar properties in the same area and make adjustments for extras, size of plot, location, views, and square meters built.The staff at MiroDali Properties will be pleased to help you with this.

Additionally, if you are applying for a local mortgage, your Spanish bank will automatically send a specialist to evaluate the property, and the report being generate will state the official market value of the property. The evaluation report for a property well priced will normally come within 10% of the selling price. The difference resides in some of the extras that evaluators are not taking into consideration during the evaluation process (because they should not be considered for mortgage purposes) but represent added value to the property.

Negotiable

On resale properties, technically everything is negotiable. Although a lower price might not get accepted the terms and conditions are highly negotiable (ie. deposit amount and date, completion date, some of the cost of purchase, existing furniture, etc.).

On new built properties from a developer (even if the property is ready to move in) hardly anything is negotiable. The only items a builder may accept to negotiate are items that will have no impact on their core business. As a result, the price, payment schedule, delivery, etc... are not normally negotiable.

Final Completion & Delivery

To be able to get a good property at the lowest price under construction you will have to buy early, which means that you will have to wait a long time before your property is delivered (normally about 6 months to 3 years after the initial planning has started depending on the size of the project). In addition, a high percentage of all new constructions in Spain are delayed either because of planning, unforeseen difficulties during construction and availability of material or changes required by new laws coming into effect during construction. The best way to protect yourself in this event is to understand your contractual options in case of delays.

On the other hand, when you buy a second hand property the waiting time to complete the purchase is much less than when buying a property under construction. If the seller agrees it is possible to complete the purchase at the notary as soon as the buyer has the money ready and your lawyer has verified all the essential information from the Land Registry, Town Hall, etc.

Debts and Bankruptcy

In the case of off-plan properties many buyers fear that the builder goes bankrupt or that the qualities of the property are not according to the specifications provided before the purchase. The best way to protect yourself is to ensure the specifications are attached to the purchase contract, a bank guarantee is available and insurances are in order.

In the case of second hand properties, the Nota Simple from the land registry office will list all debts or leans registered against the property. Because the time to delivery is much quicker, if there are no debts against the property at contract signing chances are this will still be the case at the moment of completion. If at completion some new debt or leans have appeared, your lawyer will be able to handle it quickly and efficiently.