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23 Apr 2007 00:00 by EOS Team Star rating in In Spain of course!. 4018 posts Send private message

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Smiley, sorry for the delay.  Here's a whole new section dedicated to the subject of black money.

If anyone has any questions or comments about black money then please start a new thread here.

Justin


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23 Apr 2007 14:46 by nesbeth Star rating. 14 posts Send private message

It frightened me to death when we went to the notary with all that money on us.

We will give our solicitor POA when we sell & buy again. As I couldn't go through all that one more time.

Wendy x

 




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23 Apr 2007 15:04 by georgia Star rating in Algorfa (As seen on .... 1835 posts Send private message

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Hi Justin,

As you are handing threads out like MBE's could i please have one of my own.

Titled:

IF YOU WANT TO BUY A HOUSE ANYWHERE??????!!

Sorry couldn't resist.

Regards

Georgia


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23 Apr 2007 20:20 by hudsey Star rating in Hexham, Northumberla.... 120 posts Send private message

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I have posted on DEED VALUE COMPARED TO HOUSE PRICE but has reference to this thread.

I contacted my solicitor who obviously contacted the agent who we are purchasing through.  We received an e-mail from agent with a new breakdown of costs which can be paid in total to the developer by Bankers Draft Cheque.  We are still awaiting reply from our solicitors as she did not have time to answer my quetions today and will e-mail me on Tuesday. 

 




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23 Apr 2007 20:47 by bobaol Star rating. 2257 posts Send private message

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Agents are now very wary of this black money system.  If it is suggested, then I suggest you run a mile.

There are literally thousands of properties available and, although I paid this on my first property some 5 years ago, when I looked around in August last year to January this year, not one agent or builder even suggested I put money aside.  The contract I have for the one I picked states the exact amount I'm paying (less tax, of course).  The only problem was when I was looking for a resale and the Spanish owners insisted on money up front because that's the way it's always been done. 

Hopefully this system is now dead and buried but, if it isn't, you have the choice to go elsewhere.  I just hope no-one comes back in a few years time and says they weren't warned.




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23 Apr 2007 22:39 by Smiley Star rating in San Pedro de Alcanta.... 2502 posts Send private message

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IT IS FAR FROM DEAD AND BURIED BOBAOL - just look at other threads on recent completions. I have had somewhere in the region of 15 clients so far this year that have had or are having problems with this. I just wish I had been firmer with the powers that be on this site about having a separate thread for this when I joined the forum last summer. The more people that are aware of this and the potential consequences the better. It deserves to be permanently at the top of the threads. While the authorities are trying to stamp it out it is still a problem and wil continue to be that way for quite a while yet methinks.  

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23 Apr 2007 22:52 by hudsey Star rating in Hexham, Northumberla.... 120 posts Send private message

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Agree with Smiley.  My new breakdown of bill shows approximately £500 more in tax.




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23 Apr 2007 23:20 by Roberto Star rating in Torremolinos. 4493 posts Send private message

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Bobaol: "The only problem was when I was looking for a resale and the Spanish owners insisted on money up front because that's the way it's always been done."

Bob, do I presume that by "money up front" you are talking about black money? Or do you actually mean that some sellers were asking for you to give them money in advance?

In the (recent) past, I believe it has been the case that both sellers and buyers were keen to under-declare. A "friend of mine" has been happy to do so when buying previously, and by doing the same when selling later on, avoided considerable amounts of tax (but you didn't read it here). However, with the authorities toughening up on this practice, buyers, especially those smart enough to take the advice of professionals like our Smiley, are shying away from it, as evidenced by discussions in this and other forums (forae?) But certainly there will still be some, esp. Spanish, sellers who will try to "persuade" buyers to under declare.

To anyone who finds themselves in this position and is not happy about it, I would suggest that you simply turn up at the notary with your original contract showing the full sale price, and a bankers draft for the same amount (less any deposit paid). The seller is going to find it very difficult to explain why they do not want to sign.

Even as I wrote the above, I realised that each situation can be different, and it will not always be as easy as that for some (before I get lynched!) My point really is that the law is on your side, and as has been said elsewhere by Smiley and others, be assertive and insist on having things done your way (the correct and legal way). Do not let yourself be bullied or told "this is the way we do it here". Maybe before, but things are changing.


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24 Apr 2007 11:23 by JeansSis Star rating. 2376 posts Send private message

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This message was last edited by JeansSis on 5/18/2007.



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24 Apr 2007 18:09 by Roberto Star rating in Torremolinos. 4493 posts Send private message

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I have bought a couple of new builds in recent years. On one, the developer sent me a "suggested" breakdown immediately prior to completion, which I simply rejected and sent my own figures back by return, which were accepted unquestioned and nothing was ever mentioned about it again. I know of another owner in the same complex who bought at the same time, and thought the "suggested" figures were compulsory. Now regrets it deeply. The other property I bought off-plan, at the time of signing the contract I was asked about under-declaring. The developer offered a discount if I was prepared to! I politely declined, and there was absolutely no argument.. On the other hand, I offered to pay 30% on signing, rather than in 18 monthly installments (having worked out how much interest I would lose on my money over 18 months) and secured a decent discount by doing so (worth more than the lost interest, obviously). Everyone seemed happy with this arrangement, and what's more, no laws had been broken!

It's a real shame that many people have had bad experiences when buying, and I hope that by sharing those experiences others may avoid similar mishaps. Fortunately my own experiences have been pretty much trouble free, and I hope that this will also encourage those who are feeling nervous about the whole process, or may have been totally put off it. My point is that as long as you are well informed and stand up for yourself, buying a property in Spain can still be a very rewarding and sound investment. Go for it!

 


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"Politicians and diapers must be changed often, and for the same reason"

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24 Apr 2007 18:13 by bobaol Star rating. 2257 posts Send private message

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Roberto.

On one house I was asked for €196,000.  The seller required €26,000 as a deposit (fair enough) but then wanted the deeds to say €170,000, the balance.  So that was "up front black money" (are we getting complicated here?).  Ok, so my tax (transfers etc.) would have been €11,900 instead of €13,700 and I've have saved a bit.  I think the seller would have saved more because of the CGT.  Either that or the Spanish don't like telling the state everything.

On the original place I have, I wasn't even told the reason some money was paid in cash.  It was off plan and I paid 10% as a deposit, £6,600.  3 months later I paid £27,000 bringing it up to 40% of the cost.  On completion, I paid £37,000 ( a bit more than the other 40% because of exchange rates) so I had now paid 80% of the total.  The final 20% was paid in euros.  I'd paid my bankers draft to the agents (to take it up to 80%) and was then taken to the bank to draw out the final (I think) €23,000 in cash (can't remember the exact figure because exchange rates kept changing).  I handed this over to the builders who then handed me the keys.  According to my deeds, the cost of the house was the deposit plus the two payments, ie less the €23,000 cash.  Now that I am getting my deeds, the solicitors have informed me that the full price (including the €23,000) will be put on the deed and I have to pay a further sum to cover the 7% IVA on that.  The land registry have asked for a further €1,500 on top of that as either a fine or interest on the amount not paid.  At no time was I told the reason for cash except "It's the way it's done in Spain".  My solicitors are fighting the interest insisting it is the builders fault.

Of course, this was my first foray into Spain.  Now, with help from forums like this, I know what the money was for.  At the time, I had no idea and took the agents (big ones with a name like a book of maps) word that everything was hunkey-dory.  Hence my advice on "run away" when deals like this are offered.  Especially if you are in the position to buy more expensive properties than I am.  One couple I met had been asked for €50,000 on a €300,000 villa they were looking at and putting the deeds at €250,000.  They had been told by the agent that this was a good deal because the seller had originally been asking €100,000 up front as black money.  Imagine their bill when the land registry finally catches up with them.  They also refused as a similar off-plan house was up for sale at €20,000 less and they were prepared to wait the 18 months.

 




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24 Apr 2007 18:26 by hudsey Star rating in Hexham, Northumberla.... 120 posts Send private message

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Received reply from my solicitors.  She obviusly knew all about it.  Did not answer any of my questions and advised - 'by now you should have received a new breakdown of costs from your agents and no money would exchange hands.  Also, the deeds will show the correct purchase price'.  She did not elaborate on anything, that was all I got. 

If I had not read Conrads note, the same thing would have happened to me.  It's something your don't expect and people need to be informed.

Jeansis, I'm sorry you had such a bad time.  Its a great shame that forums like this were not available sooner. 

 

 




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24 Apr 2007 18:37 by JeansSis Star rating. 2376 posts Send private message

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This message was last edited by JeansSis on 5/18/2007.



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24 Apr 2007 18:49 by Pitby Star rating in Andalucía. 1904 posts Send private message

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Tut, tut, JeansSis!!  Just did a search of the forum of "british shop" and look what it turned up!!!

www.eyeonspain.com/Secure/ForumPosts.aspx

Enjoy!!!

This message was last edited by Pitby on 4/24/2007.



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24 Apr 2007 18:58 by JeansSis Star rating. 2376 posts Send private message

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24 Apr 2007 19:16 by Roberto Star rating in Torremolinos. 4493 posts Send private message

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Bob - got it now! Thanks for clarifying.

I've been on both ends of the "B" issue over the years (buying & selling), and although I'd be lying if I denied I'd benefitted from it, it's also been a right pain in the culo. I never thought I'd see the day when things changed here, let alone as rapidly as they are, since the Spanish are usually so set in their ways. Maybe it's down to Smiley's vociferous campaigning (and those TEETH)! 


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"Politicians and diapers must be changed often, and for the same reason"

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24 Apr 2007 19:46 by bobaol Star rating. 2257 posts Send private message

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Roberto, glad you got down to my post through all the thread drifts.  Or do they only take black money in British supermarkets in Almoradi???



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24 Apr 2007 20:26 by JeansSis Star rating. 2376 posts Send private message

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24 Apr 2007 23:41 by rowlandsbb Star rating in Gloucestershire &Hue.... 771 posts Send private message

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On the way out!!

After 'Madrid' the property world in Spain started to change

Now it is advanced...just see how it has recently changed to get your NIE No ......[UK Gov will have access to the name of every UK purchaser in Spain]

Anyone who buys' with black money' now is making a big mistake 

Also the good mortgage terms currently on offer [ 40 years up to 80, interest only for up to 15 years ] will not be on offer with 'black money'

In a way it is now becoming similar to UK.....which is not bad for UK investors and buyers

Bit of a problem with the capital gain for everyone who has bought  several years ago but unless you have to sell then in time the change will be mitigated by the medium term continued increase in value 


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25 Apr 2007 09:58 by Gillespie Star rating in Costa Calida Area. 608 posts Send private message

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I think it will be a long time before we see the end of "Black Money"

To understand why, we need to understand how it happens.

There have been 2 markets in Spain, The local Spanish Market and the Overseas buyers market.  The overseas market in the last 8 years vastly out paced the local market.  As a result, the catastral (the rating valuation department) was left behind, often showing property values for rating purposes at about 50-60% of the actual sales values.

The catastral is revised every 10 years and even then doesn´t reflect the true increases, this is because like in the UK if you hike the values too much for rating purposes you get a rebellion and usually ousted from power - remember the poll tax!!

As a result of these low valuations, the tax office (hacienda) expect to recieve their 7% based on the valor catastral.  Lawyers can access these figures to advise on the lowest declared values for the title deeds ,saving the buyer a load of money and the vendor a lump of CGT.

The rule of thumb is "valor catastral y poco mas"  a little more than the absolute minimum. 

If the declared value on a title deed is below the valor catastral, the notary is obliged to report it to the Hacienda for re evaluation, and  they can claim any short payment from either vendor or buyer or both, i think for up to 4 years after the sale.  A good lawyer should avoid this by declaring a little more as described above.

Bank valuation companies also used to use the catastral valuations  as a guide and as a result were often well short when mortgages were applied for in the overseas market.  Now the bank valuation companies are more up to date often reflecting the actual market value, but then they have nothing to loose compared to raising townhall rating values to match.

Lawyers are quite happy to advise buyers that a 60-65% declared value is OK provided it is a little over the valor catastral as no-one will bother the buyers or vendors.  The hacienda expects this to happen, so long as the catastral rating values are low.  The last review was (i think 2004) not too sure.

With the market prices stable over the last 1-2 years, the catastral values will still remain at about 65% of actual sales price, so expect to pay around 35% black money in a resale situation, and enjoy the saving whilst  lasts .

The only negative is, if you have your house compulsoraly purchased, you will only get the declared value as opposed the the actual sales price.

Banks will more often than not lend black money to UK buyers as they have been doing it for the Spanish for quite some time.

 The best way to avoid the black money situation is to insist the notary draws up the "contacto de compra venta" "the purchase contract "  this will have to be done at the full sales value as he/she will be producing the final title deed and will need to declare the full value as is always shown on the "compra venta" though this is usually destroyed after the completion.  More often than not, an agent or the clients lawyer draws up the contracto de compra venta.

If the government is to stop black money, then it will need to legislate that all contracts are only legal if produced by the notary.  I think this is how it is now done in France, but it has really killed the French property market for the last 4 years.



This message was last edited by Gillespie on 4/25/2007.

This message was last edited by Gillespie on 4/25/2007.

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