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OCU warns that flats offered by banks are not cheaper

22 may. 2015
Our investigation analysed 54 real estate offers from banks, estate agents and individuals

Flats offered by banks are not always the cheapest. An investigation conducted by OCU in Madrid, Barcelona and Benicasim indicates that it is not always the case that flats offered by the banks are cheaper compared with those offered by estate agents and private sellers. The study is published in number 148 of the magazine Dinero y Derechos (Money and Rights).

OCU has analysed 54 real estate offers (13 banks, 21 estate agents and 20 private sellers) in two major cities and a seaside resort. The results show that despite what many people believe, that the bank is the owner of the property is no guarantee of a good price: there are privately owned homes just as cheap or cheaper and above all in better condition.

Although some properties owned by banks are cheaper than the average, this does not mean they are a good opportunity. In the OCU investigation when a property had a significantly cheaper price, it was because of the condition it was in and the need for major renovation. Half of the bank owned properties visited by OCU needed some building work (and in some cases, a complete refurbishment).

Moreover, there is no advantage in the financing obtained. The usual differential offered by banks is between 1.6% and 3% depending on the level of involvement with the bank through the contracting of other products. The cheapest differential found was 0.9%, equal to the best offers on the market, but for an expensive flat.

From the conclusions of the study and for those interested in buying a home, OCU gives the following recommendations:

• OCU estimates that the price of housing in Spain must continue to fall in order to match Spaniards’ real capacity to pay. In this context, it recommends extreme caution before rushing to buy. Take time to compare and never limit yourself to bank owned properties.

• Always negotiate the price. In almost all the offers in the study we achieved a reduction, which in some cases can reach 30% of the initial price.

• Before buying, it is always advisable to ask for a nota simple (an informative summary about the property) in the land registry to see if the property is free of charges. Pay special attention to debts with the homeowners association and always ask for the debt certificate. Talk to the neighbours, as there may be some large expenditure coming up, for example, the installation of lifts in old buildings. You may be in for a big surprise as soon as you buy a "cheap flat".

• Try to avoid paying advances which some banks require as a "show of interest" when enquiring about a property.

• When comparing prices between banks, estate agents and private sales, note that banks and private sellers do not charge commission to the buyer. But there are some estate agents that do.

• Note the condition of the property, in some cases the cost of the necessary building work can make what seems cheap at first sight end up being expensive.

• It is necessary to add onto the selling price of the property the transaction expenses of the sale which, depending on the region, can be up to 14%.

• In the study, most banks finance 80% of the value of the property, but in 3 cases 100% financing  was offered; albeit, in less advantageous conditions regarding the interest rate and additional fees.

• OCU recommends not to invest more than 4 times your net family income in buying a property. According to the Bank of Spain, in 2014 consumers spent 6.3 times their gross income when buying a home.

• The consumer should not be misled about investment in property. This is not an investment comparable with fixed deposits in a bank: property is risky, has high acquisition costs, taxes and maintenance and low liquidity. According to OCU, for a housing investment to be profitable, the profitability should exceed 5% to offset the costs of purchase, renting out, risk of non-payment and damage to the property. And to get returns at that level, the detailed study of 300 neighbourhoods in the main Spanish cities shows that on average you would have to buy for at least 30% below current average prices in the area.
 

For more information (media): Eva Jimenez Tel .: 91 722 60 61 - ejimenez@ocu.orgwww.ocu.org