Questions and Answers – Property Law
22/10/2008 @ 12:06
Q) I recently exchanged contracts on a property, at which point I paid a deposit of 10% of the purchase price. I have subsequently obtained a valuation, in which my Property has been valued at 22% less than the agreed sale price, although not because of any apparent fault in the property. Am I bound to pay the agreed purchase price, or can I get my deposit back if I decide not to go ahead?
A). In Tenerife, it is fairly rare for purchasers to independently instruct a valuer/surveyor unless there is some obvious need to do so (e.g. a finca on rustic land etc). There is certainly no legal obligation to obtain one. However, when taking out a mortgage, nearly all lenders will obtain their own valuation (at your expense) to ensure that there is sufficient value in the property in the event that there is a default on the loan and they need to repossess the property.
The typical ?contract for sale? drawn up by the estate agent or seller?s lawyer will only make provision for the refund of the deposit if the seller pulls out of the transaction, where typically the buyer is then entitled to a refund of double the amount of the deposit paid. However, there is rarely any clause allowing the buyer a refund of the deposit under any other circumstances.
If the purchase is dependent on raising a large percentage of the purchase price by way of finance from a lender, it may be sensible to negotiate a clause in the contract specifying that the buyer may pull out of the purchase if a subsequent independent valuation prior to completion demonstrates that the property is not worth a certain minimum amount against which the bank will lend the requisite finance. Otherwise, if you are unable to secure adequate finance, you may a) try your luck at renegotiating a lower purchase price; b) try to raise finance from another source at possibly a far less-competitive interest rate; or c) pull out of the purchase and lose your deposit.
If the seller or their adviser is unwilling to agree to such a clause, there is always the option of obtaining an early survey/valuation prior to signing a standard contract. Waiting until a valuation has been obtained also has the added advantage of confirming to the buyer whether they are paying over the odds. In the current depressed property market, the buyer would then be in a very strong position to negotiate a reduction in the purchase price.
In any event, this situation highlights the need to obtain advice from a solicitor before paying a substantial deposit or signing any contract.
Tenerife Solicitors are currently offering fixed fee conveyancing (property purchase or sale) of 1,300? Euros. This is a comprehensive service covering all aspects of a transaction, from negotiating a price and signing a contract, though to signing at the Notary and subsequently registering for taxes and utilities. Call now on 922 71 78 45 (0871 218 0063 from the U.K. ) or email to: info@tenerifesolicitors.com
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