What precautions to take if you are buying your home cash (Part 1)

Despite the collapse of the real estate in Spain, believe it or not, homes are still sold and not only that, but three of every ten sales of properties bought in Spain are done so with cash in hand, i.e. without the need for a mortgage. 


These buyers are, in general, small and medium investors over 55 years of age, able to pay the full price of a dwelling, without having to go to the local or UK bank for a mortgage. The buyers aim is to provide it as a donation to their children or get a return by letting it, preferring to invest in brick and mortar rather than leaving the money in a deposit account, as they believe that their savings are not well assured in the bank and the interest rates are not very jubilant either.

Savings of up to 50%.

Anyway, before acquiring a house or flat, it is recommendable to take into account certain precautions, as obvious as to find out if a tenant resides in or to check charges that can weigh on the property but let's start from the beginning. We will list them on next week articles.

If you take a calculator in hand or use an Excel sheet and start doing some arithmetic you will find out that acquiring a property without funding from a bank and paid in cash it can mean savings of up to 50% with respect to the purchase through a mortgage.

Buy without mortgage.

275,000 mortgages were signed during 2012 of the nearly 320,000 homes that were sold in Spain, according to data from the INE (National Statistics Institute). Despite the collapse of the real estate sector, the Spanish government is still fundraising VAT. With each ten sales of homes; three are carried out with cash, without the need for funding.


The abolition of tax incentives for house purchase from January 1, 2013 and the closing of the mortgage tap, especially for flats that are not owned by banks, has caused that access to a mortgage is more expensive and involves a larger number of demands. Thus, the increase in cash payments to buy flats is a trend that is spreading throughout Spain, except in the Basque country, where the majority of purchases still being done with mortgages.


Who are buying homes with cash on hand?

Since the beginning of the crisis, has emerged a new kind of real estate investor, usually a 55-year-old, who is able to pay the full price of a property in cash, without having to resort to the a mortgage from a bank. New home buyers perceive the mistrust in the financial system and considered that their savings are not sure all in banks. For this reason, they prefer to invest in bricks and mortar, instead of putting all the money in doubtful financial products, or in an account with a fixed interest, speciallywhen interests are decreasing year after year.



Prices are down by as much as 50 up to 70%.

The type of property which is mostly purchased in cash tends to be small and old, with prices down on its current value by as much as 50 up to 70%. Real bargains you might say.

These small investors do not possess large fortunes, but have enough liquidity to acquire a property without a mortgage. The types of property which attract these buyers are usually small and old, with large reduction in their original prices. In addition, the statistics show that they do not buy to speculate or to reside in it, but rather to leave it in inheritance to their children or to achieve profitability that may round a 5% at present, through its rental. At the same time, both banks and property developers and individuals are making a great effort adjusting prices downward to attract those who are willing to still invest their savings in the real estate market.

Next week we will analyse a complete list of tips of what to look for before carrying out a purchase.



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