Walter Finch
HOMEBUYERS across Spain are coming to terms with an expression that Brits have long been familiar with: gazumping.
This practice, where a seller agrees to sell to a buyer but then reneges and accepts a higher offer from another buyer, can leave buyers in a very precarious position.
While it’s a common issue in countries like the UK, Spain has a system in place to protect buyers.
Nonetheless, eight out of ten homebuyers would like to see gazumping banned in Spain, as it can lead to significant stress and financial loss.
In the UK, where the sale of a property isn’t legally binding until the deed is signed, buyers are particularly vulnerable to this practice.
However, in Spain, the situation is different. Deposit contracts – known as arras in Spanish – provide a level of protection for both buyers and sellers.
Once a deposit contract is signed, both parties are legally bound to the terms of the agreement. If the seller backs out, they must return the deposit and pay a penalty.
Real estate portal Fotocasa explains: “A home seller has just signed a deposit contract to guarantee the sale of the property, whose sale price is €200,000.
“Deposit contracts usually represent 10% of the purchase value, so the buyer is about to pay a deposit of €20,000 to the seller.
While gazumping is still possible in Spain, the existence of deposit contracts significantly reduces the risk for buyers.
Fotocas points out that ‘it is common to agree on compensation that is twice the amount paid’, so in the previous example, the seller would have to pay ‘the gazumped’ the sum of €40,000 euros.
This legal framework, regulated by the Spanish Civil Code, offers much-needed protection to buyers, reducing the risk of gazumping.
The convention is that buyers are protected for 2 weeks by putting down a small refundable deposit to allow initial legal checks and to have a building inspection to check the house hasn’t any serious problems. If all is OK, the 10% non-refundable deposit is paid and that legally secures the property for the buyer. If the seller decides not to sell to them, for whatever reason, they must return the deposit plus pay the same again as a penalty. So a gazump won’t happen unless the new buyer is going to pay at least 10% more and the original buyer at least gets 10% of the price as compensation for their lost time and effort. Also note that gazumping isn’t a UK problem, as it doesn’t happen in Scotland. When the initial contract is signed, both buyer and seller are legally obliged to proceed. A wee bit misleading on two points Walt.