2023-05-01 16:56:07
The coronavirus pandemic accelerated the need to change residence in search of better conditions, a trend that has been consolidated. This is what the data reveals: customers after a mortgage to change homes they increased by 32% from 2020 to 2022, according to the financial intermediation company Grocasa Hipotecas. To make the move, many need to get rid of a previously owned home. Choose the best time to put it up for sale it’s key to get the best conditions or not go broke trying. The aspects to be taken into account are multiple as long as there is no urgency to perform the operation. The market situation and taxation are part of these variables that can mark the success or failure of one of the largest investments that are made in the course of life.
Rising inflation, interest rate hikes by central banks and the energy crisis create a scenario full of unknowns. And to the equation must be added all the actors involved in this type of situation, such as notaries and banking institutions, in addition to the corresponding paperwork. In order to clear up doubts and find out what is the best road map in these cases, ‘actius’ has asked several experts in the real estate sector and buying and selling flats.
The starting point is to have a clear personal situation. You need to plan resources and time according to the set of needs and be clear why you want to put the house up for sale to buy later, as detailed Jose Garcia Montalvo, professor and director of the Department of Economics at Pompeu Fabra University (UPF). Questions that can cause real headaches. Having found the ideal home, but not being able to afford it because there is no buyer for one’s own, or if the usual home is sold and there is still no place to move to, can push the interested party to buy or sell for an unwanted price simple necessity.
There will be price reductions of up to 5% in specific areas. It is not a shutdown of the real estate sector, but a logical adjustment
You also need to have a broad view of the market that allows you to understand if there is an opportunity worth taking advantage of. The truth is that the market is in one turning point after experiencing one of the stages of greatest growth in recent years due to the health crisis. Rising savings pushed the volume of sales to 650,000 properties in 2022, the highest figure since 2007. This year, however, sales are being weakened by the decline in the purchasing power of families and the increase in the price of mortgages. In this context, according to a study carried out by CaixaBank Research, a decline in the number of purchases and sales of up to 480,000 is expected .
“logical” fit
Housing prices adapt to this situation. “There will be price drops of up to 5% in specific areas. It is not a shutdown of the real estate sector, but a logical adjustment,” he concludes Anna Puigdevall, director general of the AIC and treasurer of FIABCI Spain. Despite the moderation in prices, experts do not believe that this is enough reason to stop buying a home or wait to sell.
“The most recommended thing is to sell quickly and wait a while to buy the next home, while negotiating, until interest rates have dropped,” according to Gonzalo Bernardos, professor and director of a master’s degree in real estate at the University of Barcelona (UB). The idea of buying now should be put away, according to the expert, because when interest rates rise, the circulation of money soon decreases greatly, which anticipates a bad moment in the world economy.
In the other hand, mortgages become noticeably more expensive. Since the European Central Bank (ECB) started raising interest rates, the Euribor has been climbing at high speed. Specifically, the monthly data closed in March 2023 at 3.647%, while in 2020 it was even negative, at -0.3%. Starting a mortgage with these conditions is a significant barrier for most.
The ECB itself has noted that mortgage loans “to households are moderating as a result of the tightening of granting criteria, the increase in financing costs and reduced consumer confidence”. Maria Matos, director of studies and spokeswoman for Fotocasa, points out that “it is not the most favorable time to buy due to the increase in mortgages, but yes for those who do not need them”. For these, it can even become interesting because “the buyer has market power over the owner”. “There are a lot of flats for sale and they have the potential to get additional downs,” he adds. However, the percentage of buyers who need to apply for a mortgage to buy a flat is around 75%.
Best time to sell
Despite the moderation in prices, experts agree that they are perfect time to sell. “Prices are at their highest and have had the most important increases in the last months of the last 20 years, reaching almost 10% annually due to the rise in interest rates”, he emphasizes Matos. Although it should be noted that there are “fewer buyers due to the difficulty of Euribor”.
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‘ASSETS’
“Sales times will be longer and price counter-offers will increase, so it is recommended to go to a professional to do the management,” explains Emiliano Bermúdez, deputy director general from Donpiso. Now, selling a flat takes between 45 and 50 days, a time that it extends to 60 days towards the end of the year. In addition, the purchase of a home is greatly influenced by the falling in love factor, and a high emotional component, so it is advisable to be rational when paying a possible overprice.
Define the budget
Everything has time. Assess the property correctly and know the sales price range of the specific neighborhood where it is located must be prioritized. And know that even when the price adjusts to market conditions, there is room for negotiation. Then you must define the budget for the purchase – with a maximum price – and start looking for the home you want. When there is already a buyer, a contract is drawn up to reserve the home and all that remains is to manage the necessary financing. “It is always necessary to ask for advice when making a sale to make sure that the property is in condition, free of pending charges and spills, and for the expert to guide us in the process. Most clients do not have financial training,” he adds kill
Two possibilities
Another of the main doubts that may arise for someone who wants to make a replacement sale – as it is called selling a house to buy another one – is whether they will be able to access a mortgage without having sold the previous one. The most common is to use the money from the sale to pay off the debt, so you can request a certificate of outstanding debt from the bank. Another alternative is to take out a bridging mortgage, a loan that allows you to change homes without having sold the previous one and without contributing new savings. Once the buyer is found, the debt is cancelled, the old property is released and start paying installments on the new mortgage. Experts warn that, in any case, buying and selling replacement is not simple and involves financial risks, taking into account the additional costs, in addition to time and contracting a new mortgage.
But it’s not all problems. There are also advantages when settling the debt with the Treasury. Although owners who have sold their home during the year must include the operation in the declaration, those who have transferred their usual home can benefit from the exemption for reinvestment. This assumes save personal income tax (IRPF) when certain requirements are met. The most important requirement is that both the home being sold and the home being purchased “constitute the taxpayer’s habitual residence”, as he explains Bernardos. In addition, “when you change flats you have two years to buy another one in order to benefit from the exemption”, adds the professor. Those over 65 can also take advantage of it.
Question of expenses
All the money from the sale must be reinvested in the acquisition of the new home to be exempt from paying the full income tax. Although, if only part of it is used for the purchase, the seller is exempt from paying the part proportional to the reinvested amount. “Taxation always depends on the profile and where the operation takes place. It is not the same to buy a second-hand house as a new one, nor in Catalonia as in other autonomous communities”, he explains Bermudez.
In addition to the tax aspects, the interested party in this type of transaction must take into account all the expenses involved. Apart from the sales tax, there is the municipal capital gain, the costs derived from a possible liquidation of the mortgage, the real estate commission, notary fees, moving costs and the costs of the deed of sale, as well as renovations to the new home, if necessary. Therefore, it is recommended create an economical mattress to cover yourself in case a problem arises.
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