Buying property in Mallorca is not a no-brainer, as the latest example shows again ....
El Aviso headlined in February 2020: "The time of windy property sales will soon be over". At that time, the Association of Real Estate Agents of the Balearic Islands (API), together with other industry associations, tried to get the government to curb the proliferation of real estate agents. Since its liberalisation in 2000, anyone could call themselves an estate agent. Without any examination or prerequisites.
The policy remained inactive. Although the serious providers of the industry repeated the demand to the politicians, among others, also in January 2021.
And in December 2021 there was the big bang. Picture: "The beautiful Ferdinand and his dirty secret". The Mallorca Zeitung reports that the alleged fraudster is said to have relieved his victims of at least 2.2 million euros, other publications assume an amount in the tens of millions.
What happened?
Well, if the media coverage is correct, and in a superficial knowledge of some of the people involved I can well imagine it, buyers of luxury properties were "ripped off". Empty villas were viewed. And the happy buyer was told that he could (or had to...) pay the deposit directly to the estate agency. But in some cases there was probably no interest in selling on the part of the owner... Or there was already another buyer. In any case, however, the down payments were, according to the authorities' accusation, retained by the real estate agency and presumably used for sports cars and luxury clothes.
In the brokerage office with two locations (Puerto Portals and Port d'Andratx) in the very finest location, it looked like serious business. Which probably also took place to some extent. Today, no one works there any more.
Let's go through a few points that are located between general life experience and lay legal advice. So that you don't fall for a scam!
GUCCI and G-Class are not a sign of success
It may be that your counterpart, who drapes himself with status symbols like an advertising pillar, simply has bad taste. But it is also possible that he is trying to represent something he is not.
The really rich people I have met were never conspicuously dressed or adorned. Accumulations of presently visible brands may be "in vogue" among the newly rich in the Near and Far East, but in Central Europe they tend not to be and should perhaps even be perceived as a warning signal.
The same goes for brokers who drive up in a Ferrari or in the AMG G class. Everyone is entitled to that. But it has never happened to me with a successful broker. So: Is this a highly superficial view? YAAAA. But even clichés always contain a grain of truth.
Greed eats brains
There are no bargains. And don't take it personally, but even if there were, no one would offer them to you. Why is that?
"One-Shot" of the heirs
The children are waiting for grandma to finally die. And then the community of heirs steps in to sell the family's silverware. Often they have to, because the costs of preservation are much higher today than in the golden days when the family property was built. Or also because inheritance tax becomes due.
The heirs know that they can only sell their inheritance once. And of course, they have all heard from friends that they have sold for an incredibly good price. Without taking into account that the friends may have invested more money in renovating the finca beforehand. Or that it is not located on a main road ... Or that there is no high-voltage power line running through the property ...
What I want to say is: When buying real estate in Mallorca, greed reigns on the seller's side just as much. Everyone wants to see as much money as possible, because nothing else will follow. That's just the family heritage. And when the silverware is sold off, it's gone. End of story. And that's it. And then the imagination is often greater than the viability of the market.
When buying a property in Mallorca you will also hear sentences like "Every heir wants to have at least 500,000 euros". This is simply a more emotional way of looking at it, knowing that it will be the last time you can expect a hot shower.
In addition, Mallorcan families generally live down to earth. And they have close family ties. And they themselves value land and property very highly as an investment.
Sellers are greedy too
Every seller buying a property in Mallorca will try to get as much as possible for their property. That's logical. Due to the fact that the last decades have seen an almost uninterrupted upward trend and that every jackass has heard of at least one other jackass who has sold his villa at a high profit, every seller wants to make the big cut first. Statements by estate agents like
He can't sell at that price, because after his purchase price, ancillary purchase costs and renovation costs, he won't make a good deal.
are meant seriously. They have often worked over the last decades. And if the seller does not have to sell, he will probably not consider your serious, lower but reasonable offer for buying property in Mallorca. Even if it is factually and substantively closer to the actual market value than the price he has offered.
I have seen many properties on the island that have not turned around for 5-10 years. Because the selling price was far too high. In fact, at some point reality catches up with the inflated price. Or the famous "doofus" finds himself.
why you of all people?
Then you should ask yourself, when someone offers you a supposed bargain, why you should be the lucky one.
I live here and invest professionally in real estate. And of course I get a lot of offers for properties. So many, in fact, that I ask the estate agents to give me at least two or three introductory arguments to the exposés, explaining to me why this particular property is so interesting. I often find that the agents themselves don't know. Why is that?
Estate agents in Mallorca do not have exclusive rights to properties. This means that the broker who "registers" a prospective buyer with the owners as quickly as possible "wins". This is the process by which the seller confirms that this prospective buyer is now blocked for agent xy and that this agent is entitled to the commission in the event of a sale.
Unfortunately, the procedure means that there is actually no economic reason for the estate agent to spend as much time and detail as possible on the property. He then only risks never being able to receive a commission because another broker was quicker.
So I just have to read every synopsis. And get an idea. And Google Maps, if I'm lucky enough to find the address. But whenever I get offered a real bargain, there are simply reasons for the low price! Either a new construction project garnished with "ocupas" (squatters). Or the often hyped bank sales. But beware, these are all issues where the price discount is justified. Because getting rid of the "ocupas" is a rocky long road. Somewhat easier for private individuals, extremely costly and lengthy for companies that invest professionally. And the bank loans that are sold on do not guarantee at all that you will become the owner in the end. You buy a loan. Which is either serviced. Then you are, so to speak, a private bank without a property. Or you can sell the property at public auction. Where perhaps another interested party buys your dream property away from you.
"what an outside third party is willing to pay".
Experts know that I am talking about the market value here. In contrast to the capitalised earnings method, in which the value of a property is determined e.g. via rental income, the market value is a very variable value. This is because soft factors come into play here. If, for example, the developer of the new villa in Port d'Andratx was so clever as to have his new building furnished with Missoni furniture and the nice Russian oligarch couple finds it totally "wow", then the absurd asking price of 18 million euros is suddenly the realistic market value. Even if a serious calculation might say: 3 million land + 3 million building costs + 2 million profit for the developer equals only 8. But the "outsider third party" just came around the corner and added 10 million. For the furniture, which may have cost 500,000 euros.
Mallorca as a seller's market
The simple main reason why there are no bargains: There are too many interested parties.
And it is extremely unlikely that only one estate agent happens to know about a good property. And he just happens to know you and just happens to want to do something good for you. It's probably not impossible, just very unlikely.
People buy houses, especially holiday properties, emotionally. If a property is well made and ready to move into, it is never a bargain. Because it is easily marketable even at a high price in a seller's market. If there are bargains at all, they are occasionally projects for investors that require extensive renovations. But here, too, the potential profits for the investor are usually already anticipated in the existing prices. So there is little potential to make a killing in such a hot market!
So don't be dazzled when Mr. "Gucci" comes around the corner and offers you the dream of a house in Portixol in the first place for 1 million. There is no such thing. And if he then asks for a deposit on his account: Hands off and go to the police.
Buying property in Mallorca safe?
Buying real estate in Mallorca or real estate transactions in general work differently in Spain than in Germany. However, the role of the real estate agent is relatively identical, as this is now largely harmonised by European law.
How do I find a broker?
We have already dealt with this topic in the first part. In short: it is not wrong to rely on the well-known names. But: please google first. Look at Google Maps, look at Facebook. If you don't find anything there, don't bother. If you don't find predominantly positive and enough reviews, don't bother.
Otherwise, the brokerage fee is usually negotiated with the owner beforehand, so you have only limited influence on it. And, assuming you are serious, you must of course also find your estate agent likeable and credible. But please: Don't ask him for a lawyer or a civil engineer. You could have the misfortune of being recommended someone who doesn't look too closely.
How do I find a lawyer?
That's a good question! I would generally recommend not using a lawyer recommended to you by an estate agent. Why? I know countless honest good estate agents. But unfortunately there are a few cases where there's a bit of a merry-go-round between estate agents and lawyers, where the lawyers don't take their checking job very seriously. In return, they keep getting clients from the brokers. And the brokers themselves are even involved in the property development companies.
Of course, the unsuspecting buyer will never receive the objective and serious advice he needs. And that's how one or two bad purchases have come about. In principle, I think it makes sense not to mix up the different interests of the parties involved:
The broker is desperate for the deal to fly. Only then will he get his money. That is his right, but it does not make him the most objective advisor, even if he tries hard. You should pay the lawyer so that he always gets his money. Even if the purchase does not take place. So that he can advise you objectively. And does not have his own interest in making the deal happen.
In Spain we have a similar, but of course different law than in Germany. And in the autonomous region (comparable to a German federal state) of the Balearic Islands there are of course also state laws or formations of national law in state norms. This includes, in particular, points such as nature conservation and environmental protection, so that not only a good knowledge of Spanish property law is important for your lawyer. But also a very good knowledge of Mallorcan customs.
In the beginning, I worked with German lawyers because it was easier for me linguistically. In the meantime, I work with two Majorcan law firms because I have the impression that the local conditions are better known there.
However, I am honestly "biased" because my wife now looks after the German clients in one law firm as a German lawyer. I can warmly recommend both law firms, but I don't want to be suspected of using this guidebook for surreptitious advertising. Therefore, I am not recommending anyone here, but recommending you: Google and ask friends who have already bought successfully. But in any case: Google every partner before you decide.
"Arras" or "promesa de compraventa"
Most of the time, the seller still wants to move out. Or you need time to arrange financing. Then an option contract ("contrato de arras") or a promise to purchase ("promesa de compraventa") is negotiated between the lawyers, the content of which is largely identical to the purchase contract that is later notarised. The option contract does not have to be signed in front of a notary, the signatures of both parties are sufficient. This is the main formal difference between buying a property in Mallorca and in Germany.
Usually a deposit of 10% is agreed. It should be that the seller agrees to sell to you. Or he pays back the 10% AND a penalty of the same amount. The other way round: If you don't buy, the seller gets to keep the 10%. The 10% should be in a notary's escrow account. Or at a super reputable long-established law firm. But NEVER with the estate agent. NEVER with the seller. Better not with the seller's lawyer.
Often you can also negotiate that if your financing falls through, you will get the 10% back. But this can also frighten the seller, because he sees that his sale is not as dry as the estate agent told him beforehand.
Unlike in Germany, the notary has a purely executive role when buying property in Mallorca. He also reads the contract again during the notarisation, but does not deal with it as extensively as German notaries do. For this, his fee is also much lower. The actual work here lies with the lawyers, the usual fee is 0.5 - 1% of the purchase price.
Tasks of the lawyer
What does the lawyer have to check?
Quite a lot! The most important thing is that the owner is also the owner. And that your desired property is also registered in the land register. And that it is registered with the actual building and the correct areas. Slight deviations are normal, even between the different registers.
I have already talked in detail about illegal buildings when buying property in Mallorca in the first part. Here only so much: If small things are illegal, you may be able to live with it. But if decisive parts of the house are not legal and cannot be legalised, leave them alone.
"After eight years it is legal"
That is not so. After 8 years, the prosecution of illegality becomes time-barred. But as soon as you have to submit a building application - even if it's just to plaster the façade - it will fail. Because your object is not legal. So the illegality remains. And it will be pursued ever more strictly. And perhaps, if you want to sell your property again, it will become a slow seller.
And: If your house burns down, you can "only" legally rebuild it. Not the way it might have been. But only as it is legally. Does that happen every day? No. But if it happens to you, it's just too bad.
Then there are more complicated issues when buying property in Mallorca, which are often only regionally important. For example, the area around the Tramuntana Mountains enjoys very strong protection. There is nature conservation and flood protection.
So, for example, you can't build next to a riverbed (any more). Which is quite reasonable, as the storms have shown us. But if it's the only legal place for the pool, then you might even get permission from the city council. But the pool is still illegal. Only the lawyers who deal with transactions in such areas know that.
For condominiums, it is very important to check the statutes of the community of owners ("Comunidad") and the minutes. And check whether there are any arrears. The same applies in principle to arrears on the property itself, e.g. taxes.
Sometimes lawyers negotiate very strictly when buying property in Mallorca, because on the one hand they want to protect your interests. On the other hand, they may also want to show their importance to you. In the phase when the lawyers are talking, I recommend that you keep at it. Talk to the estate agent. Talk to your lawyer. Many transactions fall through before the option contract is signed, because either the lawyers harden the fronts or another buyer, often presented by another estate agent, comes around the corner who simply goes one better.
What I don't want to say is: Agree with everything. But if the ownership is clear. And your desired object is ideally legal, then the only real point of contention is the guarantees.
Warranty often worth nothing
Guarantees are often only valid from reputable developers when buying property in Mallorca. Because mostly you buy from owners' associations of investors or a project SL and then have addresses for service of process in northern Norway ... And in court the table of Spanish construction costs is used for comparison. This is usually much less than it actually costs to fix the defect especially in a luxury property. And even more important: many things that are perhaps badly built or stupidly planned are obviously crap. But not a defect.
I usually buy unrenovated properties. The seller doesn't want to guarantee anything. Sometimes we manage to get him to at least declare that he knows of no defects. Or that the structure is fine. But honestly, with the properties we buy, that's secondary.
For you, who would probably like to buy a new building or a newly renovated property, the quality of the structural realisation is of course a very decisive factor when buying a property on Mallorca.
In my estimation, about 70% of properties have been relatively poorly built or remodelled.
This can often be seen in the "finish", i.e. how the final elements have been installed, e.g. tiles, built-in cupboards and similar externally recognisable parts of the building structure. More expensive and difficult to cure, however, are issues such as: Quality of windows, quality of installation of heating and / or air conditioning. Here it can make sense to ask the seller to let you carry out tests with experts on various dates, for example to determine whether the control via the KNX bus system works at all. And whether the dimensioning of the system is sufficient for hot summer and cool winter days. There are specialised engineers for this, whose advice I would definitely seek, at least for a larger property. And: make the effort. Buying property in Mallorca the safe way is a lot of work. Costs time. But it is worth it!
Otherwise, the advice from the first part applies in general: keep an eye out when buying property in Mallorca and consult professionals!
My point is: it is better to check, check, check. Rather than hoping afterwards that any guarantees can be successfully enforced. And if you have really checked thoroughly, it is better to see that the transaction is completed successfully than to demand "wild" guarantees from the sellers.
But that is clearly a decision you have to make yourself. It is difficult for anyone to give objective advice. Don't compromise too much, but don't be too stubborn either. As always in life 😉
Have fun with the further and hopefully successful search for your dream property!
Arnd
