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General: 5 top tips for buying overseas property safely - Paul Owen, AIPP

5 top tips: buy overseas property safely

Buyers of property overseas often subject themselves to much too high a risk, something you can and should avoid. This month, I’ll share with you our top 5 tips to buying safely - follow these tips and there is no reason why you’ll be taking any more risk buying overseas than you do at home.

Before I begin, I remind you that I’m not trying to sell you anything in this article (or, indeed, anywhere else). The AIPP is a non-profit organisation set up to make the international property market a safer place to buy and a better place to work. It is an independent industry body for international property.

So, onto those tips....

1. Independent lawyer

No matter what anybody tells you, no matter how easy it all seems and no matter how lovely the agent seems, ALWAYS use an independent lawyer to represent you throughout the purchase of your property overseas.

It is the lawyer’s job to protect you and inform you.

You will need to pay the lawyer a fee – accept that as part of your purchase costs. This is not an area in which to keep costs down.

The definition of ‘independent’ is that the lawyer represents you and only you.

2. Do the numbers

Make sure you know your budget before you start looking at properties – this should include at least a provisional mortgage offer if you’re borrowing money. Never has it been more important to check that you can raise finance before you commit to a purchase as it is significantly more difficult to raise money now.

If you can raise the money, don’t then be tempted to buy more properties than you can afford (particularly on off-plan properties) hoping to sell the extra properties before completion unless you fully understand the risks as well as the rewards (see point 5). This was widespread practice in the boom years and was risky then – it’s even more so now.

If borrowing money, your repayments will stretch over several years, years in which lending criteria and borrowing costs may change. Discuss the long term repayment with a financial specialist before proceeding and make sure you’re also aware of the effects of foreign exchange movements (see point 3).

3. Beware exchange rate movements

The rates do not need to move substantially to affect the value of your purchase. When you start looking, £100,000 may buy you a certain property – a 10% drop in the value of the £ against the Euro, for example, may then put that property out of your budget. If you’ve already signed contracts to buy, this could cause you a problem. Speak to specialists in this area and secure your rate of exchange early.

The rate fluctuations will also affect the costs of mortgages (if you raise the mortgage overseas and earn your income at home). Again, speak to a foreign exchange specialist to highlight the risks and to take appropriate action.

More pages

Page 1: 5 top tips: buy overseas property safely
Page 2: 4. Use professional agents and developers

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