The current market value of a property, being the price that a prudent buyer would pay, and a prudent seller would accept, is not what the seller will finally receive or what the buyer will totally pay.
- The Buyer has Survey, Legal, Notary and Registry fees. Transfer Tax, or VAT on new property, is the big one, at up to 10% of the price in some Regions. Insurances, Mortgage and Money Transfer charges, plus IVA (VAT) on most of these, can bring the total to 12% of the price or substantially more.
- The Seller has to deduct estate agent and legal fees and marketing expenses, then local and national capital gains taxes, plus the ubiquitous IVA (VAT) on most of these, all of which again can amount to 12% or substantially more.
- Some Buyers and Sellers avoid some of these costs by, for example, not using lawyers or a surveyor or insurance, but at the end of the day the risk that they are taking is significant, and they could find themselves without legal title, responsible for buyer’s costs or unpaid taxes, in a house with substantial and costly physical problems, and thereafter involved in substantial costs and legal disputes that can carry on and dominate their lives for many years. Not the dream that the prudent purchaser or seller was looking for.
- Avoiding taxes by paying part of the price in cash and not declaring it is foolish, as the penalties are substantial and can lead to criminal money laundering charges, plus the buyer will just have to pay them when they eventually sell.
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