My lawyer has exchanged contract for a property paying 10 percent of the purchase price. The valuation has devalued my Property by 22%. What is my right of recourse?
Antonio Flores Vila
20th of November 2001
have agreed to purchase a property and our lawyer (introduced by the Esate Agent) has exchanged private purchase contracts in advance of a valuation; a 10% deposit was made at this time. Subsequently, the valuation devalued the property by 22% from the offer price. As far as we can determine, the devaluation was not due to any fault with the property.
We have a number of questions:
- What is our legal position?
- Are we committed to the original purchase price?
- Can we renegotiate the price on the basis of the 'adverse' survey?
- Have we been correctly advised to exchange in advance of the survey?
- Can we obtain a refund of costs and deposit so far?
A. In Spain, not many people instruct for valuations to be done on properties prior to purchasing. There is no legal obligation to do it, and therefore really nobody can be held accountable for it unless you specifically agreed that with the lawyer acting on your behalf.
If the valuation you instructed was for the purpose of establishing that the property was suitable to obtain mortgage loan, I would say that your lawyer has been too quick to exchange contracts, with the result that you may now be short of cash to complete the deal as the bank will not lend as much as you expected. This would be the result of poor advice and a rush to exchange contracts and pay a sum, this perhaps due some pressure on the side of the real estate agent on the lawyer. You cannot really renegotiate the price nor obtain a refund unless the contract specifically stated that the deal was subject to a minimum value to be stated on the surveyor´s report. This would be a condition of the sale, confirming and closing the sale or leaving it without effect, as they case would be.
Finally, bear in mind that many properties in Spain are currently high
priced due to a high demand and that valuers/surveyors do not always follow the property market price trends as quickly as it is currently developing. This means that it is fairly normal for properties to be higher priced than what a surveyor would reflect in his/her report.