Why does the estate agent want to help me get a mortgage?

When shopping for property in or near Barcelona, the real estate agent might recommend a broker to help you get a mortgage. Why? Two main reasons:

1) They want to know how much money you have so they can negotiate the property’s price accordingly. Thus, in the context of referring a broker, the agent might ask:

a) “How much money do you have in savings?” 

b) “What percentage of the purchase price do you need in order to buy the property?”

Good stuff to know. If you say you have a lot of money, or a decent percentage of the purchase price, the agent might not negotiate the price. Remember, most apartments in Barcelona are overpriced by 5% to 15%, and owners, some of whom are desperate, will negotiate.

I usually interrupt the agent when they ask my clients these questions. I don’t want to lose precious negotiating power. The agents, of course, don’t like my intrusions, especially when I ask: “How much money does the seller have? What? How much? Can you say that again?”

2) New Law. To reserve property in your name, you normally must pay the seller a deposit equal to 10% of the purchase price. It’s generally not refundable. However, under article 621-49 of the Catalan Code, the buyer may withdraw from the sale, and get their deposit back, if they can show that the designated bank refused to grant them a mortgage. 

So if the bank rejects your mortgage application the seller has to return your deposit (so long as you don’t act in bad faith such as rejecting the mortgage because you decide not to buy, etc.). Thus, agents want to help you find a mortgage and get around this law. So if their broker finds a bank that approves your mortgage the agent can say: ‘You got a mortgage and we complied with the law. I’m not returning your deposit’. You might be stuck, even if the mortgage terms are terrible.

In short, keep your finances and mortgage search totally separate from the agent. Shop for a mortgage yourself by going bank to bank or hire a mortgage broker. They’re some good ones out there. Just remember, disclosing your finances to the seller, or their agent, will most likely doom your chances of negotiating a good price for property that the seller might want to get rid of anyway.

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