How to sell residential property abroad: a step-by-step guide

In 2005 a couple from the UK bought a flat in Spain for €190,000. In 2008 the property market bubble burst, the prices fell drastically, and in 2009 when the recession really started to bite, the couple put the flat up for sale for a paltry €100,000 without going in search of any professional advice. Even so, they could still not find a buyer. As a result, they had to rent the apartment out.

Why did that happen? Because they made three drastic mistakes: they did not contact professional realtors, nor did they choose the right time to sell, nor value the property properly.

To avoid such mistakes and sell your foreign property successfully, we recommend that you take the following 16 steps into account.

You can always sell property remotely. An owner who lives abroad can send a representative who is able to hire realtors, hand over the keys to them and then later sign the sales contract. However, one point of note: power of attorney to the representative may be needed.

Local legal specialists in the given country can supervise the sale so if you cannot or do not want to occupy yourself with the transaction at all, you should contact them straight from the off.

If you are the owner of a property and do not want to involve a representative, you will need to visit the country at least twice: to find the realtors and sign the contract. The real estate agents will complete all of the other necessary arrangements themselves. You will be able to control their actions by telephone or e-mail.

Marina Filichkina Head of Sales Tranio Thailand, Europe

1) Look for the best moment to sell

The best times to sell property are at the stages of expansion and peak of its lifecycle, during which the prices reach the highest level and profit can be maximised from the sale. However, those sellers utilising the property themselves at the time they want to sell do not always have the occasion to wait for the opportune moment.

The season in which you are looking to sell is also important. Many put up their homes for sale in April or May, accepting bids throughout summer and then close the transaction by autumn. Property is rarely placed on the market before holidays and in midwinter when many people are away and not looking for accommodation. However, there are buyers for whom the time of year doesn't matter. For example, one of Tranio's partners closed a transaction on 31st December, since the clients in this circumstance had a custom of celebrating each New Year in a new home. Being in a hurry and in a festive mood, the buyers paid generously and to the benefit of the seller. When selling property in the low season you can take advantage of a situation in which there are fewer houses on the market, but there still are genuine buyers looking for a new home.

2) Compare the property to similar offers

Take steps to receiving a preliminary estimate of the value of your property; it is recommended to look through similar offers on real estate web portals and subtract about 5% from the average price (since many properties sell at a discount). This way the owner can determine the approximate price and decide whether to sell at such market conditions. A more exact estimate can then be sought from either a real estate agency or an appraisal company.

3) Estimate the related expenses

Sellers of properties pay capital gains tax and may also be liable to pay the realtor's, solicitor's and notary's commissions. If the seller plans on purchasing another property immediately, it's better to make advance calculations of expenditures in order to see whether there will be enough money to make a new purchase.

If the property was bought using a mortgage and the loan is not yet repaid, the owner must inform the bank of the sale to take place. In addition, it is necessary to check whether the bank agreement contains a clause regarding early repayment and any such penalties related to it. This is necessary to understand any extra costs that may be incurred, resulting negatively on the final sale price.

4) Make your residential property look attractive to sell it quickly

Put your residential property in order before selling it, as follows:

• give it a general cleaning;
• get rid of all the unnecessary things: remove excessive furniture for the rooms to look larger, take down family photos and personal items (according to Big Yellow Self Storage (UK), by throwing clutter away the sellers add an average of £4,811 to the property value, and another £921 by hiding family photos);
• hire specialists to repair broken appliances or utility connections;
• do cosmetic repairs (if required), including changing the colour of walls to neutral colours;
• tidy and prune the territory around the house.

Spending too much on the pre-sale repairs is not recommended: costly alterations such as installing an extra bath or retiling the roof do not always pay off.

5) Hire realtors

When choosing a real estate agent, paying attention to the quality of the website, customer testimonials, experience and the agent’s specialization in the required market segment, their competence and attitude towards the buyers' preferences is also recommended.

The real estate agent’s main duties during the sale process include: evaluating the property, arranging viewings, welcoming prospective buyers and negotiating the price. Realtors will not only help you save time but also help you increase the price. Sometimes the buyers set the wrong price and lose more money than they would have spent on selling with an agency (commission included).

If the market supply outstrips demand and there are too few buyers, contacting and making use of several agencies at once is also recommended. They will conduct their work in parallel with each other, whilst attracting various buyers through a variety of means. If, however, demand significantly exceeds supply, one agent may be enough.

In most countries, the agent who sells the property is remunerated with a fee, but in the UK, for instance, the amount of commission that buyers pay depends on the number of agents and the type of agreement concluded. If the agent is representing the property alone (sole agreement), the commission rate will amount to 1.5% of the property value and the agreement duration will be 12 weeks. If you hire two realtors (joint sole agreement), the commission will come to around 2.0% and this will be shared between them equally. If the property owner engages the services of more than two agents (multiple agency agreement), the commission rate will increase to 2.5 – 3.0%.

Where there is more than one agent representing the property, the agreements are signed for shorter terms.

6) Sign an agreement with the realtors

The agreement includes, among other things:

• the price at which the property is to be put up for sale;
• the conditions for which the price may be lowered;
• the amount of the realtor's commission and a list of those who are to pay such commission (the commission fee is paid either by the seller or the buyer, on other occasions it is shared between the two).

7) Entrust the assessment of your property to professionals

Property assessment is best left to realtors and professional assessors.

Sellers need to have a firm understanding of whether the market is "bullish" (the prices are increasing) or "bearish" (properties are getting cheaper). Depending on market conditions you will need to decide if the environment is on the seller's or the buyer's side. If the market is bullish, the longer you wait, the greater the chances are of you selling for a higher price. If the prices are rising and there is enough time before the market inverts into a bearish phase, the property seller can set a slightly higher price (e.g. 5-10% more) and wait for more buyers to appear. If the market is falling and you need to sell urgently, it's better not to hesitate and sell at a discount because the prices can fall even lower with time, and you will have to allow for an even greater discount.

George Kachmazov Founder

The buyer's subjective judgement on the property also affects its price. "For example, at the time of selling a residential property, the level of yield and price per square metre gets less attention than a much less measurable lifestyle element: the buyer who likes the look of a house is ready to pay a higher price. If the property is in a higher-value segment and there is enough time, the seller can increase the price,” says George Kachmazov.

There are also personal circumstances. For instance, if the seller has a loan to repay, and the property prices are falling, it would be better for them to offer a discount.

8) Prepare the documents

The documents required to sell property are:

• title deed;
• documentation from the Land Title Registry, verifying that the property has no encumbrances;
• documents proving there are no outstanding tax or utility debts; loan agreement (if applicable).

If you are selling the property via an agency, the realtors will help you to prepare the documents.

9) Order professional photos

Before advertising the property the owner should make sure that the agency has taken photos. In most cases the realtors will not be able to take quality photos and so you will find that large agencies usually work with professional photographers.

Photos are a must. According to research carried out by Paul Ernesto Carrillo, an Associated Professor of Economics at the George Washington University, the absence of photos abates the property price and overextends the time needed to sell it. And vice versa: adding 10 photos can increase the sale price by 1.7%.

It's always better to have professional photos taken: a study by an American company, Redfin, demonstrates that advertisements that include photos taken with a professional camera are viewed 61% more often than those containing compact camera pictures.

10) Advertise your sale

According to the National Association of Realtors, three quarters of home buyers start searching for residential property nowhere else but on the Web. Therefore, in most cases it's advisable to advertise property online, unless the property in question is ultra-expensive and is likely to sell off-market.

The owners can create advertisements on their own, but when using agencies this is usually done by the realtors.

The seller would be wise to ask the realtor to place the advertisement among the "premium listings". This way, more prospective buyers will be able to see it. Read more about what information a good advertisement should contain in our listing rules.

11) Contact a lawyer

The seller can hire an attorney to represent their interests. Sellers should also find a notary to certify the agreements, perform conveyancing and broker the transfer of money. Either the buyer or the seller hires the notary.

12) Tell the realtors to organise the viewings

As a rule, the owners entrust the viewings to the realtors' and give them the keys for the agents to bring prospective buyers to the property in the owners' absence. According to Tranio's partners, property viewings mostly take place from Thursday to Saturday. Not all owners agree to schedule the viewings for Sundays, as many of them prefer to rest at home with their families and not to be disturbed.

You can make your property more attractive during viewings by doing the following:

• put vases with natural flowers or fruit bowls around the place;
• spray some scent (vanilla, coffee, freshly baked pastry). According to Big Yellow Self Storage, this increases the selling price by £849 on average;
• put some soft classical music on.

13) Sign the sales contract

Usually the seller signs a purchase and sale agreement with the buyer first. At this stage, the buyer places a deposit which is usually placed in a notarial account and is retained there until ownership is transferred. The deposit is usually 10% of the sale price. Until the final contract is signed the seller has the right to cancel the transaction or decide to sell the property to a different buyer at a higher price (gazumping). Should this occur, the buyer gets the deposit back. If the buyer who fails to complete the transaction, the seller keeps the amount deposited.

Once the buyer completes due diligence (within four weeks after placing the deposit) the parties sign the definitive purchase and sale contract. This agreement has full force and effect, and is legally binding for both parties. At this moment in time, the buyer pays the remaining amount. This money is also kept on the notary account until the property is registered to the new owner.

14) Pay the realtor's commission

In Austria, Bulgaria, Greece, Italy, France, the Czech Republic and other countries, the seller usually pays realtor's commission. In the other countries, including Hungary, Spain, Cyprus and the USA, the agent's fee is split between the buyer and the seller.

15) Wait until ownership is transferred

Once the buyer pays the transfer tax, the notary registers the new owner with the Land Registry. When the property is re-registered, the notary transfers the money obtained from property sale to the former owner.

16) Pay the capital gains tax

When selling a property the former owner pays the capital gain tax, chargeable from the difference between the purchase price and the sales price.

The capital gains tax is paid once and only in the country where the property sold is located. If the tax rate is higher in the seller’s country of residence, the difference is to be paid to this home country.

When selling a property, contacting tax consultants is recommended since each country has its own nuances. For instance, the proceeds from a property sale by an individual in Germany is not subject to tax given that: over 10 years has passed since the initial purchase of the property; or in cases where it has been used for personal residence only since the very moment it was purchased; or during the year the property’s ownership was transferred and the two preceding years.

The Tranio team is ready to help you sell property abroad. Please note that we work on an exclusive basis only: if you sign a contract with Tranio, you will not be able to work with other brokerages at the same time.

Yulia Kozhevnikova, Tranio