When buying or selling a house, both buyers and sellers often have many common questions, most of which are related to the property’s square footage. Therefore, today we will try to clarify some aspects that we believe may be useful for homeowners and buyers.
Negotiations between the parties, whether for a detached house, townhouse, or semi-detached house, mainly revolve around three key factors: square footage, location, and price. The price is almost entirely determined by the first two.
The location is the first factor to be resolved, as it is neither debatable nor negotiable that a property is situated in a particular place, and the price per square meter in an area is influenced by factors beyond the control of the owner or buyer.
To determine the price of a property, the issue of its square footage must be clarified. This can be broadly summarized into two scenarios:
The property has the square footage listed in the Land Registry and the Property Title. In this case, negotiations are simplified and continue with other factors such as quality, energy efficiency, renovation needs, etc.
The property has different dimensions, and the square footage listed in the Property Title differs from that listed in the Land Registry, differs from the actual square footage, and in some cases, even differs from what the owner knows and maintains. In our experience, this is a very common situation with many villas in the prime residential areas where we operate, and it is this second scenario that we will focus on today.
In many cases, the Land Registry indicates that a property has more square footage than it actually has or than what is listed in the Property Title. This is because the Land Registry uses aerial photography to take measurements and adds the square footage of spaces like the pool, porch, roof, terrace, etc., to the actual square footage of the house. Why does this happen? We assume it’s simply because this is the most efficient way for the Land Registry to measure properties, and if it weren’t for the fact that the Land Registry almost always estimates square footage higher, this could be the reason. The reality is that the Land Registry is an entity under the Tax Agency, and since the cadastral valuation of a property depends on its square footage, the tendency to overestimate the value makes sense. This allows the Tax Agency to increase the taxable base for certain taxes that depend on the cadastral value, such as income tax, property tax, inheritance tax, wealth tax, etc.
This situation sometimes causes the process of buying and selling a house to deviate from the normal procedure.
Some homeowners see this situation as an opportunity to sell their house for a higher price thanks to the additional square footage listed in the Land Registry. In this case, the seller sells the property as is, and if the buyer doesn’t request a building permit and/or update the square footage in the Property Registry, they will most likely pay more than they should.
In short, this situation can lead, even after the signing of the preliminary sales agreement, to the cancellation of the sale, a lawsuit from the buyer, etc.
Although it may seem like a situation that benefits the homeowners, it isn’t, since all owners of luxury homes listed in the Land Registry with more square footage will pay more taxes, and at the time of the sale, they will face difficulties that sometimes result in the loss of the buyer. Most buyers, after visiting a house several times, want to purchase it relatively quickly if the property meets their requirements. If the seller only begins the process of updating the square footage once they have a firm buyer, they will most likely lose that buyer due to the delays in the entire process.
Another common scenario that can prevent or slow down a sale is when the buyer wants to negotiate a lower price based on the square footage stated in the deed of sale, which is less than what is recorded in the Land Registry. In this case, to maintain the property’s true value based on the actual square footage, the seller has no choice but to update the property’s square footage property Update Procedures
There are currently many cases of luxury home owners who have not updated the registered area of their properties for various reasons, such as a lack of concern for this aspect, difficulties in the regularization process, the time required for this procedure, possible extensions to the property carried out by other family members who are not the ones selling the house at a given time, lack of awareness of the property’s status if it is an inherited or donated property, etc.
To avoid situations like those described above, to avoid paying more property taxes than necessary, and above all, to ensure that the sale process is completed in an optimal time and with minimal inconvenience for both parties involved, Ketier recommends that homeowners update the registered area of their property before starting the marketing process. These procedures require time and can be quite tedious in some cases, but it is time well spent that saves prime property owners potential future problems. Furthermore, we are happy to accompany and advise you to make the whole process as easy as possible.
