Question:
I have heard buying pre-construction is a good way to buy property here in Tenerife. How does that work?

Answer:
For many years, buying pre-construction or “off-plan” as been very popular in many parts of Spain and elsewhere. Developers like it because they receive varying amounts of money during the progress of a project (most building projects here run for about 2 years), thereby minimising the amount of money they have to borrow to finance the project. Buyers like it because they normally get a price that is 10% to 20% lower than the market value of a similar property which is complete. And of course investors like pre-construction because they can buy at the beginning of the project, pay a percentage of the purchase price, and sell near the end and make a profit.

How it works is this. When you select the apartment from the artist’s impressions or models, you will be asked to pay a holding deposit, between 3,000€ and 12,000€, and you will be provided an agreement (in Spanish) which will fix the main purchase terms and price. After a short period, usually 30 or 60 days, you will be asked to make this up to a percentage of the total price, probably 20% or 30%. Then at one or more times during the course of the contract, you will be asked to pay additional payment(s), and at this time you will be provide with the main contract. The bulk of the money will be paid at the end of the project, at the Notary’s office at completion and can be paid by cash or mortgage. If you decide before completion, to sell the property, this is normally acceptable by the developer. It is worth asking the developer to confirm before paying anything if this would incur a charge from the developer (some charge several thousand euros!). As with most purchases here, it is worth doing this through an Estate Agent who can advise you on this point, and guide you through the Spanish documents and keep you advised of ongoing developments. You will not pay any premium for this as most good developers will pay a commission to the Estate Agent – if in doubt, ask!