Covid fills the market with legacy homes (and their new owners accept discounts)

Apartment for sale in a neighborhood of Madrid.Olmo Calvo

There are accounts that are painful.

Deaths from covid in Spain, which already exceed 50,000, have shot the number of homes transmitted by inheritance to record levels, especially in Madrid and Catalonia, two of the communities most affected by the pandemic.

The INE collects in its latest statistics on transmission of houses the magnitude of what happened.

In the Community of Madrid, so many homes have never been transferred by inheritance in a single month (those that are inherited by legal will).

Only in October did they reach the figure of 2,078, the highest in the last 13 years —the INE has data from January 2007—.

In the same month of the previous year they totaled 1,641.

In Catalonia, 3,034 transactions were registered in October, also the highest figure since 2007. If we look at Spain, the institute records 16,285 transfers by inheritance, compared to 15,513 in the same month of 2019.

“Since the return of the summer we have noticed that many inheritances have been signed on the occasion of the covid because, in addition, they have been joined with those that could not be formalized in the two and a half months of the first state of alarm, when the notaries were open , but only urgent cases were signed, ”says María Teresa Barea, spokesperson for the General Council of Notaries and dean of the Notarial Association of Andalusia.

Hence, the Council registers that the total volume of inheritances from March to October in Spain (229,562) is less than that of the same period of the previous year (286,819).

The same happens in Madrid, where 30,044 inheritances were processed from March to October 2020, 7.57% less than in the same period of the previous year.

And in Catalonia, with 44,581 inheritances, 18.47% less.

"All procedures have been reduced due to the spring and autumn break, but inheritances and wills are the ones that have fallen the least in relative terms," ​​the notary concludes.

Returning to the real estate market, the agencies are already aware of the increase in inherited homes that arrive at their offices for sale.

In fact, they have all been waiting for this to happen for months and have prepared.

"We have developed

marketing

strategies

and proactive actions to serve this type of client because the process, from deaths until the documentation is prepared and the heirs make decisions, takes a few months," says Toni Expósito, CEO of Comparcasa.

In this agency they say that the orders for the sale of inherited homes have grown 20% compared to the previous year.

"Since October we are marketing this type of inheritance housing, which is sold very quickly because the heirs are willing to accept discount proposals," he adds.

In their agencies, the reduction is around 15% on the published price.

“We knew that these homes were going to go on the market because of all the deaths of elderly people in residences.

We have noticed an increase of between 25% and 30% so far this year, ”points out Manuel Jiménez, Re / Max Ability broker in Madrid.

In a rush to sell

Behind these inheritances there are stories of great pain, but also of misunderstandings and even family confrontations.

Therefore, it is very common for heirs to have some urgency to sell the house.

Other times there is a rush because they fear that the property may be illegally occupied or because they need liquidity to pay the inheritance tax and the municipal capital gain (tax on the increase in the value of urban land), which taxes the profit that it has meant for the children the acquisition by inheritance of a property due to the increase in the value of the land since their parents bought it.

The heirs have six months to pay the inheritance tax and capital gains, although an extension can be requested for another six months, within the fifth month from the death.

It must be taken into account that the covid has been so sudden that "many heirs have faced a huge problem when deciding whether or not to accept the inheritance," says Fátima Galisteo, a lawyer specializing in inheritance at Galisteo Abogados.

And that, although in the Community of Madrid the descendants (children, grandchildren) or ascendants (parents) have a 99% discount in the inheritance tax, it does not exist in the case of siblings or nephews nor is it so benevolent in other autonomous communities .

This urge to sell is what causes these homes to go on the market with significant discounts.

"Up to 20% with respect to the market price and varies according to the socioeconomic level of the neighborhood," says Jiménez.

Although, when it comes to several heirs, agreeing on the price is not easy, he acknowledges.

Something common about these houses, and which also pulls the price down, is that "they tend to be of some age and need a major reform," says Jesús Manuel Martínez Caja, general secretary of the Madrid Association of Real Estate Companies (Amadei).

The problem is that it is not always possible to sell the house to pay the taxes.

"The sale is almost impossible mission when the purchasers are not forced heirs (ascendants, descendants and spouses), but brothers, uncles and nephews or strangers", explains Galisteo.

"Although the inheritance is accepted, the registration of the ownership of the properties or real rights in the Property Registry will not take effect in terms of third parties until two years have elapsed from the date of the death of the deceased, therefore, if the buyer intends to obtain financing, no bank will risk an operation that, although unlikely, becomes unsuccessful due to the appearance of a forced heir within that period of two years ”, adds the lawyer.

When buying one of these houses it is important to make sure that it is free of charges in the Property Registry.

Normally, due to the age of the deceased, it is so.

Although, sometimes, even though they are financially canceled, they are not registered.

In addition, "we are observing the existence of new charges on homes acquired a long time ago, derived from the mortgages subscribed by parents as collateral for loans for their children in the periods of the previous economic crisis", argues Galisteo.

This is just the beginning.

The volume of legacy homes that will hit the market will grow in the coming months.

"There are many heirs who continue to organize and decide what to do with the house," says José María Alfaro, General Coordinator of the National Federation of Real Estate Associations (FAI).

In his experience, if they are forced heirs or less than three people, they usually keep the apartment or rent it.

If not, they tend to sell it.

However, due to the unexpectedness of the pandemic, "there are people who have died in nursing homes without having left a will," says Marco Lamberti, director of Coutot-Roehrig in Spain, a company in charge of locating heirs worldwide.

He estimates that his business volume has grown by around 3%, not excessively because not leaving a will does not mean that the heirs are unknown.