'Nuda propiedad': The pros and cons of selling your home in Spain while still living in it
'Nuda propriedad' known as 'home reversion' in English, means the option for retired or elderly people to transfer ownership of their homes, whilst still maintaining the right to live there. We take a look at the pros and cons of this process and find out if it could be a good option for you.
In Spain, selling your home in this way is not yet very common, but in other countries such as France and Belgium, it is more popular.
According to statistics from the Spanish National Statistics Institute (INE) only around 1,000 properties of this nature have been sold within the last few years.
So, could it be a good option for you – what are the pros and what are the cons in selling your home this way?
Pros:
It provides liquidity on assets for the elderly and retirees
If you need extra income or to top up your pension when you’re retired, then this could be a good way to move forward, allowing to you be more comfortable in your retirement whilst still having a place to live.
“It is a very good option for retirees who can’t generate extra income or want to compensate for a reduced pension and thus have a more comfortable lifestyle", says Ferran Font, director of studies for home selling website piso.com.
María del Mar Villa, director of operations at Grupo Retiro, a pioneering company specialised in this sector explains that the demand for this product is increasing due to the change in mentality in the older population, who increasingly understand that they must use real estate assets (which represents 85 percent of their wealth) to generate income during retirement.
It provides you with more options
There are different types of sale options for nuda propriedad. The most common is to receive the money in a single payment, but it is also possible to receive periodic annuity payments or a part of the capital at the beginning and collect the rest in the form of a monthly income for life.
This means that it can offer you many more options, enabling you to have more money upfront if you need it, or more monthly income for living expenses.
It solves problems
A home reversion could be a great solution for single or widowed elderly people who do not have direct descendants. It means that they don’t have to worry about what to do with their property or their money and can seek a supplement to their pension whilst they’re still alive and can enjoy it.
Villa points out that on average the sellers are over 75 years old and own homes in large cities whose average price is around €300,000.
Cons
You have to sell your property below market value
One of the main downsides to selling your property in this way is that you have to sell it below market value if you want to continue living in it. This means that you won’t get as much for your home as you would if you sell it in the traditional way, but you will be able to continue living there.
Experts point out that the sale price is between 20 and 50 percent below the market price. The commercial value of these properties depends largely on the life expectancy of the seller, which is determined by age and sex, according to the official data from the General Directorate of Insurance and the INE. Another factor that affects the value is the location of the home.
There are still some expenses to pay
There are still various expenses to pay in selling your home this way, both to companies and estate agents, so before you go ahead with this idea, you need to look into if you can afford it and whether it will be worth your while.
There are fewer options of estate agents who can do this for you
Because selling your property ‘nuda’ is still not that common or popular in Spain, there are fewer real estate companies that will offer you this option. At real estate network Comprarcasa, for example, this type of transaction represents only around two percent of the annual total.
According to Villa, however, the demand for this type of sale is increasing due to the change in mentality in the older population. "Interest in these products has been triggered," she says.
You may still have to pay tax on your property
From a tax point of view, there may still be tax to pay on the sale of your property, so again, you’ll have to work out if it’s worth your while or not.
Ricardo García-Borregón, a lawyer from the Ashurst tax law department, explains that in the event that the transfer of the property generates a capital gain for the seller, calculated as the difference between the price of sale and acquisition value, you will be taxed on the base of savings at a rate between 19 and 21 percent.
If life annuity is chosen, then the seller must pay annual taxes for each annuity received, reduced by percentages that the law establishes, according to the age of the recipient (for example, 20 percent of the annuity if they are between 66 and 69 years old and 8 percent from 70 years old). In any case, if the seller is over 65 years of age, and if it is their habitual residence, then the profit would be exempt from personal income tax.
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In Spain, selling your home in this way is not yet very common, but in other countries such as France and Belgium, it is more popular.
According to statistics from the Spanish National Statistics Institute (INE) only around 1,000 properties of this nature have been sold within the last few years.
So, could it be a good option for you – what are the pros and what are the cons in selling your home this way?
Pros:
It provides liquidity on assets for the elderly and retirees
If you need extra income or to top up your pension when you’re retired, then this could be a good way to move forward, allowing to you be more comfortable in your retirement whilst still having a place to live.
“It is a very good option for retirees who can’t generate extra income or want to compensate for a reduced pension and thus have a more comfortable lifestyle", says Ferran Font, director of studies for home selling website piso.com.
María del Mar Villa, director of operations at Grupo Retiro, a pioneering company specialised in this sector explains that the demand for this product is increasing due to the change in mentality in the older population, who increasingly understand that they must use real estate assets (which represents 85 percent of their wealth) to generate income during retirement.
It provides you with more options
There are different types of sale options for nuda propriedad. The most common is to receive the money in a single payment, but it is also possible to receive periodic annuity payments or a part of the capital at the beginning and collect the rest in the form of a monthly income for life.
This means that it can offer you many more options, enabling you to have more money upfront if you need it, or more monthly income for living expenses.
It solves problems
A home reversion could be a great solution for single or widowed elderly people who do not have direct descendants. It means that they don’t have to worry about what to do with their property or their money and can seek a supplement to their pension whilst they’re still alive and can enjoy it.
Villa points out that on average the sellers are over 75 years old and own homes in large cities whose average price is around €300,000.
Cons
You have to sell your property below market value
One of the main downsides to selling your property in this way is that you have to sell it below market value if you want to continue living in it. This means that you won’t get as much for your home as you would if you sell it in the traditional way, but you will be able to continue living there.
Experts point out that the sale price is between 20 and 50 percent below the market price. The commercial value of these properties depends largely on the life expectancy of the seller, which is determined by age and sex, according to the official data from the General Directorate of Insurance and the INE. Another factor that affects the value is the location of the home.
There are still some expenses to pay
There are still various expenses to pay in selling your home this way, both to companies and estate agents, so before you go ahead with this idea, you need to look into if you can afford it and whether it will be worth your while.
There are fewer options of estate agents who can do this for you
Because selling your property ‘nuda’ is still not that common or popular in Spain, there are fewer real estate companies that will offer you this option. At real estate network Comprarcasa, for example, this type of transaction represents only around two percent of the annual total.
According to Villa, however, the demand for this type of sale is increasing due to the change in mentality in the older population. "Interest in these products has been triggered," she says.
You may still have to pay tax on your property
From a tax point of view, there may still be tax to pay on the sale of your property, so again, you’ll have to work out if it’s worth your while or not.
Ricardo García-Borregón, a lawyer from the Ashurst tax law department, explains that in the event that the transfer of the property generates a capital gain for the seller, calculated as the difference between the price of sale and acquisition value, you will be taxed on the base of savings at a rate between 19 and 21 percent.
If life annuity is chosen, then the seller must pay annual taxes for each annuity received, reduced by percentages that the law establishes, according to the age of the recipient (for example, 20 percent of the annuity if they are between 66 and 69 years old and 8 percent from 70 years old). In any case, if the seller is over 65 years of age, and if it is their habitual residence, then the profit would be exempt from personal income tax.
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