Watchdog - buying overseas

Non-profit organisation The Association of International Property Professionals, aims to improve standards of professionalism in the international property market. If you're thinking of buying property abroad, read the following tips to protect your investment.

One: Independent lawyer

No matter what anybody tells you, no matter how easy it all seems and no matter how lovely the agent may be, always use an independent lawyer to represent you throughout the purchase of your property overseas. It is the lawyer's job to protect you and inform you.

You will need to pay the lawyer a fee - accept that as part of your purchase costs. This is not an area in which to keep costs down. The definition of 'independent' is that the lawyer should represent your interests and nobody else's.

Two: Do the numbers

Make sure you know your budget before you start looking at properties. You should have least a provisional mortgage offer if you're borrowing money. Remember repayments on borrowings will stretch over many years, and your bank's lending charges and conditions may well change during that time. Discuss a long term repayment plan with a financial specialist before proceeding. If you are buying off plan, beware of buying more properties than you can afford, with the aim of selling them on before completion. If you do decide to do this, make sure you fully understand the risks (see point five).

Three: Beware exchange rate movements

Exchange rates do not need to move substantially to affect the value of your purchase. £100,000 may buy you your dream home. But a drop of just 10 per cent in the value of the pound against the euro could put that property out of your budget overnight. If you've already signed a purchase contract, this could cause you a problem. Speak to specialists in this area and secure your rate of exchange early. If you take out a mortgage overseas and earn your income at home, any exchange rate fluctuations can affect how much you're paying back each month. Again, speak to a foreign exchange specialist to discuss the risks and to plan appropriate action.

Four: Use professional agents and developers

There are few, if any, guarantees when buying property, at home or overseas. Using an independent lawyer (see point one) significantly reduces the risks you take on an overseas property purchase. Employing a professional agent or buying from a professional developer will also help. Ask lots of questions. Three-year-old children are known for asking lots of questions (why? why? why?) and you should follow their lead when talking to agents about a purchase. Initially, focus questions on the company itself, not the properties for sale. Dig around for details on the founders of the company and check out its track record. Ask for client testimonials (real ones) and make sure you find out in detail exactly what service the company offers. Don't just take their word for it – ask for details of their service in writing, preferably in the form of some type of 'Terms of Business' document. In other words, find out exactly what the company will do for you once you pay them your money.

Five: Remember the 'reward to risk ratio'

If you're buying property overseas as an investment (as many people have done very successfully in recent years), you need to bear in mind that big returns may come with significant risks. The potential profits may well be enticing, but be careful to assess the possible downsides to an investment property if things don't work out as planned.

Source: The Association of Independent Property Professionals

Read the Watchdog report on why dozens of Brits have been left disappointed in Bulgaria.

For more details, visit the The AIPP's website or contact 020 7409 7061 to get a free guide on buying overseas safely.