Am I losing out by receiving payment in Sterling instead of Euros?
July 20, 2018 2:33 AM Subscribe
I have just sold a house in Spain and am based in the UK. The purchasers are also based in the UK but the house was listed in Euros and a price was agreed with the them in Euros. A week ago, my lawyer came to me to say...
...that as the purchasers are also based in the UK they would rather pay me directly in £ Sterling. I wasn't sure how we would agree on an exchange rate and the lawyer suggested the rate of the date of completion - the 30th of July. I agreed to this as I thought I would probably have to pay fees to ultimately transfer it to my Sterling bank account anyway and this would be easier for me.
I have since asked a friend who works in finance who said that I am losing out this way and should ask for the payment in Euros, which I did, and they have refused. My lawyers has just told me that they have already drawn up the contract in Sterling, using a rate of 1.14, which they looked up on the internet as being the 'official' rate for the day the contract was signed. I'm worried that I'm potentially losing out on this, but I don't know enough about currency to know why.
My questions are:
- Should I keep asking for payment in Euros? I don't know enough about this to know how much I'm potentially losing out on. I also don't need the money straight away.
- If we do settle for Sterling, what would be a good exchange rate to use that is fair to both parties? Should I ask for something different to 1.14?
Thank you, money-minded Mefites!
...that as the purchasers are also based in the UK they would rather pay me directly in £ Sterling. I wasn't sure how we would agree on an exchange rate and the lawyer suggested the rate of the date of completion - the 30th of July. I agreed to this as I thought I would probably have to pay fees to ultimately transfer it to my Sterling bank account anyway and this would be easier for me.
I have since asked a friend who works in finance who said that I am losing out this way and should ask for the payment in Euros, which I did, and they have refused. My lawyers has just told me that they have already drawn up the contract in Sterling, using a rate of 1.14, which they looked up on the internet as being the 'official' rate for the day the contract was signed. I'm worried that I'm potentially losing out on this, but I don't know enough about currency to know why.
My questions are:
- Should I keep asking for payment in Euros? I don't know enough about this to know how much I'm potentially losing out on. I also don't need the money straight away.
- If we do settle for Sterling, what would be a good exchange rate to use that is fair to both parties? Should I ask for something different to 1.14?
Thank you, money-minded Mefites!
If you were going to convert it to sterling anyway and the price was based off of the midpoint of the bid/ask spread this is absolutely the most efficient way of doing this.
If you are domiciled in the UK you are also indifferent to venue.
posted by JPD at 4:13 AM on July 20, 2018 [4 favorites]
If you are domiciled in the UK you are also indifferent to venue.
posted by JPD at 4:13 AM on July 20, 2018 [4 favorites]
That contract now locks in your FX risk to the exchange rate at the day of completion.
If you receive the money in EUR, then you get a fixed EUR sum and can manage the exchange to GBP at the time of your choosing, when you consider the rate to be favourable.
BUT you would then be liable for FX fees, and you would need a EUR bank account to hold the cash in. So really it's swings/roundabouts unless the sums are very large, and/or you foresee a big swing in the GBP/EUR rate in the next 10 days
posted by el_presidente at 4:19 AM on July 20, 2018
If you receive the money in EUR, then you get a fixed EUR sum and can manage the exchange to GBP at the time of your choosing, when you consider the rate to be favourable.
BUT you would then be liable for FX fees, and you would need a EUR bank account to hold the cash in. So really it's swings/roundabouts unless the sums are very large, and/or you foresee a big swing in the GBP/EUR rate in the next 10 days
posted by el_presidente at 4:19 AM on July 20, 2018
I’m the last 24 hours the pound has taken a serious dip to 1,119... you might want to factor that in to your decision
posted by catspajammies at 4:20 AM on July 20, 2018
posted by catspajammies at 4:20 AM on July 20, 2018
You yourself would pay a solid fee to convert from Euros to Sterling so take that into account.
posted by DarlingBri at 4:47 AM on July 20, 2018 [1 favorite]
posted by DarlingBri at 4:47 AM on July 20, 2018 [1 favorite]
If you believe the price you are getting in Sterling is a fair price that you are happy to accept then that is really what matters. The exchange rate is likely to be volatile over the next few months and you could drive yourself mad with 'what if's'. You might end up gaining a few grand and you'll be a financial genius. If you lose a few grand you'll have the comfort of knowing you got a good price regardless.
posted by night_train at 7:45 AM on July 20, 2018 [2 favorites]
posted by night_train at 7:45 AM on July 20, 2018 [2 favorites]
This thread is closed to new comments.
The exchange rate on the day of completion seems reasonable but make sure it's the interbank rate (check somewhere like oanda.com or xe.com) and make sure that it's not set at 1.14 but at a number of decimal points if those decimal points are in your favour. For instance (using two rates that both round to 1.14):
100,000 euros at 1.1351 = £88,098
100,000 euros at 1.1449 = £87,344
Also ensure that any fees that might be incurred in all this are not paid by you. If you agree to sell for £90,000, then £90K should be what appears in your account and bank transfer payments etc are paid by the purchaser.
posted by humuhumu at 2:46 AM on July 20, 2018 [3 favorites]