BUYING A PROPERTY IN SPAIN / COST OF BUYING ON THE COSTA DEL SOL / PROCESS FOR PURCHASING A PROPERTY IN SPAIN

General Spanish Property Information

What fees and taxes are involved in buying a property in Spain?

As a general guide the fees and taxes involved in buying a property in Spain amount to about 11% of the purchase price of the property so it is important to bear this in mind when you are determining your budget.

The biggest fee will probably be the VAT or transfer tax on the property you are buying which is charged at 10% with slight variance for high priced properties(IVA as it is called in Spain). When you buy a property in Spain it also incurs stamp duty of 1%. The lawyer dealing with your purchase will charge you in the region of 1% of the sale price. All property sales have to go before a Spanish notary who will charge up to 1% of the sale price. This is payable at the point of signing the purchase agreement. There is also a property registration fee to pay and this is approximately 40-50% of the notary’s fee.

How can I get a mortgage?

Both residents and non-residents can now obtain loans and mortgages against a Spanish Property. Like all other European countries mortgage criteria in Spain has become more stringent. In the current climate you should expect no more than a 60% to 70% loan against the property value as a non-resident buyer. Interest only mortgages are also available, as are a wide range of other products to suit specific needs of the buyers. Getting a mortgage is usually quite straightforward, but the bank will require your income documents, bank statements that show the income being deposited on a regular basis, and a yearly tax return statement. That is it in a nutshell, though some banks may require additional paperwork. On occasions mortgage subrogation can be applicable, but this very much depends on the circumstances of the sale.

What is a notary?

A notary checks that the title deeds and all documentation relevant to the purchase of your property in Spain are in order before the final payment is made and the purchase document is signed. He then sends these to the local Land Registry Office and the final registration normally takes around 2 months. Note that although you may choose any notary to carry out these tasks, it is a public office and as such it makes no difference which notary you use.

What does a Spanish lawyer do?

  • Review the seller’s title deed
  • Review a recent nota simple
  • Review the full catastral certification document
  • If buying in an urbanisation, checks the plan of building plots
  • If buying a plot checks that building is a legal possibility
  • Review the IBI receipt or the declaration of new construction
  • Review the community charge receipt and the statutes if buying in a communally owned development
  • Review the sellers utilities receipts
  • Sign the escritura de compraventa in the presence of a notario
  • Pay the required fees and taxes
  • Establish how and when you will receive the escritura publica making you the legal owner
  • Take care of the setup of water, electricity and other utilities. 

Can I open a Spanish bank account?

Normally all that is needed to open a Spanish bank account is a passport and a small deposit to go into the account. Most banks have English speaking staff to help you. Some banks may require clients to have a NIE number, which is a fiscal identification number required from everyone in Spain who wishes to make any type of purchase.

What are community fees?

These apply to properties that share benefits e.g. swimming pool, gardens, security, general maintenance. There is a committee with a president who are voted for by the property owners once a year. The price of the community fees depends on both the shared benefits and the number of residences sharing them. It also depends on the size of your property...the large your property, the bigger share of the community costs you have to bear. In general the community fees ensure that the grounds and exterior of the buildings are maintained to a good standard.

Do I need to speak Spanish if I live in Spain?

It is obviously a good idea to learn Spanish to fully enjoy the Spanish culture. There are numerous language schools scattered throughout the area which enable you to learn Spanish at a pace that suits you. Learning the language will be essential if you are planning to live anywhere OUTSIDE the popular tourist areas, but otherwise you can get by most of the time without it. There are numerous international schools, multi lingual radio stations and locally printed international papers widely available. As more and more people from all over the world make this their home, it is getting easier than ever to get by using English to communicate.

 


THE PURCHASE PROCESS

How does one go about purchasing a property in Spain ?

The process of purchasing a property in Spain is similar to that followed in most countries in continental Europe. Every single step of the way demands a commitment from all parties involved. As a result there are no “chains”, no “gazumping” and no time wasting. As you may be unfamiliar with the paperwork and the language, it is always advisable to use a lawyer to carry out all the searches, and save yourself any unnecessary hassle.

The offer

Once you have found a property in Spain, you need to agree on a price. This is done by placing an offer to the vendor through the agency. Should the offer be accepted, it is immediately formalised and is put in the form of a “pre-contract”. This document shows your intent to purchase the property at the agreed price and binds the vendor to take the property off the market. In order to show goodwill and commitment, you are required to cement the contract with a small reservation deposit (usually about 6,000 euros). This will freeze the price and at the same time buy you some time until the next stage.

The legal work

At this point you will appoint a lawyer to carry out your legal work. The lawyer will typically get in touch with the vendor’s lawyer and will initiate the necessary searches. In the unlikely event that a problem is discovered at this stage, your lawyer will inform you and attempt to find a solution. If a solution cannot be found, then the purchase cannot be carried out and the reservation deposit is returned to you. The more likely scenario though is that the lawyer will deem the paperwork to be in order, and a private purchase contract is drawn up. Your lawyer will make sure that your interests are protected and that everything is legally binding on both sides.

The private purchase contract

At this stage, you will be required to make a more substantial payment to the vendor. Also known as the "exchange of contracts", this is the stage where you are required to pay 10% of the full purchase price to the vendor in exchange for his agreement on a formal contract to sell you the property within a certain agreed timeframe. The private purchase contract contains every detail of the purchaser, vendor and the property in question. A completion date (the date you receive the keys) is also specified here.

The completion

On this date, all the parties meet at an official notary’s office. This legal body will once again check all the documentation and make sure that there are no irregularities. Usually the two parties are represented by their lawyers (through a power of attorney document) and do not need to be physically present. Once the notary is satisfied, the remainder of the monies due (the total purchase price minus the reservation deposit which you have already paid) is paid to the vendor and you (or your lawyer) will receive the keys to the property. The property will be registered in your name from this time forth.

The mortgage

If you are using a mortgage to finance your property, it is probably best to consult a financial advisor first and foremost. They will be able to advise you on the different products available by the lenders and will also give you a good idea of what you can expect to repay every month. There are various repayment options available from banks, and you must shop around to find the best one suited to your needs. The interest rate charged by the banks varies, but is always pegged to the EURIBOR, which is the rate set by the European Central Bank.

As soon as you have an offer accepted by the vendor, we will forward all the relevant documentation to your lender. They will carry out their own searches on the property and instruct a surveyor to look at the property. At the date of completion, the lender’s representative will be at the notary, and they will provide the necessary funding to finalise the purchase.

What are the benefits of this system?

Once your offer has been accepted, the property is taken off the market. The vendor has the assurance that you are indeed a serious client by virtue of having placed a reservation deposit along with your offer.

You have the assurance that the vendor will not renege on his acceptance of your offer. Don’t forget that the offer is in writing and has been signed by all parties (including the agency). Should the vendor decide not to abide by his commitment to you, Spanish Law requires him to repay you the reservation deposit amount in total.

This system requires all parties to show commitment at every stage, and therefore removes everyone’s risk. It also ensures that the process is carried out relatively quickly…in cases where there is a cash purchaser, this process can take as little as one week!

 


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