Step By Step Process of Buying Property in Spain

The process of buying a property in Spain is fairly straightforward. In this section, we’ll present you answers to how to buy property in Spain as a foreigner, so you don’t miss anything:

1

Finding a Property and Making an Offer

After you’ve looked at homes and found the one you like you should make your offer. You usually make this offer through the seller’s real estate agent. Prices are often open to negotiation.
Unless the price is extremely attractive, try to make an offer that is a bit less than what the seller asked for. Though don’t go too low because you might offend the seller. After you verbally negotiate the price and reach an agreement, it’s better that you have the agreement in writing. For this, it’s always a smart idea to hire a notary.

2

Signing the Preliminary Contract and Paying the Deposit

After you’ve agreed on the price with the seller, you’ll sign the preliminary contract known as (contrato privado de compravento). After that, you’ll pay the deposit which is usually 10 percent of the property value.

3

Arranging a Mortgage

You can only have a mortgage agreement in Spain if you own property. You should discuss your mortgage needs with your provider before buying the property of course. However, you won’t be able to complete the process until you’ve already paid the deposit and signed the preliminary contract.

4

Signing the Contract

Once you figure out your mortgage you sign the contract of sale ( escritura de compravento). Keep in mind that you should do this in the presence of a notary.

Things To Know When Buying a property.

Spain Real Estate: Notaries, Lawyers, and Solicitors

It’s technically not mandatory to have a notary complete the sale. However, it is always a good idea to have a trusted lawyer complete due diligence. As the buyer, it is your duty to register the property. A notary or legal counsel can help you with the process.

All lawyers practicing in Spain must be registered with the local bar association (colegio de abogados). You can ask for their registration number to verify that they are registered. Keep in mind that their registration doesn’t necessarily reflect honesty or trustworthiness, but it’s a start.

Property Surveys

A house survey is an essential part of buying property. technically you can buy property in Spain without making a house survey. However, this is highly inadvisable. Completing a thorough survey will ensure that there are no major defects that will be costly later down the line.

There are two types of surveys available for existing properties: A valuation report and a building survey.

The valuation report is a preliminary survey that can give you an independent view of the property market value.

The building survey is more extensive and goes deeper. It examines the structural integrity of the property and explores any serious issues.

A building survey is a bit more expensive than the valuation report, but it is highly recommended. This is because having a comprehensive understanding of the property is important when making such an investment.

Home Insurance

Having insurance is always a smart idea to put your mind at ease in case the worst happens. Mortgage providers necessitate that you take out a building insurance policy before approving your mortgage.

A building insurance policy covers the structure of the property against fire, natural disasters, and other damage.

Contents insurance. This insurance covers your belongings in the home. You should have this type of insurance if you plan to regularly rent out your property.

Setting Up Utilities

This might be the most tedious part of buying a property in Spain. There are various deals for gas, electricity, and water that you can compare before agreeing to one. Sometimes you’ll find that the previous owner had some policies that you can just take over.

Waste disposal is managed at the municipal level. There are also annual fees that you need to pay to the municipality for garbage collection.

Buying New-Build Homes in Spain

Property scams are unfortunately common in Spain against inexperienced buyers. They usually involve unbuilt or unfinished properties that don’t have sufficient permits. Below are a few tips for you to avoid scams:

Never sign a contract you don’t fully understand. Hiring a third-party legal counsel is always a smart idea when signing any contract
Ask the local city hall that the planning permission has been granted to the property
Check the legitimacy of the company and make sure that the project is registered with the land registry
Hire a trustworthy third party for translation
Have written proof that you’ll get a refund if the property is not built for any reason

Selling a Property in Spain

The main issue with selling a property in Spain is the relatively large Capital Gains Tax (CGT). CGT in Spain applies to the profit of selling your home. The CGT levels are as follows:

First 6,000 euros: The CGT is at 19 percent.
6,000–50,000 euros: The CGT is at 21 percent
50,000 or more: The CGT is at 23 percent.

For example, if you purchase a property for 400,000 euros and sell it for 550,000 euros then you pay CGT on 150,000. Because of the tiered system, the tax will be 33,260 euros.

Reductions on capital gains tax

There are a few cases where you may be able to claim a reduction on CGT to account for inflation:

If you are buying another property in Spain
If you are over 65 years of age and have lived in the property as your main residence for more than three years

Otherwise, you’ll have to pay CGT no matter how long you’ve lived on the property. Additionally, you have to pay regardless of your residence status. This means that you need to pay CGT even if you are no longer a resident in Spain.

Frequently Asked Questions About Spain Real Estate

What is the property transfer tax when buying property in Spain?

The property transfer tax is 6-10 percent.

Do I need a NIE – foreigners identification number ?

Yes, a NIE (Numero de Identidad de Extranjero) is a personal identification number required in order to carry out any fiscal transaction in Spain such as opening a bank account or buying a property.

Is buying a home in Spain a good idea?

Spain has attracted many foreign home buyers over the years. Buying a home in Spain could be a very good investment whether you plan to rent it or live there yourself.

Can Americans buy property in Spain?

Yes, they can. There are no restrictions on property investments for Americans. Indeed, Americans are very interested in houses for sale in Spain as it promises a relaxed lifestyle along with nice weather, good food, and lots of sunshine. However, Americans will need professional help in their property search in Spain because of the language barrier, especially in non-tourist areas.

Can foreigners get a mortgage in Spain?

Yes, some Spanish banks offer mortgages to non-residents but the rates can be higher. This is why getting offers from various lenders will be wise before you make a commitment to houses for sale in Spain.

What are some of the best places to buy property for sale in Spain?

Spain is a big country and has different areas for different tastes and lifestyles. If you want to live in a big city and close to the beach, Marbella is a good option. If you want a more relaxed way of life, including beach, sailing & polo consider Sotogrande. If you are looking for one of the most exclusive residential development and country club in Europe close to everything Marbella has to offer, maybe La Zalaleta is the perfect solution.

Is it easy to find homes for sale in Spain?

Yes, it is. Apart from local agencies, there are many international real estate brokerage companies that can help you with your search for a property. Please visit www.luxe-villa.com or email info@luxe-villa.com

Taxes and Other Costs when Buying Property in Spain

Extra costs such as registration fee and legal fees differ from region to region as well. As the buyer the various taxes and costs associated with the purchase of a property will add approximately 13-14% to the purchase price.

These include:

The Property transfer tax: This stands at 6-11 percent for existing properties depending on the region.
VAT or IVA: This stands at 10% for new properties & 1.5% of AJD ( stamp duty)
Notary costs, land registration fee, and title deed tax: These stand at 1-2.5 percent of the purchase price.
Legal fees: These are 1-2 percent of the purchase price including VAT.

How To Buy a House in Spain: Financing Your Property Purchase

Some Spanish banks and international banks offer mortgages to foreign buyers. As an expat buyer, you’ll often realize that you need to borrow at a lower loan-to-value rate than Spanish residents.

This means that you’ll need a bigger deposit for your purchase. Depending on the mortgage type, foreign residents can borrow 60-70 percent loan-to-value. This number goes up to 80 percent for Spanish residents.

An interesting thing about mortgages in Spain is that mortgage lenders usually won’t complete the agreement until you own a property. This is why it is crucial to include in the purchase contract that you may cancel the purchase in case you don’t get a mortgage.

Property Debt

Many expat buyers have fallen prey to the “property debt” scam. You buy a property and then later realize that there is massive debt tied to this property. In Spain, when the property is sold the debt is transferred to the new owner. It is critical that you ensure that the property is debt-free. If there are any debts, then be sure that they are covered in the terms of the purchase contract.

How To Avoid the Pitfalls

There are a few steps you can take as a foreign buyer to be sure that you don’t get into trouble. To make your life easier, we’ve prepared a checklist that can help you ensure you’re getting the right deal:

Check the land registry or (Registro de la Propriedad)
Check that the proper planning permission has been acquired before building
Check the debts of the property
Check the credentials of any lawyer or real estate agent you’re planning to work with
Have a surveyor or architect check that the property is up to code and not cheaply built

You can usually obtain this information in the land registry office. You need to put in a request by email, phone, fax, or in-person to access this information. You can also have a trusted attorney check them for you.
If you have any questions, please email info@luxe-villa.com

We strongly recommend that you choose an independent lawyer who specializes in Spanish land law (urbanismo) Independent means that they work on your behalf only and are not also looking after the interests of the agent or developer.

Disclaimer:

The details above is for general information purposes only and while we endeavor to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to this information for any purpose. Any reliance you place on such information is therefore strictly at your own risk.