Buying a Property in Spain
Prior to viewing:
Prior to traveling to Spain for viewing, you should make sure that you have sufficient funds available to cover the reservation sum.
The reservation sum is payable upon reserving the property you want to buy, and it is necessary in order to get the property off the market. If you don’t go through with the purchase, the reservation sum is lost. The minimum amount is 3,000€ for a normal apartment. You may pay either with credit card or cash. In the case of a check drawn on a foreign bank, the Spanish bank will spend about 2 weeks to clear it. Hence, the risk of loosing the property to another party in the meantime.
After the reservation sum has been paid, there is normally 2-3 weeks to sign the Private Contract for the sale. At this stage we always recommend our clients to seek independent legal advice. There are excellent Spanish lawyers available in the area, and we shall be happy to introduce you to someone, that also speaks your language.
The lawyer assists in setting up the contract, and checks all the legal aspects of the sale, including the legality of the property, and that the property is free of any dept, encumbrances, charges and liens. Furthermore he assures himself that the owner is up to date in all his payments, be it community fees, property taxes, utility bills etc.
On signing of the Private Contract a larger amount is due for payment. The amount depends on the actual stage of the property, if it is under construction. If it is already complete or a resale, the normal amount is 10% of the price. In this case the amount is non-refundable, should the purchaser not complete the deal.
If the property is under construction, the price is paid in stages, following the progress of the works. Such payments are guaranteed either by bank or insurance company (compulsory by Spanish law).
The Public Title Deed:
When the property is ready for taking over, the title deed must be signed at the Spanish Notary. At the same time, the remaining price is to be paid and/or eventual financing will be formalised with the bank. Hereafter the purchaser will take possession of the property.
The Public Title Deed will normally be signed within a month from the signing of the private contract.
When the title deed has been signed, it must be registered in the local Property Registry. The notary will immediately fax the “Nota Simple” to the registry. The final registration will be taken care of by your lawer whilst at the same time taking care of the payment of all relevant taxes and charges in connection with the purchase. The registration process normally takes about 2 months for uncomplicated properties.
The total sales costs involved, to be paid by the byer, are normally 11 – 12% of the price.
The normal costs consist of:
– Legal fees, approx. 1% of the price + 21% V.A.T.
– Notary fees, are fixed by law and range from 300 to 900€ depending on the property involved.
– Registry, approx. 60% of the notary fees (thumb rule).
Property transfer tax 8% – 10% if it is a resale, or 10% V.A.T. if bought from developer or 21% V.A.T. if the property is land, commercial or garage (+0.5% Stamp Duty).
“Plus Valia” (tax on increased land value) is normally payable by seller. Should be negotiated before the purchase.
Spanish banks normally offer financing of up to 60-80% of the price and repayment over up to 30 years. The loan can be with fixed interest rate, variable interest rate, mixed and with fixed repayment instalments.
The conditions vary from bank to bank, and depend on the bank’s evaluation of the property, the client’s creditworthiness, the client’s status in Spain (resident or non-resident) etc.
If you are interested in a Spanish mortgage, you will need to show last income tax returns, 3 months salary slips, bank reference, breakdown of assets and liabilities, 3 months bank statements, and if self-employed – statement of accounts.
However, it does vary from bank to bank how much documentation is required.