Buying a property in Spain
CHOOSING THE PROPERTY
If you have not already done so, the first step is to establish the type of property you are looking to buy and in which areas you would like to buy, you will then be able to establish what is available and at what price.
USING A REPUTABLE REAL ESTATE AGENT
Marbella Homes have been established since 1995 and we take pride in offering a professional service. We work with you through the whole buying process and work to protect your interests throughout.
Care should be taken in selecting an agent who will provide the experience to answer all your questions and guide you through the negotiations and procedures towards completion of your purchase. Agents do not normally make a charge to buyers and therefore it makes sense for a buyer to use the helpful and knowledgeable services of an experienced agent. Agent’s fees are usually paid by the seller as an agreed percentage of the purchase price.
MAKING AN OFFER ON A PROPERTY
When you have decided on the property the first step is to make a verbal offer through your agent. This may often be 5% – 10% below the asking price. Negotiations will then proceed until a price is agreed; at which stage you should appoint a lawyer to formalise the agreement.
APPOINT AN INDEPENDENT LAWYER
The lawyer, who should be fluent in Spanish and your own language, will carry out the necessary checks on the property and complete the legal requirements of the sale. The Lawyers will make all the necessary enquiries regarding the property at the Land Registry, Catastral Office, Tax Office, Town Hall and Banks among others. They will obtain from the property registry a “Nota Simple” which will identify the registered owner and provide details of any mortgages or embargos on the property.
You should obtain from the seller receipts for payment of IBI (Impuestos sobre bienes Inmuebles), the annual real estate tax. These will show the “Valor Catastral” the assessed value of the property on which your property income tax will be based.
If you are buying a new property ask to see the “Declaracion de Obra Nueva” and the “Declaracion de Alteracion de Bienes Naturaleza Urbana”.
Where a community is involved, ask for receipts for community charges and obtain minutes of meetings from the president to identify any problems. A chat with the neighbours is also a very good idea.
RESERVATION OF THE PROPERTY
To reserve the property a document is signed with the vendor of the property (Real Estate Agency or vendor himself), in order to take the property off the market.
Normally, a minimum of 6.000 € is paid upon signing this document.
If you haven´t already done so you will need to open a bank account and request an NIE number (fiscal identification number for foreigners). This document is absolutely necessary in order to purchase a property..
PRIVATE PURCHASE CONTRACT
This contract covers all the terms, conditions and obligations of the purchase, such as: the property that is sold and its annexes, the purchase price, the conditions and obligations of each party, terms and means of payment, date of completion, etc.
Upon exchanging the private purchase contract, the buyer shall pay from 10% to 30% of the purchase price as a reservation or deposit towards the property, as further confirmation of the reservation of the property.
COMPLETION AT THE NOTARY
Signing the Purchase Title Deed before the Notary Public, payment of remaining purchase price, handing over the keys and all the documents related to the property will be completed. If necessary, a Mortgage loan Title Deed will also be signed on the same day.
Registration of the Title Deed of Purchase at the Land
Registry as well as changing the name of the water and electricity supply contracts, local rates, garbage collection, etc. will be done soon after by the lawyer.
REMEMBER ! YOU are responsible on signing the property insurance at completion, so have this arranged beforehand.
PROPERTY PURCHASE COSTS
There are taxes to be paid on your property; either transfer tax (ITP) or IVA if the property is of new build.
Other costs involved in a purchase are Lawyers fees, Notary fees, Land registry fees, Law agent’s fees and Notary fees.
- TRANSFER TAX: 8%, 9% or10% depending on the purchase price, but if the property is new from a developer then the tax is IVA at 10% plus 1.5% AJD stamp duty.
- LAWYER FEES: usually 1% of the purchase price plus 21% IVA
- LAND REGISTRY FEES: approximately 40% of the notary fees
- NOTARY FEES: fixed by law on a sliding scale depending on the purchase price of the property.
- PLUS VALIA TAX: This is a local municipal tax and is based on the officially assessed increase in the value of the land since the last time the property changed hands. This is to be paid by the vendor.
WHO PAYS WHAT?
It is normal practice for the buyer to pay the above fees and taxes with the exception of the “Plus Valia Tax ” which is normally paid by the vendor but everything is negotiable and should be stipulated in the contracts.
The vendor will pay his own capital gains tax and also the estate agents fees.
In the event that the non-resident buyer needs finance in order to purchase the property, Spanish banks may grant a mortgage loan. Nowadays, banks can grant non-residents a mortgage loan for up to 80% of the purchase price or Loan to Value (LTV), whichever is the lowest, although this may vary depending on the financial institution. The timeframe for the duration of the loan depends on several aspects, such as the age of the mortgagee. Mortgages are normally paid on a monthly basis. The debt to income ratio is normally around 30%. This means that if the monthly payment is 300 €, you shall need to have a combined net income of 900 €.
YEARLY EXPENSES FOR MAINTAINING YOUR PROPERTY
There are currently three types of annual fees that must be paid by owners of properties in Spain:
- IBI (Property Tax). It is a local tax that must be paid every year both by residents and non-residents. In some municipalities, garbage collection tax is also paid.
- Wealth Tax
- Non Residents Income Tax Expenses and fees related to maintaining the property.
Expenses related to maintaining the property:
- Expenses related to supplies (water, electrical, gas, etc.) depending on the consumption. The invoices for the supplies are directly debited to your bank account.
- Community of Owners fees are the fees that the owner of a property located in an urbanization or block must pay for the maintenance of the common areas (garden, swimming pool, etc.
ANTI-MONEY LAUNDERING LAWS
Due to new legislation that is being enforced you will be asked by your real estate agent to provide information as to where the funds to pay for the property are coming from. If you do not supply the information then this will be seen as an attempt to launder money.