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Buying Property in Spain

Buying property in Spain is quite straight forward. There are basically 4 different stages which we have listed below for your information.
1. Reservation Deposit
2. Exchange of the private purchase contract
3. Before Completion
4. Completion

1. Reservation Deposit

Once you’ve found your ideal home you simply reserve the property with a Reservation Deposit. A deposit between 3000 – 6000 Euros is usually sufficient. The deposit is refundable if the vendors change their mind but is not refundable if you cancel. Paying the reservation deposit guarantees that the property is taken off the market and is reserved for you at the agreed fixed price. If you haven’t previously appointed a local lawyer, we will be happy to arrange one for you. They will explain the procedures for buying in Spain and all the associated costs. From now on, up to, and even after completion of the purchase, our support staff and your lawyer will take full responsibility for the entire transaction, advising you, and keeping you up to date every step of the way. Choosing the right lawyer is your guarantee that Spanish Legal requirements are met, that the property is genuinely registered in the vendor’s name and is free from any mortgage, charges or restrictions. Your lawyer will negotiate and discuss the purchase terms with the vendor’s lawyer and as well as the agreed price will include all your other requirements such as fixtures and fittings, the completion date and your preferred method of payment.

2. Exchange of the Private Purchase Contract

Once you’ve paid the reservation deposit you then have a period of up to 30 days to exchange the private purchase contract with the vendor. You can arrange for your lawyer to handle both this stage and the completion on your behalf if you are unable to attend. Before your lawyer exchanges contracts he will have completed the detailed searches and investigations at the Land Registry in respect of the property.

3. Before Completion

With a new property, before you instruct your lawyer to complete the purchase, we inspect the property and detail anything that might need putting right. Once everything is corrected and you are satisfied, the title deeds can be signed.

4. Completion

Finally, on the day set for completion you will go to the Notary Public with your lawyer to sign the Title Deed, making the final payment to the vendor who simultaneously passes you possession of the property and hands you the keys. In this way the Notary and Land Registry are acting jointly to protect and guarantee your interests.

The Best Way To Buying Property In Spain

The best way to buying property in Spain is to use a professional real estate company. There are many good companies in Spain selling property, but you have to make sure you have a really good one, as many people want to grab a piece of the action in this hot market.

the best way to buying property in spain

the best way to buying property in spain

Buying Property In Spain :There are 3.8 million second homes in Spain (almost two million belonging to foreigners). In the next five years, between 800,000 and 1,700,000 European families are expected to settle their second home in Spain, according to WTO. (world tourism org)

A short guide to the best way to buying property in Spain :

as stated first get yourself a good real estate agent.

All reputable agents are licensed which means they should have a current API or GIPE number, although from year 2001 this is not necessary. All properties should be registered in the Registro de Propiedad, here you can obtain full details of the owner, debts or judgements against the property, mortgages and the exact size and description of the property. Unless notarised power of attorney has been given to a third party, only the person(s) named on the Escritura (deeds) has the right to sell the property).

The second step in the best way to buying property in Spain is to get yourself a good lawyer, who will check for any encumbrances, debts, mortgages, etc. He or she should inform you of their fees. Customary is 1% of the purchase price of the property. Do not try to do this yourself, as it will only lead to disappointment or even worse: financial disaster.

When you have found the property you want, a contract will be drawn up by your agent and you should pay a 10% deposit. The contract then needs to be signed by both parties. There should be a completion date on this contract and on this date the final payment should be made in front of a Spanish Notary. The property is now yours and the title deed (Escritura Publica) needs to be registered in the Land Registry Office.

the best way to buying property in Spain : Choosing a Property in Spain

Firstly, think about the reasons that made you decide buying a property in Spain. It could be that you are a keen investor and you look upon Spain real estate as the ideal investment opportunity, gaining momentum and value as time goes by whilst in the mean time earning you some rental income.

Or you could be Buying Property In Spain looking for that dream house in the sun to live in now or to retire in later on in life. Or is it a hideaway you are looking for away from the daily hassles and the demanding and stressful way of life you have been torturing yourself with lately…?

Decide how much you want to spend on your buying property in Spain: write your wish list!

Do you want to be Buying Property In Spain near a golf course, overlooking the sea, within walking distance of a busy town or would you prefer to live in one of the pretty inland villages? Do you need a swimming pool? Will it have to be private or can you settle for an communal swimming pool in an urbanisation?

In fact, golf is considered the best appeal for foreign home seekers and implies a bigger added value. For instance, Costa del Sol has more than seventy golf courses, almost twice as much as the second region in number of golf courses (Catalonia). 

It is also a perfect complement for “sun and beach tourism” since demand for playing golf is higher during the periods from February to May and from September to November. So consider this when Buying Property In Spain

But as always: look before you leap.

Seek and take professional advice.

If Buying Property In Spain for your own occupation, ask yourself whether you’d be comfortable in the area. A remote farmhouse might sound idyllic, but is it in reality?

If Buying Property In Spain for an investment, that is, to let out to holidaymakers, make sure the property is in a place where people want to stay. If you want easy access fro your guests, best to choose a resort near one of the Spanish airports, served by the “low cost” airlines, such as Alicante, Malaga, Palma De Mallorca.

If you are not going to be there, who will manage the property, that is, take care of the changeovers, keys, that sort of thing? Thus research the property management side of things too.

the best way to buying property in Spain : Financing Your Purchase

Mortgages

New Spanish homes often come with a mortgage and up to 50% of the purchase price can be raised in this way. Basically, the mortgage will be secured on the Spanish property; your income will be taken into account and you need a P60 or if self employed, your certified accounts.

Both Interest-Only and Repayment mortgages are available in Spain although the majority of Spanish mortgages offer a variable as opposed to fixed interest rate.

With some Spanish Lenders offering products with very low interest rates , there are some excellent deals available and many banks will now lend up to 70% of the purchase price. Which makes Buying Property In Spain a real good opportunity.

A variety of lenders will lend on Spanish properties, both new and resales; up to 70% LTV (Loan to Value) is possible. If buying for holiday letting, some lenders will take into account the projected net rental income.

It’s quite possible to re-mortgage your existing property at home, providing enough equity available and you meet lenders requirements. If you do this, then the charge is against your home property and not the Spanish home; effectively you then become a cash buyer.

Equity Release

For older people, perhaps consider releasing some equity from your home, in this case there would be no monthly payments to make, but you need to consider the interest and charges as well as the outcome.

Paying in full in cash is another option but not one that’s readily available to everyone! If you are planning to make a part or full cash payment for your Buying Property In Spain then do not delay when arranging the necessary transfer of monies.

Daily fluctuations in the exchange rate can have a dramatic impact on the price of your property. For example a property purchased in January 2003 for 150,000 Euros would have equated to £97,000 Stirling but the same property would have cost £109,000 Stirling five months later as the Euro had strengthened against the British pound.

The same is true for the Euro-Dollar exchange rates.

Do consider using the services of specialist currency dealers when transferring any substantial funds overseas for your Buying Property In Spain. They should not charge for their service plus they are likely to offer a more favourable exchange rate than a bank.

If you plan to make a series of staged payments over subsequent months, you can agree a fixed exchange rate thereby making it easier to budget for future payments.

THE INFORMATION GIVEN HERE IS NOT A SUBSTITUTE FOR TAKING PROFESSIONAL ADVICE. PLEASE CONSULT YOUR FINANCIAL ADVISOR.

the best way to buying property in Spain : Safe Property Transfers

If you are buying property in Spain, you may not be aware that your only foolproof title is the final registration in the official Spanish Property Registry, and that all taxes must be paid in order to obtain this.

If your seller does not hold such a title, an escritura pública, something may be wrong with your purchase. It is the first thing you ask to see. You can also check this public title deed at the Spanish Property Registry to make sure that no mortgages are outstanding.

A mortgage or a legal lien against the property is inscribed as marginal notes against the title.

Too many property purchasers have discovered too late that a mortgage was outstanding against their new property or that a Spanish court had placed a lien against it for some other unpaid debt. That could turn your Buying Property In Spain dream into a nightmare

An unscrupulous seller can fail to mention an unpaid mortgage or a lien, and then disappear with the full purchase price. As the mortgage attaches to the property itself, this can leave the buyer facing the payments under threat of losing the property.

When you are buying property in Spain, you also want to see the latest paid-up receipt for the seller’s annual property tax, the IBI receipt.

As of 1999, the seller must also present a certificate showing that his fees are paid up at the Community of Property Owners, or listing the exact amount of his debt. You should read the Statutes, the regulations, of the Community where you are purchasing.

And you should use a Spanish lawyer when you buy in Spain. A lawyer should charge you around one per cent of the price for advising in any Spanish real estate transaction.

the best way to buying property in Spain : Costs Of Buying

On top of the purchase price you should allow another 10% on top for transfer fees. These charges should be divided between buyer and vendor as follows:

Buyer Pays:  Transfer Tax or IVA (VAT) 6% on resale and 7% on new property Registration fees to change the deed to your name € 120,-to € 300,- Notary charges for the first and any further copies of the title deed, which is on a sliding scale. Average on a property of € 360.000,- is € 360,-.

If there is a mortgage on the property, you will need an extra deed and this will incur an extra charge.

Vendor Pays:  Plus Valia Tax – A municipal tax based on the official increase in the value of the property since the last transfer. The town hall will assess the value.

Agent Fees Annual Costs  Make sure you receive copies of all the bills, as they should have been paid up to date. The Real estate tax or IBI (Impuesto Sobre Bienes Inmuebles), Rubbish Collection (Basura), Community charges, etc should be checked by your lawyer, as any debts are attached to the property rather than the person.

As a non resident you are liable for 2 annual property taxes, but this is a very complex issue and therefore we recommend you to use a fiscal adviser.

the best way to buying property in Spain : Fees and Taxes

With regards to the additional fees and taxes payable, the simplest way to budget for these is to assume that the combined total of these costs will be approximately 10% of the purchase price.

Once you find your dream Spanish property, you need to pay a Reservation Fee to secure it at the agreed price and remove it from the market.

Typically this will be around 3,000 Euros and you can pay with a credit card. For properties situated within a “Community”, each owner is required to pay a “community fee” – this is your contribution to the upkeep of the communal pool(s), lift(s), landscaped gardens, 24 hours security, lighting system, etc.

This figure will vary in accordance with property size and location and obviously only becomes payable once the development has been finished and you have finally completed on your purchase.

Normally, you will be expected to pay 30% of the purchase price within the following 4 to 6 weeks. You then enter into what is commonly referred to as a “Personal Private Contract”.

This document clarifies all details of the sale including the allocation of costs for fees / taxes payable by the buyer and seller. It represents a preliminary and binding commitment on the part of both parties.

If you buy a “re-sale” property, i.e. one which is currently / previously owned by another, you do not pay IVA or Stamp Duty. Instead you pay a Property Transfer Tax (ITP), currently set at 7% in Andalusia.

Lawyer’s fees are around 1% of the purchase price plus they are entitled to levy small additional charges, e.g. should you wish them to act as your Power of Attorney at the signing of the Title Deeds (the “Escritura”) before the Notary at the time of Completion.

Your Lawyer will take care of any complicated legal and fiscal issues, will carry out a full search on your property to make sure there are no claims or debts lodged against it, will liaise with your Seller, receive and transfer each payment, ensure documents are properly drawn up and executed plus he will organise your NIE (tax identification number).

Once the Escritura has been signed, it must be registered with the Spanish Property Registry whereupon it is stamped, formally recognised as a public document and the original returned to the Notary. Again, your lawyer will take care of this for you. Once this is done and finished your Buying Property In Spain dream will have become a reality !