Purchase procedure for buying a home in Spain

Choosing the right Estate Agent…

Always select a reputable real estate agent who will find you the right property and be able to guide you through the preliminary negotiations with the seller. Girasol Homes are experienced, trustworthy and look after over 100 estate agents in the UK and abroad.

Our Recommendation…

NEVER SIGN ANYTHING UNTIL YOU HAVE HAD IT CHECKED BY YOUR LAWYER.

The Lawyers Job…

It is advisable to use a lawyer based in Spain who will provide the legal guarantees for the purchase of the property, ensuring that Spanish legal requirements are met. Your lawyer will check to ensure that the property is bought free of encumbrances, liens, charges or debts and that all payments of local contributions and community charges are paid, also if the developer has planning permission to build. The property searches may vary depending on the kind of property that you have chosen to purchase. Using a lawyer from your home country could substantially increase your legal fees and most certainly will delay the sales process, also he or she probably does not have any knowledge of Spanish Law.

New Development

And buying off-plan …

Your lawyer will ask the developer for all the documentation needed to guarantee the procedure, with the appropriate planning consents and without the burden of debts or charges registered against it. Purchasing a property on a new development, the developer should provide, by law bank guarantees against each payment made on account of the purchase price, your lawyer is the person responsible for asking them. Many developers offer these bank guarantees free of charge, others make a percentage charge. A bank guarantee protects your payments. In the unlikely event that the developer does not finish the property or goes into liquidation, all funds will be returned to you.

New property is handed over without water and electricity connection. This can however be arranged through your lawyer. Connection of such services can take up to four weeks following completion. Therefore, we suggest that you do not make any plans to use the property during this period.

Under Spanish Law, the developer will issue you with a 10 year construction guarantee, also your lawyer will ask for all the documentation needed to guarantee the purchase procedure.

The taxes involved in a New Development are: VAT (IVA) which is 7% of the property price. VAT is payable with each instalment. A VAT rate of 16% is applicable when buying commercial premises, plots of land or garage spaces. Stamp Duty is at 1% of the purchase price. Plus Valia: This is a tax paid on the increase in value of the land since the previous sale and is fixed by the local Tax Authorities. It is calculated on the size of the land. By law, the vendor is obliged to pay this tax, however it has become customary to negotiate this and it is not uncommon that the purchaser settles this amount.

Resale Properties: Key in Hand …

As a Resale property, your Lawyer will provide you guarantees checking that the property is bought free of encumbrances, liens, charges or debts and that all payments of local contributions and community charges are paid.
The taxes involved on a Resale Property are:

• Transfer Tax (ITP) at 7% is applicable.
• Plus Valia: This is a tax paid on the increase in value of the land since the previous sale and is fixed by the local Tax Authorities. It is calculated on the size of the land. By law, the vendor is obliged to pay this tax, however it has become customary to negotiate this, and it is not uncommon that the purchaser settles this amount.

Steps…

• FIRST STEP. Reservation deposit. Once you have found the right property, the purchase process begins with a reservation agreement, which takes the property off the market and also freezes the purchase price. The deposit to pay at this stage is between 3.000 and 12.000 euros. Before arriving in Spain, ensure you have funds available. The best way to pay the reservation fee is by credit card or in cash. It is not advisable to pay by cheque, especially if drawn on a foreign bank account, as it can take approximately 14 days to clear at a Spanish bank. Such a delay could cost you your property.

• SECOND STEP. Exchange of private contracts Within 28 days after signing the reservation agreement, the private purchase contract is to be signed between the purchaser and the seller (or their authorised representatives). During this time, your lawyer has gone through the terms of the proposed contract and has completed the investigations and searches of the property and will have arranged with the seller the procedure for cancellation of any outstanding debts. It is customary practice at this point to pay between 10% and 50% of the purchase price. Funds should be lodged in your own Spanish bank account. Your lawyer can arrange for an account to be opened for you. We have negotiated competitive rates with local Spanish banks for our clients.

• THIRD STEP. Completion (Escritura de Compraventa) A property sale is formally completed in Spain when the title deed (escritura de compraventa) has been signed before a Public Notary in Spain, the agreed final payment has been made and possession of the property passes to the new owner. In the case of a new construction it can take up to 18 months before completion and usually payments are in stages of two to four months, for example by bills of exchange, cheques from the Spanish bank account or transfers.

• FINAL STEP. Registration
  Once the title deed has been signed, the notary will fax a copy of it to the local land registry. Your lawyer will pay on your behalf all the relevant transfer taxes and will deal with the formalities of registering your title deed. Final registration of the title deed may take several months. Your lawyer will arrange for the transfer of accounts with utility services, such as water and electricity, through your Spanish bank account (direct debit).

Costs:

There are in principle three fees to pay when purchasing property in Spain. You should budget that the costs involved in purchasing a property in Spain are approximately 10% to 11% of the purchase price. If you have a mortgage there is an additional cost of 3% to the property purchase price.

The fees to bear in mind are:

1. Legal fees: Fees vary between a fixed amount to 1.5% of the purchase price depending on the purchase price and the work involved, plus VAT (IVA) currently charged at 16%.
2. Notary fees: The notary charges according to a fixed scale and depending on the official value of the property. His charges may range from 300 to 1000 euros.
3. Land Registry fees: Generally 1000€ or even less.