The process of buying a house in any country can be complicated and confusing. When you are purchasing a property abroad, it’s even more so. How long will it take? Who should be involved? What can you do to ensure that you buy safely?
There have been mistakes made in the past and there have been some high profile bad experiences. However, buying a house in Spain is straight forward if you take one step at a time with the right conveyancing experts.
Here we outline the steps to buying a house in Spain:
Do your research
You’re out in Spain, you see the perfect property, you want to put in an offer before you go home. Stop! This is where people make mistakes. Sometimes impulse buys can work well – especially when it comes to the odd item of clothing or a gift. When we are talking about an investment as significant as a house, it’s really not a good idea.
You need to take your time, check out the area, consider what your needs will be, not only now but in five or ten years time. Rushing into a property purchase is probably one of the main mistakes that people make.
Use a Spanish lawyer
It is essential to find a good quality Spanish lawyer who speaks English. Ideally, they should be in the area you intend purchasing in but this isn’t an absolute requirement.
Your choice of solicitor is an important step in the process of buying a house in Spain and they must look after your interests.
Your solicitor should:
- be able to communicate easily with you – make sure they speak your native language well
- be accessible – if you are still abroad during the purchasing process how will you communicate?
- have a good reputation – always try and make sure that you speak to someone who has used them before
- have been established for a while – you want to be assured that your solicitor has the experience and is trustworthy
Preliminary check on the property
With a nota simple from the Property Registry, you'll find out if the property is free of debt, if it really belongs to the seller, and if the description of the property matches what the buyer has been told (to avoid surprises about missing square meters). You should get this document from the real estate agent before giving any downpayment.
Sign the deposit agreement.
This is the first contract that is normally signed and it’s a kind of preliminary safeguard for the rights of both the buyer and the seller, assuring both will enter into the sale agreement. When you sign, you’ll have to pay a 10% deposit on the house, and with this, you take on all the rights and responsibilities of a buyer. If you as the buyer later decide not to go through with the transaction, you will lose this deposit but if the seller cancels the sale to you, they will have to return the deposit to you.
Sign the Title Deed
The Title Deed needs to be signed at the Notary’s office. At this stage, you will also make the final payment and receive the keys.
When you sign the Title Deed you will not be given the original document immediately but an authorised version known as the Copia Simple. If you have a mortgage, the bank keeps the original of the loan Deed until the loan is cleared.
For the buyer: transfer tax(impuesto de transmisiones patrimoniales) and stamp tax(impuesto de actos jurídicos documentados).
If the seller is an individual, the buyer pays a transfer tax. This tax varies between 6% and 10% of the purchase price, depending on the region of Spain. Some regions like Andalucía have a progressive transfer tax, where the per cent increases based on the price. If it's a storefront (local commercial) or parking space sold by itself, the transfer tax will be higher than 10%. If the seller is a real estate developer and the building or land to be built on represents a first-time transfer, then the buyer pays VAT tax instead, meaning 10% for housing, 21% otherwise.
For homes, you also pay a stamp tax. The stamp tax also varies depending on the region -- between 0.75% and 1.5%.
For the seller: a local tax called the plusvalia (sometimes it is agreed that the buyer pays this tax).
With a copy of the deed in hand, the seller must go to the City Hall (or wherever local taxes are paid). After filling out the form, the seller will receive in the mail a notice of how much they have to pay. This amount is calculated based on the number of years the property was held, and on the property's cadastral value. Be aware that each town has a different procedure regarding payment of this plusvalia. It's best to ask at the notary's office about this payment.
Credits: abacoadvisers.com, torcalestates.com, strongabogados.com