10 Tips to Buying Property in Spain
DO YOUR HOMEWORK…
Buying a property in Spain can be a stressful and costly experience if you don’t do your homework properly. It is vital that you prepare thoroughly for what will probably be one of the most important investments you will make.
There are many books and online due diligence guides available on “How to buy property in Spain” and the points we outline on this page are by no means a substitute to many useful and instructive guides. We do, however, feel compelled to write a short summary of the points to consider before embarking on the rewarding but nonetheless challenging experience of purchasing property in Spain.
TOP 10 TIPS ON BUYING PROPERTY IN SPAIN
1. What type of property do you want to buy? – It’s very important for you to define what type of property you are looking to purchase. Are you looking for a holiday home? Will your new home in the sun be a future home for you to retire to? Do you really want a renovation property? Is it to be purely an investment? Are you going to rent out the property? What is your budget? All these questions are key in determining the location, type and size of your property. Remember also that your relatives/grandchildren may not come out to see you as often as you might envisage.
2. Research fully – Once you know the type of property you need and you have a good idea of the area of Spain in which you would like to buy, you must dedicate a great amount of time to researching the area fully, taking into account distances to airports, schools, hospitals, beaches, golf courses as well as the road and rail infrastructure … everything depends on your needs. Information is power – if you’re fully informed, it will make it easier to narrow down your options. Once you have information on the area, search for properties on the Internet that match your needs and choose a local real estate agent that will be able to help you find your ideal property. You can choose to meet various agents, although properties in Spain are very rarely exclusive to a single agent and you will find that the same property is often listed with many agents along the coast. The important thing is to try and find reputable and well-established companies that have a good knowledge of the area and can provide you with the professional service you expect.
3. Rent first! – If you are thinking of moving to Spain permanently or even if you are just looking for a holiday home, we recommend that you rent a property in your chosen area before buying. This will give you a good feel for the area before making that all important decision.
4. Get a good Spanish lawyer – We recommend you hire the services of a reputable Spanish lawyer even before you view any property. A Spanish lawyer will be able to give you expert, invaluable advice on all aspects of purchasing Spanish property. Speak to us and we can provide you with a list of several reputable local lawyers we have worked with. Alternatively perhaps family or friends who have bought in Spain could recommend one.
5. The visit – When you are ready to come to Spain and look at various properties, use a knowledgeable local agent to show you a selection of properties. Take your time and don’t get pressured by pushy salesmen into buying the first property that matches your search criteria.
6. Checking the property – Once you find a property you like and it meets your needs, instruct your lawyer to carry out the appropriate checks on the property. He/she should check the land registry to make sure there are no charges on the property and make sure all council taxes are fully paid up along with utility bills which you might otherwise inherit. If you wish to buy an off-plan development, make sure you have proof that the developer has all the required licenses and bank guarantees.
7. Mortgages and finance – If you require a mortgage to complete the purchase of your Spanish property there are various ways to go about it: You can either contact various banks personally or use a reputable mortgage broker who will find you the best possible offer for your particular situation. The process of obtaining a mortgage can take up to a month while all the required paperwork is processed. Therefore we do recommend that you begin looking for mortgage lenders before finding a property as this will avoid delays and possible disappointments once you do find the right property. Email one of our consultants for more information on mortgages and brokers.
8. Reservation deposits – Once you find your ideal home you will have to pay a reservation deposit to take the property off the market. If you are buying an off- plan property or a new development you will normally be required to pay between €3,000 and €10,000 to take the property off the market. If you are buying a resale property you will usually sign a Deposit Agreement which will usually be around10% of the agreed price. Bear in mind that both of these types of deposit are non-refundable so you have to be completely certain of your purchase before going ahead and making the payment.
9. Purchase Contract and Title Deeds – Once you have signed a reservation contract you will have approximately 30 days before you are required to sign a Private Purchase Contract (in some cases, purchasers of resale properties go straight to signing the Title Deeds). Unlike the reservation deposit, the private purchase contract is a binding agreement between the buyer and seller. The final and most important step in the purchasing process is the signing of the Title Deeds. This will happen when the property is ready for occupation and all the relevant paperwork and finances are in order. The signing of the Title Deeds takes place before a Notary Public and all parties involved in the sale are required to attend. Although you can arrange powers of attorney for your lawyer to sign on your behalf, we do recommend that you try to attend the signing in person. Remember to ask your lawyer what documents you need to take with you to the signing of the deeds (ID, NIE number, etc)
10. What’s it all this going to cost? – Be sure you are aware of the costs before rather than after the event. When you buy a property in Spain the transaction costs involved will average approximately 10% of the cost of the property. The costs are normally broken down into the following:
• Taxes – If you buy a new property from a developer you will pay 7% VAT (IVA) and 1% Stamp Duty (IAJD). If you buy directly from an owner (resale) you will pay a Transfer Tax (ITP) which in Andalucia is 7%.
• Property Registry and Notary Fees – Notary fees are fixed legally using a scale and may range from €300 for lower priced properties to €850 for higher priced properties. The Property Registry fees are usually approximately 60% of the Notary Fees.
• Legal Fees – Your Spanish lawyer will usually charge you between 1% and 1.5% plus 16% VAT) of the purchase price of the property.
• Bank fees – If you take out a mortgage with a Spanish bank, you’ll usually have to pay a set up fee of 1%. There will also be additional Notary and registry fees depending on the size of the mortgage. If you do take out a mortgage, the total average transaction costs for buying property could be as high as 13% or 14% of the sale price.
