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Aviso
Legal - Legal Advise
BUYING A
PROPERTY IN SPAIN - STEP BY STEP
BUYING PROCEDURE
Once you have decided the
property you wish to buy and agreed the offer between you and the seller, then
the procedure is as follows:
 | Step 1: Nota Simple
Informativo |
As all the properties are
registred in the Property Registry (Registro de la Propiedad) you should apply
this document (Nota Simple Informativo) in the Property Registry.
You will find out about all
details of the property you want to buy, such as, description of the property,
the square meters, who the present owners are, all the debts if there are like
mortgage, legal claims and other charges against the property.
With this document you can
check all details to avoid surprises before you sign the pré-agreement (Contrato
de arras).
| Step 2:
Pré-agreement/Private contract for deposit or down payment |
This is a contract (Contrato
de arras) between seller and buyer in which the buyer gives a deposi/down
payment to reserve the property before signing the public title deed.
In this contract both
parties will confirm all details of the purchase, such as the definitive price
of transaction, details of the property, all details of both parties, property
sold with free of all charges, determine the sufficient time to arrange payment
of the balance and other conditions.
Normally the deposit / down
payment is of 10% of the full selling price. In this contract is also stipulated
the approximated date for signing the public deeds.
There is one very important
point to take in account, i.e. when the buyer doesn’t comply the contract, then
the buyer will lose the given deposit. If it is the seller who doesn’t want to
go on with this sales operation, then in this case, the seller has to pay the
buyer double of the deposit.
*It would be also convenient
to enclose with the pré-agreement a copy of the latest paid bill of the yearly
property tax and to know how much is the community fees (if there is).
On this moment you have to
decide the declared property value in order to minimize the transfer tax. The
safest way is to get informed at the payment office of the Tax Office (Junta de
Andalucía) and they can tell you what value you can assign to the property. In
this way you will avoid heavy fines when it is under-declared.
| Step 3: Financing a
property – Mortgages/Bank loans |
Financing a property:
When you buy a new property
or second hand property, it is important to have a good finance. Normally when
it is a new property (Off plan) the developer has an attractive financing
options for the purchasers. You have to make sure you know all terms and
conditions of the payments as there are several payments, such as deposit/down
payment, monthly payments during the construction till completion and the
payment of the balance when signing Public Title Deeds.
The developer must have a
bank guarantee to assure the return of the total paid amount during the
construction till completion in case the project or developer fails. When you
sign a private pré-contract, make sure this bank guarantee is mentioned on it
with a bank guarantee certificate.
Mortgages/Bank loans:
EURIBOR (Euro Interbank
Offered Rate): is used as a reference interest rate to calculate mortgage
payments in Spain. It is used for both variable and fixed rate mortgages. The
majority of mortgages are variable rate.
Euribor is a Euro system
interbank lending rate determined by the key interest rate set by the European
Banking Federation.
In other words, this is the
interest rate that banks are using to lend to each other and it is calculated by
adding a risk-premium to the base rate set by the European Central Bank.(ECB)
So when you have the base
rate Euribor + a risk-premium between 0,75% and 2%.
It is important to choose
the right bank. Because every bank has different conditions, advantages,
requirements and costs.
In general the documents
required by the bank for a mortgage are: DNI/NIE, work contract, the last 3
paycheck stubs, the last income tax return (IRPF), pré-agreement or private of
down payment, last property tax bill (IBI) paid by seller, Nota Simple
Informativo to see if there are other loans or mortgages, Certificate of the
work history (Vida laboral), copy of records of your assets (bank statements),
local tax on economic activities (IAE) and last VAT tax declaration if you are
self-employed.
First of all it is required
a Nota Simple Informativo that confirms that the property does not have any
other unexpected debts attached to it, in order to value the property. This
valuation (Tasación) will be done through an appraiser (Tasador), he is a
licensed architect and collaborate with banks to ensure the value and the loan
will be all legal and safe. The cost of this valuation will be around 300-500
euros and paid by the person who applied for it.
In this case it is important
to know that a non-resident buyer gets usually a limited mortgage to around 70%
over the property valuation and a resident buyer can get 80-100% mortgage over
the property valuation. Once there is a valuation report, this will be studied
by the bank and decides if the mortgage is granted or rejected.
When the mortgage is
granted, there are three types of insurance to consider when arrange a mortgage:
general house and contents insurance, life insurance and mortgage insurance. The
costs of the insurance is based on your age and the amount of the mortgage loan
and can vary bank to bank and insurance company.
On the same day of signing
the title deed of the purchase, the mortgage will be declared before the Notary.
And there will be some fees involved for the mortgage.
-Mortgage opening fee:
normally a fixed fee for setting up the mortgage. Usually 1% but can be ranged
from 0,5% tot 2% of the value of the mortgage.
-Mortgage notary fee:
the mortgage deeds will be sign in the Notary and the cost is based on the
number of clauses just like signing a public deed of sale.
-Mortgage land registry
fee: the mortgage deed will be registered in Registro de Propiedad, as an
existence of a mortgage on the property you have bought. Later the mortgage will
appear on the Nota Simple Informativo for this property.
-Stamp duty mortgage:
This is a tax paid to the government and this cost depend form region to region
and depending on the amount of the mortgage.
-Procedure after signing
the mortgage deeds: this is a service that must be done by a company
(gestoria) who are specialized in arranging all the documents in order to
inscribe correctly the mortgage deed and the public title deeds of sale in the
Property Registry (as both title deeds are signed on same day). Normally they
ask a provision of funds in order to do whole the procedure.
| Step 4: Signing of
the Public Title Deeds |
If you have a
solicitor/lawyer, things will be much easier and protected against all problems.
In that case, when you are
not in Spain for signing or you have a legal representative, it is needed a
Power of Attorney. This Power of Attorney (prepared forms by the Notary) is a
legal document to authorize the legal representative to sign in your name the
Public Deeds (Escritura de compraventa) to conclude the purchase.
The notary is not a
solicitor /lawyer, it is an official of the State to guarantee the public title
deeds are all legal. Your solicitor/lawyer will protect you in all what contains
on the deeds.
To resume all the costs: an
average of costs when buying a property is between 10-15% of the purchase price:
| Step 5: Procedure
and costs after signing the Public Title Deeds and mortgage deeds |
-Notary:
300-600 euros (depending the declared value of the sale on the deed)
-Registry fee: 300-600 euros (depending the declared value of the sale on
the deed)
-Transfer tax:
normally 7% of the declared value (tranmisiones Patrimoniales) or when it is a
purchase of a new property from a developer is VAT 7% of the
declared value and another 1% of Actos Juridicos Documentados. (= Stamp duty
tax)
-Municipal tax:
this tax is on the increase of value of the property since its last sale. This
tax (Plus Valia) could be between 10% to 40% of annual increase in value of the
property. To find out exactly how much this tax is, asking to the municipal tax
office. Normally by law this tax must be paid by the seller. But in some
occasions it could be agreed, paying 50% seller - 50% buyer.
-In case you have a
solicitor/lawyer: charge around 1% of the property value.
*Tax deposit:
when you are buying a property from a non-resident, you must
retain a deposit of 3% tax to Townhall (Hacienda) in the seller’s name as
a guarantee against the non-resident seller’s various tax liabilities and pay
seller the rest of 97% of the sale price.
Once all the deeds are
registered in the Property Land Registry, then the procedure is totally
completed.
Take in mind, any changes in
the mortgage deed. Such as early cancellation (1%), mortgage partial
cancellation (usually a financial penalty on the related on amount that is paid
back early) or cancellation of the mortgage must be all signed before the Notary
and repeats all the costs like notary, registry fee, etc.
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