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Guidelines For Buying Property In Spain

Prior to viewing
Prior to arriving in Spain, you should make sure that you have at your disposal sufficient funds to cover the reservation sum. The absolute minimum required is normally 3.000 to 6.000 - but may be greater for high priced properties. The reservation sum may be paid with a credit card or cash. A cheque if drawn on a foreign bank may take up to ten days to clear by a Spanish bank.
If you do not have the means to lodge a reservation sum immediately, you may risk losing the property to another party who does have the reservation sum to lay down. There are virtually no exchange controls in Spain, which means that whether resident or not, you are free to obtain a loan or mortgage against your property in any currency and from any bank in the world. Spanish banks are quite willing to lend to non-residents purchasers of Real Estate. You will need:

  • A photocopy of your income tax returns
  • Three months salary slip, ( UK P-60)
  • A bank reference
  • A breakdown of asset and liabilities
  • Last three months bank statements
  • If self employed, statements of accounts

Negotiating the purchase
Once a suitable property has been chosen, the purchase terms and price will need to be negotiated with the seller. You may wish to make your offer subject to mortgage or Lawyer approval, or vary final completion dates, or the method of payment. The sales person may at this stage feel it of benefit to bring in a recommended lawyer to assist in the negotiation making sure that any offer meets his legal criteria.
Choosing a Lawyer
There are many excellent local Lawyers in Spain who may be fluent in your language. A Lawyer will provide the legal guarantees for the purchase of the property ensuring that Spanish legal requirements are met and that the property is bought free of encumbrances, charges, liens or debt and up to date in all its payments of local contributions and community charges etc. The lawyer may also assist the sales team in difficult and complex negotiations with the owner. Using a Lawyer from your home country will increase substantially your legal costs and most certainly will delay the sales process.

Formalizing the offer
Once there is a verbal accord between parties, the next step will be to formalize those offer terms of purchase in writing. Funds should be lodged in a local bank account or with your Lawyer in order to show the seller that there is a real intention to purchase. It is normal practice in Spain to include with the offer a sum of money to reserve the property until exchange of private contracts.

Exchange of private contracts
Upon acceptance of the offer by the owner the next step in the sales process is to exchange private contracts of sale or to sign an option to purchase. This may take place within two weeks following formal acceptance of the offer or sooner. Your Lawyer will have completed his searches and investigations of the property and will have arranged with the owner the procedure for the cancellation of any outstanding debts. The private contract of sale or option will reflect all the agreed terms of the offer and sale and set out the date for final completion at the Notary. It is customary practice at this stage to pay ten percent of the purchase price which normally is non-refundable should the purchaser not complete.

Final completion at the notary
A sale is formally completed in Spain, when the public title deeds of purchase are signed before a notary, the final payment made, and possession given to the buyer.

Once signed, the notary will fax a note of the title deed to local land registry. Your Lawyer will also pay on your behalf all the relevant transfer taxes associated with the purchase and will handle the formalities of registration of your title deeds. Final registration of the deed may take up to two months. Similarly, your Lawyer will arrange for the transfer of accounts with the local suppliers of utility services such as water and electricity and organize their payment through a local bank.

Costs involved in purchasing a property
There are in principal three fees and two taxes to pay when purchasing property in Spain. As a rule of thumb, you should budget the combined total of these amounts will be around 10% of the purchase price. If you are buying with a mortgage you will need to add another 2 to 3% to the costs.

The fees are as follows:
1) Legal fees: Minimum of 600 or 1% of the purchase value whichever is the greater, plus value-added tax (I.V.A.) currently charged at 18%.
2) Notary fees: the scale is fixed by law and may range from 300 for lower price properties to 841,40 for higher priced properties.
3) Property Registry: as a rule of thumb, 60% of what the notary charges.

The taxes
Transfer tax (ITP) at 6% or, when buying from a promoter, developer or habitual trades, IVA at 7% or 18% plus Stamp Duty at 1%. The IVA rate of 18% is applicable when purchasing parcels of land, commercial premises, or garage spaces.
Plus Valia: normally payable by the vendor but it may be stipulated that the buyers pays. This may range from a few thousand euros to as much as tens of thousands on larger properties with a lot of land. Who pays this will be discussed in the negotiations and in consultation with your Lawyer.



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