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Buying in Spain

Overseas Property >> Buying in Spain

Buying in Spain

You are thinking of buying a property in Spain, so how do you proceed?

Firstly..."with caution".

It is important to be aware that the customs and culture are different in Spain to the rest of Northern Europe.

Purchasing a property in Spain, firstly, can appear more costly than buying in the UK. Probable costs are as follows:

Cash purchase

1. 7% I.V.A. tax, a form of V. A. T.
2. 0.5% payable to notary.
3. 1% stamp duty on new build property.
4. 0.2% payable to Land Registry.
5. 1% payable to lawyer.

Purchase via a mortgage

1. All the expenses mentioned above, plus
2. 1% commission to bank for looking at application.
3. 1% tax registration of mortgage.
4. 1% tax notary fee associated with mortgage.
5. Compulsory survey, 250 euros,
6. Compulsory household insurance.
7. Non-obligatory mortgage protection insurance in case of death, loss of employment or injury leading to being unable to work.

Please note though that these are estimated costs, and where a mortgage is involved, costs obviously vary from bank to bank.

An additional point to bear in mind is that if the vendor is a non-resident, the notary retains (for the tax authorities) a total of 3% of the sale price on the escritura, this is to cover any possible capital gains tax liabilities and after 3-9 months all or part of this money may be rebated to the seller.

Assuming that a suitable property has been found, what is the next step?

Caveat Emptor: Buyer Beware. Before signing a purchase and sale contract and handing over a hard earned deposit, insist on seeing a copy of the Title Deed (Escritura or even better a “Copia Simple”, this will show if there are any debts or embargoes on the property.

Assuming that the “Copia Simple” is fine and you are ready to pay a deposit and sign a purchase and sales contract, how much is a normal deposit?

Usually 10% of the agreed purchase price. The most common type of contract is a “Contrato de Arras”, which stipulates:

• The buyer will lose his deposit if he or she fails to complete due to a change of mind. A clause can be inserted covering other possible reasons for failing to complete, mortgage refusal, property being let to tenants who refuse to move etc.
• To protect the purchaser against heavy costs arranging mortgage etc and then the seller changing their mind, the seller promises to return an amount equal to DOUBLE the deposit if they decide not to sell.

Once this transaction goes through normally in an estate agents office or in the house of the seller, a date is agreed when the deal will be finalised at the Notary office. Some days before the agreed date, a copy of the Escritura, passports, identity cards etc are left with the notary so that the contracts may be drawn up.

On the day, the contracts are handed over to the parties concerned, seller, buyer and bank manager, if a mortgage is involved. In the case of the buyer or seller not being Spanish, the documents have to be officially translated into the native language by a translator in the presence of the Notary so that there can be no misunderstandings.