Guide to buying process in Spain
The process of buying a property in Spain is very straight forward, but only for those who understand the stages and the consequences of getting it wrong!
So what are the steps you should go through:
Costs
Let’s get this out of the way first. There are a number of fees payable by the buyer, including their own Lawyer’s Fees, the Notary costs, and various taxes.
Currently Property Transfer Tax (or ITP) is charged at the following rates:
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- 8% up to purchase price of 400.000€
- 9% between 400,000€ to 700,000€
- 10% for any amount higher than 700,000€
- 10% VAT and 1.5% stamp duty for new properties bought from a developer.
Currently the Junta de Andalucia has approved a temporary reduction in the Transfer Tax for resale properties. You will pay a fixed tax of 7% until the 31st December 2021 instead of the 7% – 8% -9% (according to the purchase price). In addition, Stamp Duty has been reduced to1,2% instead of 1,5%. We stress this is only a temporary measure.
The vendor is responsible for:
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- Their own lawyers fees
- Agent’s Commission
- Plus Valia (local capital gains tax)
- Capital Gains tax (Federal)
Before Making an offer
In Spain making an offer, and having it accepted, is a legally binding contract. So do not take it lightly. You are entering into a contract, which means it will cost you money to pull out.
Before making a formal offer, you must make sure the property is legal, and is compliant with Decree 218 in Andalucia, or the laws in force in the particular Region where you are buying a property. (See our full article on this subject)
In Andalucia, you are entitled to examine these documents before making an offer, or you can make your offer “Subject to full compliance to Decree 218”. However, do remember Decree 218 does not apply to private sales, so you need to spell these out if you are buying directly from the owner.
Reservation
Once you have made an offer, and your offer has been accepted, you need to complete a “Reservation Form” and pay a “Reservation Fee”. This is usually a nominal sum, and depends on the price of the property (usually no less than 3000€).
The reservation should include the conditions of purchase, such as furniture included, or how much you are paying for the furniture, as well as “Subject to full compliance to Decree 218”, if you have not had a chance to examine these documents.
Remember this a legally binding offer and acceptance, so don’t go around making offers on different properties. You need a really good reason to pull out of this process, and there is every chance you will not get this money back if you breach your agreement.
Private Contract
The private contract is when you pay an additional deposit, usually 10% of the agreed price. This is a legal contract that fully specifies the conditions of the sale including completion date, agreement on fixture, fittings, and furniture, and consequences of failure of compliance with Decree 218.
Remember decree 218 in Andalucia does not apply if you are buying privately, so you need to be very specific on these conditions, and what you mean by it.
There are 2 primary types of Private contracts in common use:
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- Arras – With an Arras contract either party can “pull out”, but will forfeit an amount equivalent to the deposit payment made. If the buyer pulls out, they lose their deposit, and if the vendot pulls out the vendor has to return the deposit plus an equivalent amount as compensation.
- Option to Purchase – The option to purchase contract is when the buyer can “pull out” by not exercising the option, but will forfeit the deposit payment. However, the vendor is bound and cannot “opt out” of the contract. This is not something many vendors like to sign, as it is a little one-sided, so do not be surprised if this is rejected by the seller.
Completion
This is done at the notary, and where the full payment is made. Your lawyers should have made all the necessary checks, and agreed the terms of sale. They would have agreed the pro-rata deductions for any taxes such as IBI (council tax), Basura (refuse collection), Community Fees, etc.
Buyers and Vendors (or their respective authorised representative with their Power of Attorney), and both lawyers will attend the notary, as well as the selling Agent. If there is a mortgage involved, bank representatives will also be at the completion to deal with any mortgage settlements, payments, etc.
All payments are made at the notary via Bankers Drafts, including any mortgage settlements or funds for purchase of the property, agent’s commission, etc.
Buyer’s lawyer usually takes care of change of name for utilities, such as electricity, water, Internet, Community, etc.
Summary
Buying or selling a property in Spain is a relatively simple process. It is particularly important to make sure the property is legal, specially if you are purchasing in the countryside. Due to the nature of planning, many individually built properties have slipped under the radar, and you must make sure you do not fall into the “illegal build” trap.
We can offer you Property Finder’s services, as well as general help with finding, and purchasing the right property, or selling your property. Contact us for more information.