Sadly, there are many horror stories about foreigners buying property in Spain. This website is intended to help inform and offer simple advice so that property buyers can reduce or eliminate risks and avoid any nasty surprises. However before we go any further, I will offer this piece of advice: always use a Lawyer and avoid handing over power of attorney to anyone!
Summary of the Purchasing Process
Budget for Taxes and Fees
The taxes and expenses involved in purchasing a property in Spain are amongst the highest in Europe. So, when browsing those Estate Agency windows, buyers should budget for an additional 10 – 12% in taxes and legal expenses on top of the purchase price. The taxes and fees will vary depending on whether it’s a resale or newly-built property and if the buyer requires a mortgage.
If you need a mortgage, remember that the bank will offer a loan based on a percentage of the property’s valuation or list price (usually the lower of the two), not the actual cost (sale price + taxes and fees). Typically, Spanish Banks will offer mortgages of 60 – 70% to non-residents (residents can borrow more).
For Example: A buyer wishes to buy an apartment for €100,000 with the help of a 60% Mortgage. The total cost will be about €112,000 (€100,000 + 12% in taxes and fees). The Mortgage will be for €60,000, so the buyer will need to have €62,000 in hand to complete the purchase.
Once your offer has been accepted, and before you pay a deposit, you will need to hire a lawyer to make sure that all is correct with property, that there are no embargoes, no debts against the property, that it is legal and that the seller has the right to sell the property. If you need a mortgage, you will also need to obtain approval from the bank at this stage. Sometimes a reservation fee of around €500 to €1000 will be asked for to hold the property, pending the formal payment of a deposit (exercise caution with this).
A contract will be drawn up at this stage covering the conditions of the sale and a timeline for completion.
When your lawyer (and bank, if applicable) has given the go-ahead, you will pay a deposit (typically 10%) into a client or escrow account. Remember, this is normally non-refundable, so if you pull out now, then you will lose your deposit. Conversely, if the seller withdraws at this stage, they will need to pay double the deposit back to the buyer.
If you do not already have one, you will need to obtain a Spanish identity number, an NIE. Your Lawyer or Estate Agent will assist with this. You will also need to open a Spanish Bank account.
The next step will be paying the balance and signing the deeds before a Notary. This will typically be arranged with your Estate Agent and Bank and will take place in Arrecife (though there are now Notaries elsewhere on the Island).
The Buyer and Seller (or their representatives) appear together before the Notary, who will verify that the property is legally owned by the vendor and that it is free of charges (though they will not check the legality of the property). If you do not speak Spanish, then you will need to use an officially sanctioned translator (usually paid for in cash) who will go over the documents with you.
Once payment is made, the keys to the property will be handed over.
The taxes and fees will be paid next and documents submitted to the Land Registry. This process will take several weeks, but the buyer normally takes possession immediately after the signing in the notary.
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