Buying a property in Spain
How to buy property in Spain and why should each of us have one?
About the "how" I will tell you in a moment, let me first answer the question "why". Because it feels very nice to have your own holiday apartment in a place like Costa del Sol, for example. On a gray, rainy, November day somewhere in northern Europe, such awareness can save us from falling into depression caused by the lack of sun and light. At least for those of us who need sun and light for life. I am one of them, that's why 14 years ago I moved to Marbella in Spain and a few years later I founded Dream Property Marbella, a real estate office dealing with the sale of real estate on the Costa del Sol (although not only, because we also have found properties and sold them to our clients on the Costa Blanca and Gran Canaria).
Buying a property in Spain is also a very good investment idea. After the last deep crisis, the real estate market is reflecting very nicely. It has not yet reached the price level of 2007, when the real estate bubble burst with a bang, but prices have been rising consistently, and this increase has been double-digit for a long time. We follow these trends.
In addition to avoiding the November depression and investing, there are several other obvious reasons that attract potential expats or vacationers to Spain: a huge selection of tourist attractions along the Spanish coast, sandy beaches, fantastic climate, friendly Mediterranean lifestyle, great local wines – just to name a few of them.
Have I convinced you that each of us should have their own corner on one of the Spanish coasts? ... OK, now I will explain how to do it. Dream Property Marbella was created to help you making your dream about a place on the coast coming true. Since 2010, we have specialized in selling Spanish real estate to investors from all over the world. We work individually with each client, preparing a tailor-made offer for him and guiding him through the entire process of purchasing real estate in Spain. This process is not particularly complicated, but you can get into trouble if you don't get down to it skillfully. The pitfalls can be avoided by going step by step, calmly and carefully - starting with making a plan, thinking about financing the investment, visiting the places you are interested in and the real estate available there, until closing the transaction and transferring ownership. It is enough for one of these elements not to be carried out with due care and the purchasing process can end up with enormous stress and waste of money.
When exploring the subject of buying a property in Spain, you will probably read or hear chilling stories of foreigners who met various "surprises" in the process of buying. Most of these problems resulted from a lack of knowledge. That is why it is so important to skillfully protect your interests when buying a property – especially in a place where you do not know the market nor the processes taking place in it. This is where we, Dream Property Marbella, come in to help you, our clients, avoid traumatic stories and guide you through the process of buying a property in Spain as smoothly and as stress-free as possible.
So let's start with the basic question: can you easily buy a property in Spain?
Yes, citizens of the European Union (EU) countries can buy a property in Spain.
Now another, equally important question: what is your ideal property to be?
Below you will find a list of questions that should be answered before starting the research, so we avoid wasting your time and ours.
Now let your imagination run wild and let's begin:
- What is your ideal property like?
- In which region of Spain is it to be located?
- Do you want to live in the city, on the outskirts of the city, in the Spanish countryside or in coastal resorts?
- What kind of property are we looking for? Should it be a modern apartment, villa or maybe a cortijo (country house) with a large plot of land with outbuildings?
- Do you prefer to live in highly touristic or rather residential areas?
- Do you prefer an international neighborhood or a local, Spanish one?
- What is the size of your future property? How many bedrooms? How many bathrooms?
- Do you prefer older property or something new? If older, are you ready for a major renovation? (Note: we are ready for any kind of renovation. We have practiced a lot of different renovation options with our construction company, so we can help you get through yours as stress-free as possible.)
- What else is important to you? Terrace, parking, garden, pool, view?
- Are you going to rent your property?
- How far do you want to be from local bars, shops, restaurants, markets, beaches or marinas?
- How far from the airport?
- Is the proximity of medical facilities in the area important?
- What else should be close - school, gym, golf courses, tennis courts etc.?
- Are you going to use public transport?
- When are you planning to buy a property and what budget do you allocate for this investment?
- How are you going to finance the purchase?
And here we start talking about money
Spending hundreds of thousands of euros on the purchase of real estate in Spain is a very serious decision that should not be taken lightly. Setting a budget must be the first step in buying a property in Spain. You need to know exactly how much money you want and can spend, and what are your sources of financing: savings, sales, mortgage against real estate in the country, etc. It is also worth thinking about the costs directly related to the purchase of real estate in Spain (taxes) and other fees that may unexpectedly appear for you when buying – in addition to the actual purchase price.
As a rule of thumb, add approximately 10-15% to the purchase price to cover all taxes and fees
Without taking care of your funds in advance and knowing when these funds need to be released, you can fall into the trap of emotional attachment to a chosen place and agree to buy something that you will not realistically be able to pay for.
Once you have set your budget, you should ignore any properties and areas you cannot afford to avoid falling in love with a place where you will not be able to live.
Key financial points to consider:
- The amount you have on hand.
- If you are planning a purchase partially financed by a mortgage, find out what amount of own input you will need and how you will pay off the loan?
- Do you have to take out a home equity loan to release capital?
- What are the costs of buying a property in Spain (taxes and fees).
- Maximum purchase price including taxes and fees.
- Costs of maintaining the property and expenses related to staying in it.
- What other costs should be considered when buying a property in Spain?
The costs associated with buying a property in Spain will vary depending on whether the property is in the primary or secondary market, the purchase price of the property in question, and whether you are buying with or without a mortgage.
Taxes and fees related to the transaction:
- For real estate purchased from the secondary market, the property transfer tax (ITP) is progressive ranging from 8% to 10% throughout Spain (including the Islands), except for the Costa Blanca, where it will be 10% regardless purchase price.
- Notary fee: the scale of fees is determined by law and is calculated according to the value of the property.
- Fee for entry in the Land and Mortgage Register: 60% of the notary's fee should be used as a rough rule.
- Independent lawyer: approx. 1% of the transaction value.
- Mortgage related fees: valuation (approximately € 650), legal transaction tax (1.5% of the mortgage amount) and the lender's commission (usually 1.5% of the loan).
- For real estate purchased from the primary market: VAT at 10% (instead of ITP).
- Legal transaction tax when buying from the primary market: 1.5% of the purchase price.
In addition to the above-mentioned costs, as foreigners purchasing in Spain, you will need a tax identification number (commonly known as a NIE number). The NIE number is issued by the Police. The NIE number is used for all activities that have legal or tax consequences, including tax declarations, when buying a car, opening a bank account, etc. Without a NIE number, you cannot buy a property in Spain, so make sure you submit your application well in advance (waiting time 2 to 4 weeks). You can also order your lawyer to submit the application – you will need a notarial power of attorney here.
How can you finance a property purchase in Spain?
There are many ways to pay for a property in Spain: your own resources, financing your purchase with various credit options – each one you should consider before you start looking for a property; it's also a good idea to get a pre-approval for your mortgage before starting your search. You will also have to consider whether you are choosing a mortgage in your country or in Spain.
Buying a property in Spain - legal issues
Buying a property in Spain will probably be a significant investment for you, so I always suggest to our clients that one of the first things they will do when they find the right property is to invest in the services of an independent Spanish lawyer who will supervise the entire purchase process and advise on tax issues and inheritance. This is more important if you don't speak Spanish. We and your lawyer will guide you through the various steps of the transaction so that you are clear about the documentation and what you are signing.
Important: do not confuse the attorney employed by yourself to protect your interests with a notary. Although Spanish notaries are naturally legal specialists and their presence is mandatory for any real estate transaction in Spain, they are employed by the government and officially act neither in the interests of the buyer nor the seller. The role of the notary public is to supervise and confirm the documents necessary for real estate transactions, verify that all necessary taxes are paid and register the property in the Spanish land registry.
Your solicitor will ensure that your contract and property are exactly as you – his client – want to see them, and that they are secured against any possible charges against the previous owner such as mortgage costs, property taxes, council taxes and any other claims. The attorney will review the documentation and payment terms before signing the contract. He will review the private contract, check title deeds and everything else to make sure you are properly protected.
Using the services of an attorney when buying real estate in Spain is not obligatory, but by choosing such services for a relatively small fee – typically 1% of the transaction value – you can save a lot of money in the long run and give yourself peace of mind.
With all of the above knowledge, you can start looking for real estate in Spain ... of course by searching the Internet. You will see hundreds of offers of apartments, villas and plots of land, you will find the same properties with different prices, hear several times from various agents with whom you contact that "this property is no longer available" and slowly it will frustrate you. Then call us :-) We will help you plan your trip and visits to selected properties. You choose the real estate from the proposals we sent. You can also send us links to real estate offers from other agencies' websites that you find interesting. We will contact the appropriate agency and check the property for you, and if it is okay and you want to see it during your visit, we will show it to you. And it will not cost you anything, because the agency's commission is paid by the selling party on the Costa del Sol. (Note, this rule is not Spain-wide).
We found the right property and what next?
After agreeing the terms of the purchase with the seller (remember that you can and should always make an offer to the seller, but the time for "-30%" bids is a thing of the past) and pre-checking the documentation of the property, you must pay the reservation fee. The fee is usually EUR 6,000 or, for the more expensive property, 10% of its value. You usually pay the booking fee by credit card or bank transfer, so before traveling to Spain, make sure you have a sufficient and easily accessible sum to cover it. Only after paying the reservation fee, the property leaves the market and you can safely proceed to the next steps. Now a lawyer enters the action, I have already described his tasks above. When the lawyer finishes checking the property, and gives us the green light, the next step is to sign a preliminary contract with the seller (contrato privado). Then, as a standard, you have 30 days to close a real estate purchase transaction in Spain with a notarial deed – unless you need financing, then it is worth to include a period of at least 3 months in the contract, because Spanish banks operate rather slow.
Buying a property in Spain - bank account
Speaking of banks, you will need a Spanish bank account. Its opening takes a bit longer than in a bank in your country, but generally everything takes a little longer here and the sooner you get used to it, the better :-). To open an account at a Spanish bank, you need a passport or ID card and a NIE number. The mere creation of an account does not generate costs, but having it does. It is worth asking about these costs. An account is required for the transaction and then to pay current bills for water, electricity, gas, telephone, Internet etc. These bills in Spain are paid for by standing order, which is made for you by a lawyer rewriting the media contracts in your name. You just need to fund your account from time to time. You can ask for online access, which will make it easier for you to use it.
Buying a property in Spain - the notarial deed
Finally, it is time to sign the notarial deed. In Spain, the sale is formally completed when both parties sign a public deed, the so-called escritura. At the notary, you will pay the missing amount to the full purchase price (from your own funds or a loan) and receive the keys and the property deed – or in fact a copy (copia simple), because the original will be taken by your lawyer who will need to pay the costs related to the purchase of real estate in Spain and register the title deed.
One more interesting fact: you will pay with banker's checks. Transfers are rarely honored here, notaries prefer checks. Your bank will issue the appropriate check from your account without any problems, but it is worth going to the bank earlier and negotiating the commission for issuing the check.
After signing the notarial deed, the notary is required to submit information about the change of the property owner to the local land registry. From then on, you have 30 days to pay all transfer taxes due on your purchase and to complete the formalities for registering your title. In practice, all these matters are handled by your lawyer. Final registration of the document may take up to two months.
And that's it, the action: "Buying a property in Spain" is completed :-)