Spain property buying process
Once you have found your property, the buying process begins with a Reservation Agreement. This is a contract that freezes the purchase price and takes the property off the market for usually 30 days on payment of a fee between €3,000 and €12,000. The deposit is usually held by your lawyer or your agent in a client escrow account.
Within an agreed time of signing the reservation agreement, the private purchase contract (PPC) (contrato de arras) is signed between the buyer and the seller. This is similar to exchanging contracts in the UK buying process. Within this time your lawyer should complete all the searches on the property , confirming that the seller owns the property being sold, there are no loans or charges and that everything pertaining to the property is in order.
Once both parties sign the PPC, it becomes legally binding. The PPC will usually require a 10% deposit to be paid. The buyer is then committed to pay the balance of the agreed selling price and the seller (once the money has been paid in full) must transfer ownership to the buyer.
If the seller pulls out of the transaction, he must return double the amount of the deposit received by way of compensation. If the buyer pulls out he will lose the deposit paid.
The property sale is formally completed when the title deed (“Escritura de Compraventa”) is signed before a public official called a Public Notary, or Notario. This will happen at their office and be accompanied by the agreed final payment and all the relevant purchase taxes. The Escritura is then presented by the Notary to the Land Registry for registration and the property is passed to the new owner.
With a new-build property, obviously completion can take a lot longer and the payments are split over clearly defined stages of the build process and the developer should provide bank guarantees in lieu of each payment.
Spain buying costs
Allow for between 10% and 12% of the purchase price to cover the costs of buying your property in Spain but this figure varies according to the region. If you have a Spanish mortgage you need to add an additional cost of between 2% and 4%.
The above includes the Property Transfer Tax, which is equivalent to Stamp Duty in the UK. It is calculated on the agreed property purchase price and lies between 6.5% and 10%, depending on the region. It also includes the Notary fee of around 0.5 per cent of the purchase price and tends to range from €300 and €1200. Land Registry fees in Spain are normally between €400 and €600, or 0.4% of the purchase price.
Legal fees are usually a percentage of the purchase price – generally 1% but with a minimum fee. VAT on new-build properties in Spain is 10%.
Finally, you will need to budget for utility connections and obtaining your NIE number.
You’ll also need to find the most cost-effective, safe and easy way to move your money abroad when you purchase. Bank charges and fluctuating exchange rates can both have an impact on your overall cost of purchase but if you’re well prepared, you can save up to 4% of the cost. Working with a specialist currency firm will help you achieve currency exchange rates better than the banks, and reduce the risk of your international payments increasing. For example, in a £100,000 exchange, a currency specialist can save you up to £4,000 by providing better rates compared to your high street bank.
In Spain, it is not automatically part of the buying process to use your own lawyer or a have a survey done. We recommend using an independent lawyer in every type of purchase but a survey is obviously recommended if you are buying an older re-sale property. Using a Gestor (accountant) once a year to ensure you file all the correct tax returns on your property at the right time is also recommended.
If you are buying on a community or urbanization, make sure you ask your lawyer to carry out due diligence on the Community Administrator to make sure that the accounts are in good order and the upkeep of the communal areas is ongoing and efficient.