Short Version
A. Choose a local lawyer who will explain the Spanish property purchase procedure.
B. Reserve the property to take it off the market, this stops gazumping best done by paying a reservation deposit to your lawyer normally €3000 to €6000 this is refundable if there are any irregularities.
C. Give power of attorney to your lawyer to handle transaction for you, it will be a closed POA that will only allow your lawyer to do this one transaction
Your Lawyer will get your NIE number, this is needed to open a bank account buy a property & connect services such as water & electricity.
Legal fees will be% of the purchase price.
Purchase costs & fees it total will be approximately 11% of the total purchase price without a Mortgage if you take a Mortgage it can cost up to 4% more in extra fees.
Detailed Version
1. Securing a private contract
You will need to place a reservation fee to secure the property; this takes the property off the market until your lawyer has done the relevant checks. The money can either be collected by the selling party’s real estate agent or your legal representative. (Preferably your Lawyers client account) The deposit fee will ensure that the property is removed from the market. You can expect the reservation deposit to cost you around €3000 to €6000 Euros, depending on the selling price of the property. Once you pay the fee, the owner will receive notice, and the contract will be prepared. In most cases, you can’t get a refund once you pay the deposit, except if any irregularities are found in the paperwork. Make sure to clarify any concerns before you pay the reservation deposit.
While preparing the sale/purchase contract, both parties need to agree upon a definite completion date. The completion date and the details of the property such as the specifications, payment terms and penalties will all be indicated in the private contract.
If you won’t be in Spain for completion you can give your lawyer a notarised Power of Attorney to finish the procedure. Copies of the private contracts will be provided to both the buyer and the seller or their respective lawyers. The document will be valid 30 to 60 days from the day it was signed. You can either immediately pay the deposit, which is equivalent to ten percent of the property’s selling price minus the reservation deposit, or sometimes the Lawyer will want to go straight to completion without paying the 10%.
2. Nota Simple
Before you can sign the notarised deed, your legal representative will reqest the “Nota Simple” this document confirms that the seller of the property is the real owner. Your lawyer will check the registration at the Land Registry. They will also have to check that the property is free from charges, mortgage penalties, loans and back taxes. Additionally, your lawyer will need to check if the property owner has already settled his/her dues such as water, electricity and community service fees before you sign the contract.
3. Bank Account
You will need a bank account in Spain to pay utility billls, direct debit & other running costs typically you will open a Non-resident euro account – to open an account you will need a copy of your passport & later you NIE nuber when you recive it.
4. Mortgages
If you wish to take a mortgage inform your estate agent right away. You can apply for the mortgage regardless if you are abroad or in Spain. We can help you arrange it. If you wish to apply on your own, you must notify the vendor or agent of your target date to complete the transaction. Failure to secure a mortgage within the designated schedule may render the contract void and you could lose your deposit, if this point is not made clear that the purchase is subject to mortgage. If you are a Non resident of Spain, you can apply for the mortgage up to 70% of the property’s bank valuation. For residents, you can obtain 80% of the property valuation.
5. Documentation NIE Number
In Spain, they use the NIE number for all sorts of things, in Spanish it’s called the Numero de Identidad de Extranjeros,it is a tax identification and residence number. When you purchase any type of property you will be required to provide an NIE number. You can get it yourself at the local police station, Or your lawyer can get this for you if you have given him or her power of attorney , It is used to check and track your finances and other transactions when you live in Spain. It is a required document when you buy a property house or when you wish to apply for any job in Spain or connect utilities. This is a unique and non-expiring identification number & is composed of X, and a unique combination of seven numbers plus a letter.
Uses of NIE number When in Spain:
How to Apply for a NIE Number
The application process is very simple but securing all the necessary paperwork can be quite confusing. If you wish to use the number to buy a property, you should ask your lawyer to file the application on your behalf. You also have the option to obtain one from a Spanish police station.
Look for the sign ‘Departmento de Extranjeros’ at the police station and ask for the NIE number application form. You will be required to submit a few copies plus the needed documentation. Be sure to have multiple copies of your documents. Below are the requirements you need.
Be aware that some stations will ask for a written documentation that will explain your reason for the NIE number application. Just in case, you should ensure that you have a written letter from your lawyer, the bank or perhaps the owner of your target property.
Once you submit your application together with the required documents, you will receive a stamped copy of the paperwork together with the designated pickup schedule for the original files. Depending on the influx of applicants, it can take at least one to six weeks before you can finally obtain the number.
6. Payment
The deeds will be transferred to your name once you complete your payment. Make sure that the payments arrive on time to avoid penalties and other charges, you should follow the payment terms to a tee in order to avoid project delays as well as incurring penalties, payments will be sent to either your bank account in Spain or your lawyers client account,We reccomend using acurrency company for better exchange rates.
7. Signing the deeds and managing the taxes & other costs
After paying the agreed amount,you or your lawyer will sign the Escritua or the title deed at the Notary Public’s office. Additionally, you will need to settle other fees such as taxes and purchase costs. The rates vary especially among brand new and second-hand properties. To help you estimate the additional expenses, think about 13% of the total price of the property. Here is the summary of fees.
Notarial fees – When you purchase a property in Spain, the Notary collects a fee to prepare the deed and to preside over the deed signing. The fee depends on the overall value of the property you will purchase. Expect to pay around 0.6% to 0.8% of the property valuation.
New property transfer tax (VAT) – As mandated by the latest property tax rules update, you should pay the transfer tax before you can register the title deed under your name. Over the years, the transfer tax rate has fluctuated from 8% in 2010, 4% in 2011 and 10% in 2013. However, if you will purchase a Vivienda de Protección Oficial or VPO property, the tax rate will only be 4% of the selling price. For other areas such as Balearics, they charge around 8% for properties worth less than 400 000 euros and 10% for those that are valued at more than 600,000 euros. As for commercial properties, the VAT is equivalent to 21% of the selling price.
Resale property transfer tax (ITP) – If you plan to purchase a resale real estate property, you will need to pay Impuesto de Transmisiones Patrimoniales, which is otherwise referred to as ITP. The rate differs depending on the location, so prepare at least 15% of the selling price. On average, cities all around Spain charge 8% but it’s always safer to set aside more money to avoid any problem. Make sure you ask your legal adviser the ITP rate for your target property before you finally sign the deal.
Property registry fees – Before the title of your property can become ‘Escritura Publica’ you should first register your ‘Escritura de Compraventa’ through the property registry of Spain. Part of the procedure is paying the property registry fee which is based on the official bank valuation of the property you will purchase. Other factors such as the complexity and length of the deed are key determinants of the final cost of the property registry fee. In most cases, a maximum of 0.2% of the property’s valuation is charged by the registry.
Retention tax – The retention tax is only applicable for non-residents who want to sell their property in Spain. The 3% tax of the property should be set aside by the buyer and have it delivered to the local tax office. It is used to cover the capital gains tax of the vendor. It can only be waived if the non-resident vendor can provide a Hacienda Tax Residency Certification. This type of tax is required by the Royal Legislative Decree 5/2004 and it does not include the plus valia tax.
‘Plus valia’ tax - This type of tax is charged by the local government to all sold properties. It is equivalent to the number of years since the property has been handled or passed down to another owner and its rateable value. It is used to boost the value of the land on which the real estate property stands. The rate depends on how long the seller owned the estate, which suggests that the longer he/she has the property, the higher its plus valia tax.
Mortgage & Gestoria fees – This fee is only applicable for buyers who will use mortgage against their prospect property. If you will use mortgage to pay off your estate, you should negotiate the rate with your bank, broker or agent. The usual fees imposed for the mortgage and gestoria usually ranges from 1 to 2%.
Lawyers’ Fee – The rate of each law firm differs, depending on the type of services you requested and the length of time you needed a legal counsel. Normally, the property buyer is in charge of paying the fees plus the taxes. On average, you should expect to pay not more than 1% of your total expenses. In case you are selling the property through the help of a private lawyer, you can enlist his/her help in handling all the processes for you.
8.Obtaining the EPC or Energy Performance Certification
Since 2013, property vendors are obliged to provide EPC to buyers before they purchase or rent the property. The certificate must contain a comprehensive detail of the building’s energy efficiency and rating so a potential buyer like you can compare it with other viable options. The highest rating is A while the lowest is G. The overall rating takes into consideration the property’s electricity, gas and water consumption rate. Make sure that you ask for the EPC because it is one of the required documents before you can have the contract notarised. Each EPC is valid for up to 10 years since it was issued by the official installer.
9. Possessing the property
You can only take possession of the property you bought once you finish settling the payment. For properties that are currently under construction, the contract may state different terms and condition for the seller. Make sure that you do not grant permission for the vendor to stay longer in your property even after you fulfilled your end of the bargain. Avoid doing this so you don’t have to face a complicated and lengthy eviction process. We also highly recommend rekeying the locks or changing them completely to prevent people from trespassing.
10. Transferring of utilities
Once the property is already transferred to your name your lawyer transfer the services such as water and electricity to your name.
11. Insurance
Home insurance is typically cheaper in Spain compared to other countries in Europe.Home insurance should also be among your priorities, so you can enlist the help of your legal adviser to choose the best package for you. Make sure to select a policy that provides enough coverage for your property.
12. Helping you understand about rates and taxes
Tax Identification Number. Every property owner is required to obtain a tax identification number or NIE from the police station, regardless if he/she resides in the country. You can either work with a Gestor or a tax attorney or administrator to help you deal with the application and settle the ‘Patrimonio’ tax.
Local rates. It is more commonly referred to as IBI. You have the option to pay it annually at the town hall. Each part of Spain has a designated payment due date, so we recommend checking the payment terms with your local government. You can arrange the payment via your agent or local bank.
13. Joining the home owner’s association or Comunity
Purchasing a property located within an urbanisation or a large apartment complex, you automatically have to join the property owner’s association. The group takes charge of the maintenance of the property, handles community issues, and supervises community events and more. Take note that you may need to pay annual fees to cover the costs of the maintenance services. Depending on the community, you may be required to settle the bill every 6 or 12 months.
14. Spanish Golden Residence Visa
The government of Spain has recently approved a law that allows nationals from Non-EU members to get a visa for residents once they fulfil the following requirements:
1) Creating a business in Spain that employs locals and boosts the country’s economic development
2. Purchasing properties worth at least 500,000 Euros.
3) Investing at least one million euros in shares or stocks in Spanish-owned companies or banks
4) Investing at least two million Euros in the country’s national bonds.
In case you want to apply for a visa using the four conditions stated above, you can give us a call. We will walk you through the process and help you find a property that will best suit your choice. Additionally, we will connect you with an expert attorney to ensure the smooth processing of your Visa application. Feel free to get in touch with our team any time. .