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YOUR STEP-BY-STEP GUIDE TO A PROBLEM FREE PURCHASE
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Interested in buying property in Spain? You are not alone.
Current Records show that over 1 million foreigners already own their primary or secondary residence in Spain.
On the Costa del Sol alone, it is estimated that as many as 300,000 homes are owned by foreigners.
Buying property in Spain is quite different than buying property in other European countries.
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1.- Be prepared - top
Before you arrive in Spain, you should ensure that you have funds available to cover any reservation sum. The minimum required is usually 3,000 €, but it may be greater for more expensive properties. The reservation sum may be paid in cash or by credit card. Remember that a cheque, if drawn on a foreign bank, can take up to ten days or more to clear at a Spanish bank - a delay that could cost you the purchase. If you cannot come up with a reservation sum immediately, you may risk losing the property to another buyer who can.
2.- Financing your purchase - top
There are almost no exchange controls in Spain, which means that whether you are a resident or not, you can obtain a loan or a mortgage against your property in any currency and from any bank in the world. Spanish banks are willing to lend to non-resident purchasers of real estate.
You will need:
- A bank reference.
- Last three months bank statements
- A photocopy of your latest income tax return
- Last three months salary slips.
- A breakdown of assets and liabilities
- If self-employed, a statement of accounts.
3.- Negotiating the Terms of Sale - top
Once you have chosen a suitable property, the purchase price and terms will need to be negotiated with the seller. You may wish, for example, to make your offer subject to a mortgage, or you may want to vary the method of payment or final completion date. At this stage, the sales agent may recommend that you involve a lawyer to assist in the negotiations and to ensure that any offer meets the legal criteria required.
4.- Choosing the Right Lawyer - top
You will need a trustworthy lawyer who will provide the legal guarantees for the purchase of the property, ensuring that Spanish legal requirements are met, that the property is bought free of any encumbrances, charges, or debts, and that all payments, such as community charges are up to date. We can also assist the sales agent in complex or difficult negotiations with the seller. Using a lawyer from your home country could substantially increase your legal cost and would certainly delay the sales process.
5.- Formalizing the Offer - top
Once there is a verbal agreement between the parties, the next step is to formalize the terms of the offer to the purchase in writing. Funds should be lodged in a local bank account, or with your lawyer, to show there is a real intention to purchase. It is common practice in Spain to include with the offer a sum of money to reserve the property until the exchange of contracts.
6.- Exchange of Private Contracts - top
Once the seller has accepted your offer, the next step is to exchange private contracts of sale or to sign an option to purchase. This will usually take place within two weeks after formal acceptance of the offer, or sooner. Your lawyer will have conducted, during this time, his searches and investigations of the property and will have arranged with the seller for any outstanding debts to be cancelled. The private contract of sale, or option, will reflect all the agreed terms of the offer and will specify the date for final completion at the notary. It is customary at this point to pay 10% of the purchase price, which normally is non-refundable should the purchase not be completed.
7.- Final Completion - top
A sale is formally completed in Spain when the public title deed of purchase is signed before a notary, the final payment is made and possession passes to the buyer.
8.- Registration - top
Once the Title Deed is signed, the notary will fax a copy of it to the local land registry. Your lawyer will pay all the relevant transfer taxes on your behalf and will deal with the formalities of registration of your title deed, which may take several months. Your lawyer will also arrange for the payment of accounts with utility services, such as water and electricity, through your local bank account.
9.- Costs involved - top
In theory, there are three fees and two taxes to pay when buying property in Spain. As a guideline, you should budget that the combined total of these amounts will be approximately 11% of the purchase price.
10.- Fees - top
1.- Legal fees: min 900 euros or 1 % of the purchase value, whichever is the greater, plus value-added tax (V.A.T.) currently charged at 16%.
2.- Notary fees: the scale is fixed by law and may range from 300 euros for lower-priced properties to 900 euros for higher-priced properties.
3.- Property Registry: generally 60% of what the notary charges
11.- Taxes - top
Transfer tax (ITP) on residential property is 7% or, when buying from a promoter of developer, IVA (VAT) is 7% plus Stamp Duty at 1%. An IVA rate of 16% is applicable when purchasing plots of land, commercial premises or garage spaces. Plusvalía is normally payable by the seller but it may be stipulated that the buyer pay. This tax may range from a few hundred euros to several thousand euros on larger properties with a lot of land. The negotiations and consultation with your lawyer will determine who pays this.
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