Property Purchase in Spain
Steps to buying a property
After choosing the house or apartment you want to buy, proceedings are the following:
At the property registry (Registro de la Propiedad) you obtain a nota simple and you can find out whether the property has debts attached, if the seller owns the property and can legally sell it to you and whether the registered property is described as what the buyer’s been told he will be buying. Before parting with a deposit, you should really insist in getting this document from the real estate agency.
It is best not to waste any time in getting your mortgage sorted, as this can take up quite some time when purchasing an existing dwelling in Spain. So get prepared and gather all paperwork the bank requests in order to get pre-approved for a mortgage. Once pre-approved, you know you’ll have the financing in place and you can pay a deposit and sign a pre-agreement. You will be well prepared to close on the day stated in the pre-agreement.
It’s best practice to have a contract drawn up between the buying and selling party in anticipation of the public purchase deed. This will be a fairly straightforward contract where both the selling party and the buying party state their intent to pass the ownership of the property to one another at a stated price and under given conditions. Signing this agreement is usually coupled with paying a deposit to the seller, most commonly 10% of the agreed purchase price. In Spain the most typical clause in this type of contract (contrato de arras) stipulates that if the buyer backs out of the purchase, he loses the deposit and should the seller back out, he’ll have to pay double the deposit to the purchaser. When buyer and seller agree, other type of contracts can be drawn up.
The mortgage lender will appoint a tasador or assessor when they receive a copy of your pre-agreement. The assessor’s job is ensuring the mortgage loan will meet the criteria of the mortgage lender. The main aspect in the assessment is the appraised value of the property and the percentage of that value the mortgaged amount represents. To do this, the tasador will need to access the property, so the seller or their agent will need to facilitate this. When the sale closes, you’ll be charged for the assessment, ranging from €300 to €500. By law a tasador needs to be a licensed architect, so regardless of your mortgage needs you may want to get a tasador to write you an appraisal report; which could highlight structural problems with the property.
A notary has to certify the actual property transfer. The notary reads the purchase deed out to the parties present and confirms that all agree to the contents. Buying and selling parties then present proof of identity (and power of attorney if applicable), the selling party’s property title (a document from the central property register) and the buying party’s payment. Both parties sign the contract and underneath the notary signs with his ‘firma protocolizada’. From then on the purchase deed is ready for taxes.
The buying party has to pay transfer tax (impuesto sobre transmisiones patrimoniales) and stamp duties (impuesto de actos jurídicos documentados)
If the property represents a first-time transfer (this is in most cases newly built bought from developer) the buyer will pay VAT of 8% of the price specified in the deed.
Otherwise the buyer has to pay 7% transfer tax (8% in some areas), also of the price specified in the deed.
Then a stamp duty of 0.5% needs to be paid by the buyer as well. Regional differences apply here too.
The selling party needs to pay a local tax known as plusvalia but sometimes the purchase agreement stipulates the buyer will pay it.
The seller must go to the local administration office with a copy of the deed. After filling out the appropriate forms, the seller receives a tax bill in the post. The amount to be paid is dependent on the number of year the property was owned and its tax value (valor catastral). Each town has its own way of processing these tax payments; the notary’s office will be able to advise you in this matter.
Your deed must be registered at the local office. That way your right of ownership of the property is properly protected and guaranteed. A standard tiered fee applies for this, ranging from 0.4% on the lower tier of the purchase price going down 0.02% on the top tier.