When buying a property, factors to consider include taxes, additional expenses on top of the purchase price, money transfer costs, maintenance costs, and fluctuations in the real estate market, which can add to or decrease the value of a property.
There are no regulations on who can buy a property in Spain. Any adult can purchase land, residential property, or business premises. After the Spanish property market dramatically fell in 2008, Spain introduced “The Golden Visa” in 2013 to attract foreign investment. The objective was to give the struggling property market a nudge in the right direction, and the country continues to welcome foreign buyers.
Many people think finding their Spanish dream property begins with searching the internet for the perfect villa or apartment. But your property search needs to start with location. There is no point in travelling to Spain to look at dream properties unless you are familiar with the area and know you want to live there.
Frequently, people want to buy in an area they have already visited several times on holiday. Finding a property is much less of a challenge for these people as half the work is done. If you know the coast you prefer but are unsure which town, you will need to decide on the town before starting your search. We could even further say which part of the town, as one area can vary significantly from another, particularly when talking about urbanisations on the outskirts.
If you have no idea where you want to live, narrow your search down to which coastline would best suit your lifestyle. The two most popular coastlines for expats are the Costa Blanca and the Costa del Sol. Other popular regions are the Costa Brava and the Costa de Almeria. Each is distinct in weather, landscape, regional cuisine, and work opportunities, so you will need to do plenty of research and probably visit Spain a few times before you are sure you have found the right area.
It is understandable you might think the next step in your search should be the exciting step of scouring the net for properties in your chosen area, but it makes much more sense first to find someone who can help you in your search. You probably think this does not make sense, and we are trying to push our services, but if you look at it logically, you will see this is not the case.
Of course, you can search for your own property. Thanks to technology, you have access to details of 1000s of properties for sale in any given area at your fingertips. However, if you decide to follow up on one of these properties, and unbeknown to you the listing agent is a fly-by-night unreputable agent, you will realise you got things back to front, but by then, it could be too late.
Don’t make the mistake of thinking that you must work with an agency. Some buyers realise an agency is not well established or overly helpful, but they ignore these points because the agent holds their dream property.
Due to several systems within the real estate sector in Spain, many agencies often have access to the same properties. So, it may not be the case that you have to buy your dream property from the not-so-good agency where you first saw it listed. Once you have found an agent who is well-established, reputable, helpful, and willing to listen to your requirements, you can then also start your own search. If you find your dream property listed at another agency, you will need to tell your preferred agent that’s the one you want to buy and let them arrange the rest.
As you have already researched your agent and trust their professionalism and expertise, you can go ahead safe in the knowledge they will help you.
When looking for an agent, do not restrict yourself to the one closest to the property you want to buy. There may not be any! Search the internet for local agencies. Check their feedback and make a list of possible agents. Next, you will have to do a bit of legwork and visit the agencies if possible or reduce your list by calling them and deleting those who are not helpful or who try to push a property on you that is not precisely what you require.
Before you choose an agent, send them a brief. Make sure the brief states everything important to you in a property and your circumstances, i.e., if you are a cash buyer, need a mortgage, or will buy with a combination of a mortgage and cash. A brief is very helpful for an agent, and it will help you recall what is important to you in a home and not be distracted by a property that does not have all your requirements.
Tell the agent when you will visit Spain for viewings and if you have a deadline moving date.
You do not have to use the notary, lawyer, or mortgage lender suggested by an estate agent, and some buyers prefer not to as they suspect a commission is involved. This is likely the case but paying a commission for referrals is a normal business practice, and a good agent will not recommend a dodgy lawyer or lender. The agent’s recommendations are likely based on their experience and are the best option. But also do some research and ask locals for input.
Furthermore, don’t listen to real estate advice from someone you meet in a bar. The advice may be sound, but you wouldn’t go to a new town in the UK and follow financial advice from a stranger you meet in the local pub, just like you wouldn’t take health advice from a man in a pub either,
Spain has vigorous legal systems and many professional and dependable real estate agents. Take the time to look for them, following the same precautions you would stick to in the UK, and it won’t take long before you find an agent on whom you can rely.
Before buying in Spain, look for an expert property lawyer in the area. On the Costas, many lawyers speak English, but it is also essential to look at their credentials regarding property law, apart from how good their English is. You can always find someone to visit the lawyer and translate for you if necessary.
It is the done thing to use a lawyer or a solicitor for a property purchase in most countries. However, it is not required in Spain, and people may choose to forgo hiring one to save money. However, this is never a great idea, and if you are a foreigner buying from abroad, it could be a big mistake.
Buying a property is a considerable investment, often hundreds of thousands of euros, and the results of making an error can be financially and emotionally disastrous.
You might think you don’t need a lawyer if you have an expert real estate agent, and while most agents are very professional in their work ethics, a real estate agent is not a lawyer. They may know property legalities but do not have the knowledge a lawyer has.
You must remember in Spain, you do not need any certification to become a real estate agent. To be a lawyer, you must study for around seven years. Unlike an agency, a lawyer is covered by the Bar Association and mandatory civil liability insurance.
A lawyer is relatively cheap when hired at the start of the process to see that everything goes satisfactorily. However, they can become much more expensive when hired to resolve an urgent problem.
Look for a lawyer, preferably located in the area or at least in the same Autonomous Community where you want to buy. Laws may vary from one community to another, so don’t hire a Barcelona lawyer if you plan to buy on the Costa Blanca.
Once you have decided on an area and enlisted the help of a good agent, have decided on a lawyer, it is time to get your paperwork in order.
The Spanish are famous for their over-zealous bureaucracy, and before buying a property, you’ll need to make sure you have your papers in order. Your agent and lawyer can take care of nearly all the paperwork, but there are some matters you must deal with yourself.
All the documents you will sign related to your property purchase must include your NIE, so apply for it towards the start of the buying process. It is not problematic to get an NIE, but it may take a month or two. You can get an NIE number in Spain or the UK.
In most parts of Spain, you will need to go to the police station in the area where you want to live twice to obtain the NIE. You will apply during the first visit and pick up the NIE card on the second visit. The waiting time is typically around three weeks, depending on where and when you apply.
If you are not in Spain, your country’s Spanish Embassy or Consulate can supply you with an NIE. This process usually takes longer; expect to wait at least four weeks before the number arrives. The consular route is sometimes less unreliable with papers going astray, so if applying in your home country, make sure you start the process well in advance.
While not mandatory, having a Spanish bank account will simplify the buying process as you can make payments quickly and likely save money on international bank transfer fees.
When opening an account, a bank may request other documents. The staff will tell you what you must bring and let you know about account features. You may like to try a couple of different banks to determine which one offers the best features and if costs differ much from one bank to another.
However, there are ways to bypass this law, including receiving a non-lucrative visa, a Golden Visa, or a self-employed (freelance) visa. You may be able to overstay the 90-days for another reason, such as if a member of your family is resident in Spain. If staying longer than 90/180 days is paramount to you, speak to a lawyer acquainted with Spanish visa applications.
The costs of buying Spanish real estate are the same for EU and non-EU buyers.
You will need to budget for an extra 10 – 15% on top of the property purchase price for legal fees. The buyer primarily pays the costs of buying a property in Spain. The extra 10 -15% fees include:
The property transfer tax which is about 6–10% for resale properties or
VAT (IVA) at 10% for never sold before new properties
Title deeds (escritura) tax
Land registration fee of 1–2.5%.
You will also need to budget for viewing visits, possibly pay a removals company, buy furnishings, or pay for improvements for your new home.
If the property requires extensive renovations, get builder’s quotes before buying. It is better to know the costs involved in advance.
8% for a property priced under 400.000€
9% for a property priced 400.000€ – 700.000€
10% for a property priced 700.000€ and over
The Valencian Community charges a flat 10% fee.
The Tax Agency (Hacienda) may command a higher tax if it thinks a home is worth more than a buyer paid. Therefore, you may find that after paying 8% of the purchase price, the taxman later asks for extra ITP.
The extra fee is 8% of the difference between the amount paid and the tax office evaluation.
So, if you buy an apartment for 100,000€, you will pay 8,000€ for ITP. If the Tax Agency documents its value at 120,000€, they will claim payment of the difference: 1600€ plus interest.
The ITP is due after you sign the public deeds.
When buying a property being sold for the first time, you must pay VAT (IVA) on the property cost, which is currently 10%, plus 1.5% Legal Documentation Tax.
The Land Registry in Spain (Registro Catastral) is a nationwide database that records land and property owners throughout Spain. An entry should be changed whenever a property is sold and transferred to the new owner to secure ownership and control illegal or fraudulent deals.
Yearly taxes depend primarily on a property owner lets it for rental income. Nevertheless, there are differences between the Spanish and British tax systems you should know.
If you have a non-resident mortgage, you must pay income tax even if you don’t rent out the property.
The Spanish tax system is complicated, so it is best to ask your lawyer exactly how much tax you will be charged yearly before buying.
So now you have your professionals in place, your paperwork is underway, and you know exactly how much you must pay as a buyer. It is finally time to decide on a property.
The real estate agent’s job is to show you the property, explain features, costs, and information on local schools, shops, public transport, etc. However, it is not their job to go on a
“negative hunt”. When you have a shortlist of several homes you want to buy, it is a good idea to do a little reccy work yourself, if possible. You will need to put in more legwork and speak with the neighbours.
Neighbours may impart information on noise levels, a problematic neighbour, or if the area is secure at night.
It is also wise to visit the area or property at various times of the day and night and see how the atmosphere may change.
Knowing a little Spanish will be enough to communicate with the neighbours, and chances are there are other expats nearby who can offer you information.
When you feel you have found the right property, try to rent something nearby for a few days. This is not always possible, but it is one of the best ways to try out the area. Many properties are rented by the day or week to tourists, so it is worth looking at sites like Airbnb, Booking.com, or Spain-holiday.com to see if anything is available close by.
The biggest issue with getting a mortgage in any country is if the lender thinks you can make the repayments.
Lenders will look at your:
The mortgage offered will depend on your circumstances and the lender. However, usually, the amount is between 60 to 70%.
So, if you want to buy a €100,000 apartment and your lender agrees to loan you 70% of the property’s market value, they will give you a mortgage of €70,000.
This would mean you need a 30% deposit of €30,000, plus a further approximate €13,000 to cover fees and taxes.
Most lenders will only lend a higher percentage of the value if the borrower has exceptional credit, a high income, and financial security.
Mortgage lenders may have different requirements, so don’t give up if the first one turns you down.
If you want to do any work on the property, you’ll need to apply to the town hall for permission depending on the work you intend to do.
Minor changes, such as changing the doors or windows, require a works license from the town hall.
More extensive renovations require a different type of permission. You’ll need to tell the town hall’s planning department the reforms you want to make so they can give you the correct application forms to fill out. You will usually pay a small fee for the application and sometimes a tax of between 2-6% of the work cost.
It’s essential to check the documentation with a lawyer when planning building work, as without the proper permission, you could have to pay a hefty fine.
So, you have your professionals in place, know exactly how much the property and extras will cost and have done homework on your area and property. Your agent puts in an offer, and it is accepted!
Once you are at this point, it is time to pay a fee to reserve the right to buy the property during an arranged timeframe. The seller agrees not to sell the property to another buyer during this period.
In addition, one party may present a letter of intent to the other, which both parties will sign before any funds change hands.
In most countries, a down payment is made to an escrow agent or a notary or trustee’s sealed account during a property purchase. In Spain, the buyer pays the down payment to the seller.
This arrangement may sound dubious, but it is the standard procedure in Spain as long as the time between paying the deposit and completion is not overly long and the seller is not a firm on the verge of bankruptcy.
When signing a Contrato de Arras, the buyer will pay the seller around 10% of the purchase price. The contract includes a penalty clause stating if the buyer backs out for any reason, they lose the deposit, and the seller may keep the down payment. So be sure you will go ahead before signing this contract or making the deposit.
A notary is a public official who plays a neutral role while witnessing the signing of financial transactions in Spain. A notary makes sure both parties understand the terms of a contract and that the terms are legal.
You exchange contracts, pay the agreed price, and get the keys when you buy a home in the UK. After which, you can register your name as the new owner in the land register. You can’t add your title to the property register in Spain unless a notary oversees the contract signing. To turn a private contract into public deeds in the land register, you need a notary’s signature. So, without a notary, you cannot register your name in the property register.
Some new owners, for whatever cause, may forgo using a notary to witness the deal and not enter their name as the new owner in the registry. However, British buyers need to have their name in the property register, as it is the only fool proof confirmation of property ownership. Other advantages include protection from a seller’s creditors and the possibility of taking out a mortgage or loan against the property. So, completing the sale in the presence of a notary is the only way to gain the benefits of notation in the Spanish property register.
When you sign depends on if you are buying a resale or brand-new property from the builder or developer, if the property is still under construction, or if you buy off-plan.
If buying a new build directly from a developer, you make the full payment and sign the deeds when the architect certifies the property as complete. Until then, do not make the final payment or sign deeds.
When buying a resale home, you can sign before a notary at the earliest time most convenient for you and the seller. The period tends to be around one to three months after signing the reservation contract.
If you or the seller cannot attend the signing in person, you may grant power of attorney to a friend or your lawyer.
You can sign before a public notary in Spain to grant power of attorney, which is the most straightforward method. It is also the cheapest and will cost around 50€.
Alternatively, you can get an appointment at a Spanish embassy or consulate and complete the process there. Your lawyer might have to draw up the clauses and send them with a translation to the embassy. This route can take a while as you might have to wait for an appointment.
Alternatively, you can sign before a notary public in your country. An official translator must translate the document into Spanish, and you must legalise it with the Hague Convention apostille.
An appointment at the notary’s office should not be arranged until your lawyer has finished all legal checks. These include making sure the seller owns the property, that all licences are legal, and that no outstanding debts related to the property are owed.
You also need to agree on a payment method with the seller before the notary appointment. A Spanish bank-guaranteed cheque is the usual preferred method or the transfer of funds to the notary’s escrow account. Many Spanish sellers view a banker’s draught from a foreign bank as suspicious and may refuse this payment procedure. To prevent unforeseen problems at the notary office, make sure the vendor agrees with your payment method and all the funds are available.
Ask your lawyer which documents you will need for signing day and prepare them in advance. You will often only need to bring your passport as your lawyer will have prepared everything else on your behalf, but it is best to be sure before you arrive.
When all parties are present and seated, the notary will first confirm identities. After this, they will read the deeds out. They are typically only read in Spanish, but some notaries may try to help out with English if they speak the language well enough. But the best thing is to bring a translator with you if you do not speak Spanish or rely on your lawyer.
After confirming both parties are happy with the terms, the notary affirms the payment due, and it’s time to sign. You give the seller the bank draft or agreed payment method, and he hands over the keys.
Although not recommended, paying a percentage of the sale price in “black” is still common in Spain. The seller may ask for black money to avoid taxes. If you agree to pay cash under the table, wait until the completion process is finished and the notary leaves before producing the cash. The vendor must count the money in front of you, and he approves the amount, everyone can go.
After completion, all that is left to do is pay the due taxes and update the property register.
After you sign, You can collect the copia simple from the notary’s office. This is a copy of the title deeds. Each copy costs approximately 30€, and if you need more than one copy, let the office know how many you’ll need in advance. You can use this document to set up utility services in your name and pay the related taxes.
A few days after completion, the original deeds signed by the notary will be available for collection. This document is the authorised copy. This is the version needed to add your title to the property register. The notary will notify the property registry immediately after completion, and this secures the registry entry for ten days so nobody can claim the property as theirs during this time.
The government fixes notary fees. The fee varies depending on the number of clauses added to the document and the property’s declared value.
0.1% of the stated price if valued at €400,000
0.4% for properties valued at under €100,000.
After completion, the first thing you will need to do is set up utilities in your name. The previous owners will most likely cancel their contracts, so you will have to take out a new contract with the companies. Otherwise, you will need to change the existing account to include your payment details.
Even if the seller did not cancel their contract, gas companies will not usually pass the contract into a new name like the electricity company most likely will. They will arrange an installation check and set up a new contract, for which you will be charged.
Sometimes, a seller may have just restocked on heating oil or a supply of gas bottles, and the buyer will compensate the seller.
The cost of running your new home should have been clearly explained and outlined to you right at the outset by your agent. Sometimes, a buyer might tune this information out into white noise with the thrill of finally finding a dream property.
Like in the UK, your running costs and bills will vary depending on the size of your property. If you leave sprinklers on for the kids to play under, or leave the aircon running all day so the house is nice and cool when you return home from the beach, your bills will be high. Remember, you pay for what you use, so bear this in mind.
Many electric companies offer a reduced tariff at certain times of the day and week, so look into this and make the most of the cheap hours to run the washing machine and dishwasher, if you want to keep costs as low as possible.
While the initial outlay is not cheap, installing solar panels on the roof of your Spanish house in Spain can save those homeowners an average of around 24% off their monthly electricity bills.
However, legislation introduced in 2013 made it mandatory for any person or company to hook their panels to the national grid to be metered and taxed or face significant fines.
If you buy in a block, on an urbanisation, or in another type of community, you will become a member of the community of owners. The community of owners is the equivalent of a UK management or service company that looks after the building where you have purchased a flat. In the UK, a professional company usually oversees this job. In Spain, the procedure is similar, except the management company comprises the owners of the properties in the building or urbanisation.
The owners set up a delegation with a president, treasurer, and secretary to comply with the law. They will also likely hire a ‘community assessor’, a company that helps the community with legal matters.
The community of owners meets to vote on any decisions such as building repairs, installing new facilities, etc. Community fees pay for these, usually charged every three months.
Before signing, the seller, agency, or lawyer should inform buyers of any upcoming planned reforms which will require an extra payment, as this could influence your decision to buy.
The IBI (Impuesto sobre bienes inmuebles) is equivalent to the UK council tax. It pays for council services. All property owners receive an annual IBI bill.
A seller is liable for the IBI payment for the year if they were the homeowner in January of the corresponding year. However, if a property changes halfway through the year, the buyer and seller will usually share the cost.
When you buy, your agent or lawyer will request proof from the seller that the IBI is paid up to date. An agent will usually know how much IBI is due on each property they have for sale.
“Basuras” is the charge for rubbish collection. The amount you pay in IBI and Basuras will depend on the town and the size of your property.
You can set up direct debits for payments of taxes and community fees, along with your mortgage and utilities. In Spain, interest on late town hall payments is usually around 20%, so it is in your interest to pay on time.
Do not forget house insurance! Ask for quotes from insurance companies before completion and then contract the chosen insurance soon after the sale. Many companies offer home insurance in Spain, including banks.
If you want to let your property as a holiday rental, you must first register it as a rental property with the government. Not all properties are granted a rental licence, so check with your agent before buying. Authorities conduct regular checks on internet portals, and if they find your property advertised for rent without being registered, they can issue you with a hefty fine.
You have several options for finding clients. With the growth of Airbnb, Booking.com, etc., many buy to let owners have dispensed with traditional rental agencies in favour of online platforms. If you prefer not to pay a commission to rental sites, you can advertise the let with a local agency or look for clients elsewhere online. However, like with most things, hooking up with large online companies will probably bring more profitable results.
If your property is overseas, you should have a management agent who can arrange for cleaning between lets, garden maintenance, and, most importantly, deal with any problems. Getting a call at 9 pm in the UK because the sink is leaking, or the guests can’t get the oven the work will only give you stress. Furthermore, if an issue arises and the clients cannot use the apartment at all, you will have to refund them their money. Hiring a management agency or person to deal with these inevitable problems on your behalf is money well spent.
Positive reviews and repeat business are essential if you advertise the property on the internet portals. Just a single negative review could lead to the loss of future business. Getting your agent to put a welcome pack in the apartment is an effective way to greet your clients and earn a good review.
Have a document in the apartment with information about the area, nearby activities, and how to work the appliances.
The best part of a holiday accommodation rental business is that it grows over time. If you are organised and go beyond the call of duty, your rental property will be a fully-fledged repeat small business within a matter of years.
At Javea.properties, we have enjoyed helping hundreds of families relocate to the Javea area during our many years working in the real estate sector.
We have excellent working relationships with builders, developers, and legal professionals who help make the process of buying a property a positive experience for all involved.
If you are interested in buying a property, don’t hesitate to contact us today.