HEALTHPLAN MAGAZINE

Below you will find our guide to buying a resale property in Spain including the most important steps that you will encounter along the way.

We start with the prerequisites such as obtaining a mortgage, getting your NIE number and of course, working with a reliable lawyer to look after your interests.

We then move on to other steps in the buying process such as looking for a property, making an offer, paying a deposit and signing the public deeds in front of a notary.

We then discuss one of the most important aspects of purchasing a property here; the costs.

So read on and make sure you understand all of the steps involved. Some of the sections below link to existing articles that we have published and should provide you with further in-depth information.

STEP 1: Preparing to Buy a Spanish Property

- What's Your Budget?

One of the very first steps in buying a property is to make sure your finances are in order and that you have a realistic budget in mind.

You will also need to make sure that you have a Spanish mortgage pre-arranged with a lender so that you are ready to move at short notice when you find the right property.

Many people opt to use the services of a mortgage broker either locally in Spain or a specialist outside of the country. The benefit of working with an experienced mortgage broker is that they will know the market and have access to a large number of mortgage providers and therefore be able to find you the most suitable mortgage available.

Finding the right mortgage is an important step, as the difference between a good and bad mortgage can literally be thousands of Euros over the lifetime of the mortgage.

Although a mortgage broker will usually charge a fee of around €500 or more, the money they will save you can far outweigh what you could potentially lose by selecting the wrong mortgage deal.

If you are going to employ the services of a mortgage broker in Spain, it is important that the individual or company is fully authorised and regulated by the Bank of Spain. From June 2019, all providers offering mortgage advice and placement must be regulated in the LCCI and have obtained the necessary ICI (Intermediario de Crédito Inmobiliario) credentials.

Due to the intricacies of Spanish law and mortgage contracts, it is crucial that the provider is also completely fluent in Spanish.

Mortgages in Spain work pretty much the same as they do in the UK and other European countries. Fixed-rate and variable rate mortgages are the norm with LTV (Loan to Value) ratios typically around 70%. This will mean you will need to find a 30% mortgage deposit plus fees before you can proceed any further.

- You're Going To Need A Lawyer

Buying a property is a huge undertaking and the potential for financial loss is very real if due diligence is not carried out at every stage. This is where the services of an experienced independent lawyer are so important.

Although it's possible to use a lawyer based anywhere in Spain, we would recommend that you use a local English-speaking lawyer. This is because a local lawyer will have a greater knowledge and awareness of any potential issues in the area such as urban plans and other problems that may directly or indirectly affect the property and its value.

They will also have easy access to the local town hall and will no doubt have many business connections in the area such as architects and notaries. A local lawyer will also be familiar with the estate agents in the area and can help you to stay clear of any unscrupulous ones.

As a rule of thumb, a lawyer will generally charge between 1-1.5% of the value of the property although some lawyers may also charge on an hourly basis or a flat fee.

As lawyers in Spain specialise in different forms of law, you will want to work with one who specialises in property law or derecho inmobiliario.

If at any point you are unhappy with the services of your lawyer, you do have the right to change to another and can request in writing that all documentation be sent to a new lawyer. In most cases, you will only need to pay for any work already carried out. If your requests are ignored, as a last resort you should inform your lawyer that you will report them to the lawyers association or Colegio de Abogados.

The UK Foreign and Commonwealth Office has published a list of English-speaking lawyers in the different regions of Spain, which can be viewed via the link below.

https://www.gov.uk/government/publications/spain-list-of-lawyers

- Will You Need Power of Attorney?

A Power of Attorney, or a 'Poder Notarial', is when you give written authorisation to another person to represent you in all legal matters and transactions. If you are looking to buy a property in Spain or obtain a Spanish NIE number, you may need to assign a Power of Attorney.

This may especially be the case if you are not currently living in Spain, but are in the process of buying a new home here either to live in or perhaps to rent out as a holiday home.

Granting another person power of attorney enables them to undertake many of the bureaucratic tasks that you may not be able to carry out yourself from another country. If you are not fluent in Spanish, granting power of attorney to a Spanish solicitor is another way to speed up the whole legal process and make sure due diligence is carried out correctly.

For further information, please click the link below and read our Power of Attorney in Spain article.

- Open a Bank Account

One thing you will definitely need to set up here in Spain is a bank account. This will enable you to carry out everyday transactions such as paying bills, setting up standing orders, transferring money and in some cases applying for a personal loan.

You have two kinds of bank accounts that you can choose from, a resident account for those who will be living in Spain for more than 183 days per year, or a non-resident account for those who are here for less than 183 days per year.

Find out more about opening a bank account in Spain including the best bank accounts for expats.

- Getting Your NIE Number

If you are going to be living in Spain or at least buying a property here, you will need to get yourself an NIE number. An NIE number or Número de Identificación de Extranjeros is a unique number that is assigned to you and is similar to a national insurance number in the UK.

The NIE helps the Spanish authorities to keep track of your financial transactions for tax purposes and enables you to carry out everyday activities such as opening a bank account, buying a car or starting a business. In fact, there isn't much you can do without an NIE in Spain including purchasing a property.

Applying for an NIE number is relatively straightforward and can be applied for either in person here in Spain, in person at a Spanish consulate abroad or by granting another person Power of Attorney to obtain it in Spain on your behalf.

Learn more about obtaining an NIE number  

STEP 2: Finding a Property

- Defining Your Needs

Although it may seem obvious, it's surprising just how many people do not do their homework when buying in Spain and end up buying the wrong kind of property.

So why are you buying the property?

• For retirement purposes
• As an investment
• As a holiday home
• Or as a family home

If you're buying a home to live in, do you need to be close to the beach, inland, among expats or do you want to be more integrated into the Spanish community? Do you have children? If so, will you need to be close to International or Spanish schools?

Are you buying a property to rent out as a holiday home? If so, is there likely to be demand for your property or is the local market saturated with similar properties?

Are you looking for a renovation project or do you want something that's ready to move straight into with minimal effort?

Do you need to have access to public transport? What about an airport? Will you be travelling much?

These and many more are the kind of questions you will need to ask yourself before looking at any properties. Make a list of your main requirements before you contact any real estate agents.

- How to Find a Property

There are a number of ways in which to find properties in Spain. These include:-

• Online websites and property portals
• Local real estate agents
• Real estate forums
• 'Se Vende' sale boards
• Direct from owner

Not all property agents have a bricks-and-mortar business and although this does not necessarily mean that they are unscrupulous, it is a fact that many fly-by-night real estate agents do tend to adopt this business model.

- Working with Real Estate Agents

Although overlooked by many buyers, finding and working with a professional and trustworthy real estate agent/s is one of the most important aspects of buying a property and can have a huge impact on the outcome of your property hunt.

It's no secret that there are many cowboys and conmen in Spain and the lucrative real estate market is one of the biggest draws for them. Anyone can become a real estate agent here as it is an unregulated industry and is one of the major reasons why there are so many unscrupulous people trying to sell property here.

We cannot stress this enough in that you should try to find an agent that is well established, local to where you are buying and is able to demonstrate knowledge and experience in all aspects of the buying process.

Although difficult, you want to find an estate agent whose priority is finding you the right property and not how much commission they are going to make. Buying a property is a huge and expensive commitment and having the right estate agent on-side is extremely important.

One thing we would recommend is not working with just one real estate agent and maybe limiting yourself to two or three.

The reason for this is that you will be showing the agents that you are not a piece of meat that can be exploited and that YOU are in control of the purchase. If you place your trust in just one agent, you will only have one source of advice and will not be able to cross reference this with another agent.

Ultimately, you will be better informed and it will keep all of the agents on their toes and force them to provide you with a higher level of service. Make sure you make all agents aware that you are working with other agents.

Real estate agents ideally want to work with customers who have been 'fully qualified' and are primed for purchasing. If you are just shopping around and getting a feel for the market, make them aware of this so you are upfront and do not waste anybody's time.

Although being a member of a real estate association is not a requirement, some estate agents in Spain may be API or GIPE accredited. However, being a member of either of these does not guarantee a high level of service or trust. Due diligence on your part is still essential.

You should also find your own solicitor. Never use a solicitor that has been recommended by an estate agent. Like above, you want to get impartial advice and if an agent is working closely with a solicitor, there could be a conflict of interest.

STEP 3: Negotiating and Making an Offer

- Building Survey

Something many of us neglect to do when buying a property here in Spain is to do a building survey. If you were in the UK you would most likely have the property surveyed before making an offer, so why not do it here in Spain?

Although you may be provided with a wealth of information on a property from an estate agent and have all of your questions answered by the vendor, it's important that you get a building survey carried out in order to establish that everything is in order.

A building survey conducted by a registered chartered surveyor has the potential to uncover any issues there may be with the property and possibly save you thousands of Euros and avoid a huge legal headache in the process.

A survey can address any of the following and much more:-

• Plot/Land boundaries
• Check that where required, any planning permission was previously sought and granted for any renovation work.
• Check that all utility connections such as water, sewage and electricity are in place and legal
• Road access and parking
• Check for any damp issues
• Inspect the Nota Simple at the land registry to check the property description and whether there are any outstanding debts on the property.
• Check for any neighbouring issues
• Check for the last 5 years of I.B.I receipts

Although a building survey can cost around €500 or more, this is nothing compared to what it may cost you if you just take everything in good faith!

If the survey highlights any issues with the property this may not be such a bad thing and may present you with the opportunity to make a reduced offer!

You can read more about the different forms of property surveys via the Spanish Property Insight website.

- Making an Offer and Signing the Private Contract

Once you are happy with the results of the survey and your offer has been verbally accepted by the seller, you will then need to sign a private contract and put down a deposit.

There are a number of contract options available at this point. One of the most popular ones that expats come across is a reservation contract. The reservation contract or Documento de Reserva requires that you pay a deposit of between €3,000 to €6,000 to take the property off the market typically for up to 30 days. In the UK this is the same stage as "Sold subject to contract" and is basically the same thing.

Although reservation contracts are not necessary and are seldom used by the Spanish themselves, they are commonplace when foreigners are involved. Estate agents are fans of this kind of contract as expat buyers from abroad are much more likely to proceed with the purchase even after returning home.

If you back out of the contract, you will lose your deposit. If you wish to proceed you will need to sign a more substantial contract such as a deposit contract or Contrato de Arras Penitenciales.

A deposit contract will mean you will need to make a further deposit of 10% of the property purchase price, which you would lose if you pulled out of the sale. If the vendor pulls out, they would have to pay you double the deposit as compensation.

Note that in some cases if you are able to carry out due diligence quickly, you may be able to avoid the different contracts and go straight to signing the public deeds at the notary.

STEP 4: Practising Due Diligence

Once you have signed contracts and paid a deposit, your lawyer will then need to undertake a number of conveyancing checks before proceeding to the signing of the public deeds. These include, but are not limited to:-

• Confirming that the seller is the legal owner of the property
• Making sure the property is free of any debt
• Checking the legal status of the property
• Agreeing on the terms of the purchase with the seller's lawyer
• Checking that the seller's mortgage on the property has been cancelled
• Obtaining NIE numbers and Power of Attorney if required
• Filing relevant taxes with the Hacienda
• Transferring of utilities into the buyer's name
• Arranging the signing of the public deeds with a notary
• Ensuring that the notary registers the change of ownership with the land registry

The conveyancing and due diligence of the sale is extremely important and is why we recommend that you hire an English-speaking independent lawyer who specialises in property law.

Two of the most important checks that your lawyer will do is to check the Catastro land and property register and also check the Nota Simple to ascertain that the information held in the Escritura at the land registry is also correct.

The Catastro

The Catastro is a comprehensive record of the land and properties in Spain, although it is completely separate to the land registry. Because of this, it is crucial to make sure that the Catastro is up to date, not only when you buy a property, but also when you sell a property in Spain. Therefore, it is important that there are no discrepancies between the data held in the Land Registry (Record of ownership) and the Catastro.

This will usually be done by your lawyer, however, it’s important that you have a basic understanding of what the Catastro is and the kind of information that it contains.

The Catastro will contain:-

• The number of plots (Parcelas) of land contained within the property.
• The boundaries of the property.
• The class of land
• Position of the property and swimming pool (if applicable)
• Total area of the land in sqm
• Name of the property owner

The data held at the Catastro is also used to calculate the ‘Valor Catastral’ value of the property for tax purposes and is used to produce your yearly IBI tax bill. It is also commonly used to settle boundary disputes and to calculate capital gains and Plusvalia tax.

Nota Simple

Although your lawyer will check for the accuracy of the Escritura at the land registry it is important that this is accurate in order to avoid any issues when buying a property.

The Nota Simple is an official document, which is used in the conveyancing process and acts as a short report, which outlines the current information held about the property at the land registry.

The Nota Simple will contain the following data:-

• The current owner/s of the property
• Full description of the property including number of rooms
• Size of the property in square metres and any communal areas
• The boundaries of the property
• Any pending encumbrances, fees, debts or liens such as mortgage or community fees, unpaid council tax and any foreclosure procedures.
• Property classification such as residential or agricultural etc.

Unfortunately, the Nota Simple is not always correct as the owner may have made refurbishments and not updated the data held at the land registry. This is why it is important for your lawyer to check this during the conveyancing. If the information is incorrect, it is the seller's job to make sure it is corrected at the land registry.

STEP 5: Signing the Escritura Public Deeds Before a Notary

The final stage is to sign the public deeds or Escritura at the notary's office and once completed will mean that your title is inscribed in the land registry making you the new legal owner of the property.

If you are unable to visit the notary's office in person with your lawyer, you may give your lawyer or a third-party power of attorney to act on your behalf.

Notaries in Spain are public officials and it's their job to make sure that the relevant sales taxes are paid, that the sale does not contravene any laws and that both parties fully understand the terms of the contract.

It is not possible to get your title inscribed into the land registry without a notary witnessing the deeds of sale. Visiting a notary and inscribing your title in the land register is not strictly necessary and many Spaniards (especially in rural areas) bypass this step in order to cut costs. However, it is the ONLY way to make sure you legally own the property.

You will usually sign the deeds between 1-3 months after signing the private contracts. When visiting the notary will usually be required to take certain documentation such as your NIE and passport.

On signing of the deeds, you will be provided with a temporary copy, which is called a Copia Simple and will enable you to do any bureaucratic tasks until you receive the original notary signed deeds or Copia Autorizada a few days later.

Costs and Taxes Involved

And finally, we get down to the real nitty-gritty, the costs involved.

Below is a table that outlines the approximate costs of purchasing a property in Spain. As a rule of thumb, you should allow around 12-15% of the purchase price to cover the cost of any taxes and legal fees.

• ITP Transfer Tax - 7-10% (Depending on the area of Spain)
• Notary Fees - 0.5% of purchase price
• Bank Valuation Fees - €400 - €750 rising to 1% of the property purchase price for larger properties.
• Property Registration - 40% of Notary fees
• Lawyer Fees - 1-1.5% of purchase price
• Mortgage Arrangement Fee - Around 1% of the loan
• Building Survey - Around €500

** Note that due to a new law which was introduced in 2019 a number of fees now have to be paid by the lender rather than the buyer. These include AJD stamp duty fees, notary fees, application costs and property registration fees.

These alone could save the buyer around 2.5% of the fees usually associated with obtaining a Spanish mortgage.

There are also ongoing costs involved with owning a property in Spain such as IBI tax, which is like council tax in the UK, home insurance (often required when a mortgage is needed) and Plusvalia tax, which is a one-off payment based on the increase in the value of the land since it was last sold.