Spain Terrain: High plateaus, lowland areas such as narrow coastal plains, and mountainous regions.
Climate: Temperate. Summers are hot in the interior and more moderate and cloudy along the coast; winters are cold in the interior and partly cloudy and cool along the coast.

Government: Type: Constitutional monarchy (Juan Carlos I proclaimed King November 22, 1975).

Spain and the EU including links to Spanish government sites and Tourist Information

 

Buying in a foreign country with a different language, laws, rules, and currency can be quite daunting and is not for the faint hearted.

 

Foreigners buying property in Spain has become very popular. The country has a pleasant, healthy climate and in recent years the local authorities have made great efforts to increase the number foreign tourists and residents. Spain now derives more of its foreign income from tourists than any other country in Europe. Due to low European interest rates and the present financial crisis, now is a good time to buy property in Spain. There is a very wide selection of standards, from farmhouses (fincas) and plots through to villas, townhouses and new apartment developments.

 

The property buying market in Spain is currently undergoing hard times, however there has hardly been a better time to buy property in Spain. If you have the cash it's a buyers market. Wherever you look in Spain there are bargain properties to be found. The exchange rate for Sterling is at an all time low, however, even with this taken into account, you can still find cheap Spanish property.

 

Make sure when you buy property in Spain that you take suitable legal advice. Make sure your lawyer speaks your language, is registered and works from an office. Make sure your Spanish property agent is not simply a name behind a website.

 

Legal: Once you have decided on a property you need to appoint an Abagado (Lawyer) to prepare conveyance documentation (Copia Simple), for conveyance and accompany you to the Notary where the proceedings will be in Spanish. The Abogado will recommend which Notary to use to finalise the transaction.

They can also arrange a Spanish will for you which are a necessity if you have property in Spain otherwise your estate will be subject to very high capital gains taxes if inherited by non-residents.

The lawyer will prepare a pre-agreement, between the seller and the buyer there has to be a contract in place until the public deed of purchase is ready. It's usually a simple document in which the seller expresses their intent to transfer the property to the buyer, and the buyer expresses their intent to buy at the price and conditions agreed upon. At this time, the buyer also gives to the seller a percentage of the agreed-upon price. The typical agreement in Spain (called arras) is if the buyer backs out of the contract, they lose the deposit; if the seller backs out, they have to pay double. Of course, the buyer and seller may choose another type of agreement if they prefer.

The lawyer will usually provide an interpretation Service, Instruct valuations and obtain*NIE Numbers and arrange the opening of a Spanish bank account. *National Identity Card for Foreigners (Nacional Identidad Extranjeros). You can not buy property or vehicles or open a Bank Account without one. If you already hold a Spanish NIE number from a previous transaction, then a new application is not required.

Once your Spanish bank account has been opened, you will be able to transfer the funds for your purchase into that account where it will be held under your control until needed to complete the purchase. By law these costs have to be provided up front. If you get a higher valuation all well and good, but the costs must be found first.

The above will be subject to disbursements such as valuation fees, Legal fees, Notary fees, taxes and IVA (VAT) etc.

You are advised to allow a maximum 12% to cover transfer tax, mortgage tax, legal, translation and lenders fees including the Notary. Some disbursements may be liable to IVA (VAT).

 Once you have decided on the property that you want to buy, the process is this. You need a document called “Nota simple informative”. With this document from the Property Registry (Registro de la Propiedad), you'll find out if the property is free of debt, if it really belongs to the seller, and if the description of the property matches what the buyer has been told (to avoid surprises about missing square meters).

 

Mortgage/Loans: Once you have reserved a property you need to arrange the finance and discuss the mortgage options in full and to obtain a DIP at the best and most advantageous rates for you.

 

Normal Loan to Value (LTV) rate for non residents in Spain of urban property is 70% to 75% LTV, and for Rustic (green belt) property it is only 50%LTV but these can vary due to the ongoing credit crunch. This is subject to an arrangement fee of 450 euros; however there will be no arrangement fee if you are able to accept 70% LTV which will also lower the mortgage repayments. It is also possible to take out a capital plus repayment mortgage. Due to the ongoing credit crisis these figures can vary at short notice.

The documents typically required by a bank to get a mortgage are:

  • Your DNI/NIE
  • Your work contract
  • Your last 3 pay check stubs
  • Your latest income tax return
  • Your pre-agreement with the seller
  • Proof that the property tax (IBI) on the house is paid up.
  • Other mortgages or loans that you may have
  • All property titles, both in Spain and overseas
  • Certificate from work authorities (vida laboral), showing your past work history
  • Records of your assets (bank/mutual fund statements, etc.)
  • Prenuptial agreements, if any
  • Non residents: A certificate of non residency (form available from the bank)
  • If self-employed: Local tax on economic activities (IAE)
  • If self-employed: VAT tax you paid for the last trimester and last year

 

 Comparables and Valuation: There is no central Land Registry list of sold prices available in Spain.

The market value price for properties displayed on this website have been checked wherever possible against the current going rate for similar properties in the local vicinity by our resident local staff and based at our office in Spain.

The valuation method is vastly different to what we are used to in the UK. Official property valuations are carried out by the banks and only once a request for a mortgage has been received. They will not normally accept valuations from any other source and will only give a true valuation to the applicant.

The leading banks will usually provide pre-valuations based on a square meter basis for similar properties. The valuation given tends to be higher once the surveyor has visited the property as he then takes into account quality, location, sea views etc.

If you get a mortgage, you will become acquainted with an appraiser (tasador). The bank requires an appraiser to ensure that their loan to you is safe. You will need to pay for the appraiser's work, usually between 300-500 euros. Note that the tasador by law is a licensed architect, so even if you don't need a mortgage, but have doubts about the structural integrity of the house, you might want to hire an appraiser.

Completion: The property transfer must be certified by a notary. The deed of purchase will be given to the buyer after the notary reads it and the parties present agree to the contents of the deed. The following must then be presented: proof of identity (or power of attorney) of both parties, the seller's title of property (a form that reports the investment to the Central Register), and the buyer's payment. The buyer and seller sign the contract; beneath their signature, the notary signs using his firma protocolizada and the deed is ready for taxes.

Taxes: These are in two parts as follows.

For the buyer: Transfer tax (impuesto de transmisiones patrimoniales) and stamp tax (impuesto de actos jurídicos documentados).

If the seller is an individual, the buyer pays a tax of 6% (7% in some regions) of the price specified in the deed. If the seller is a real estate developer and the building or land to be built on represents a first-time transfer, then the buyer pays VAT tax instead, meaning 7% for housing, 16% otherwise. If for housing, you have to add a stamp tax, in this case reduced to 0.5%, depending on the region (for Madrid it's 1.5%). Some special conditions apply for the Canary Islands.

For the seller: A local tax called the (plusvalia).

With a copy of the deed in hand, the seller must go to the Ayuntamiento  (or wherever local taxes are paid). After filling out the form, the seller will receive in the mail a notice of how much they have to pay. This amount is calculated based on the number of years the property was held, and on the property's valor catastral. Be aware that each town has a different procedure regarding payment of this plusvalia. It's best to ask at the notary's office about this payment.

Property Registry: If you want to be sure that your rights to the property are fully protected, you must ensure that your lawyer registers your title at the local office. (Some small towns don't have an office, some big cities have many. The lawyer must check the original deed of the seller to find out which office corresponds to you). You will be charged a standard fee (about .4% of the first 6010 euros, going down to .02% for over 6,010,121 euros).

 

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Disclaimer: This guide is for information only and should not be relied upon as definitive. Details have been obtained from various sources and although we have done everything possible to ensure that it is correct, we cannot accept responsibility for it or guarantee its accuracy. This is because processes and laws change frequently, and may vary dependant upon personal circumstances. You are welcome to use the information provided, but should always obtain confirmation of specific details and get independent specialist and legal advice in the country that the information refers to.

Updated 19-09-2009