Guide to Buying a Property in Spain

In this guide you can find basic information and answers to some of the more frequent questions about buying a property in Spain. You can find information about the initial steps to take, how to find the right property, financial issues to take into consideration and a brief guide to the most important legal matters. Apart from the guide you will also find some links to professionals that can help you resolve your further doubts.

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Initial Steps

If you have decided to buy a property in Spain there are a number of initial considerations you will have to make before you start looking at properties.

First of all you will have to decide how much you are willing or can afford to spend on the property. If you need a mortgage to finance part of the property it is a good idea to contact a bank to get an initial approval of how much they are willing to lend you.

Apart from deciding how much you are willing/able to spend you also have to decide what you are looking for and where.

It is important that there is a realistic relation between how much you plan to spend and the type and location of the property you are looking for. Too many people come to Spain to buy a property without a realistic knowledge of the price level and come back frustrated and disappointed.

If you do not know much about the price level in a given area or for a specific type of property the internet or property magazines are good tools to get a better understanding of what type of property you can get for the money you plan to spend.
We can recommend looking at a number of different websites or magazines to get a better understanding of the price level. And take into consideration that some agents public properties below market price just to get the attention of a possible buyer – when you contact them the given property has normally just been sold but they will of course be able to find you another property although a bit more expensive.

If you find out that the price level is higher than expected in a given area you can either try to look for a cheaper property or look in other areas as there are big differences in the price level from area to area.

When you have found out more information about the price level we can recommend that you try to specify exactly what you are looking for. To do this you can make of a list of priorities including size of the property, price, number of rooms, facilities included, views, easy access, orientation, etc. This list can both save you and the estate a lot of time by not having to look at properties, which are not complying with your basic needs.

Finding the Right Property

When you have your list of priorities ready and have a good understanding of the prices of the type of property you are looking for it is time to find an adequate Estate Agent and plan for an inspection trip. We have made a separate guide about choosing the right estate agent – see Estate Agents in Spain - so we will go on to the next step about how to make sure that the property you have seen is the right one for you.

It can always be recommended to take your time when you are out visiting a property and remember to bring your list of priorities to make sure that you do not oversee anything significant.
In your list of priorities it is important to focus on the things in a property that cannot be changed like the orientation of the property, size or neighbourhood. If you have doubts or questions about the property or area use the knowledge of the Estate Agent.

When you have found a property you like you should first of all take some time to think it over and discus the pros and cons with family or friends. If you are still interested in the property you should arrange for a second visit. If the property is old and might have some damages to the structure or important installations it is a good idea to bring professionals to go through these areas.

Legal Matters

If you after the second visit are interested in purchasing the property it is time to talk about price. In Spain it is custom that the buyer comes with an offer at which they are willing to buy the property. It is difficult to give any guidelines for how much you can lower the price but you can try with between 1-10% of the total price. There are many owners that are not interested in lowering the price at all so if you really like the property you should be ready to buy it at the announced price.

If you reach an agreement regarding to the price of the property you will thereafter have to sign a pre-contract also called reservation contract. Before signing this contract we can recommend to contact your lawyer to make sure that the contract (which is normally a standard document provided by the estate agent) is fair.

The pre-contract is normally a one page document that states the agreed price, name and personal details of the buyer, exact location of the property and that the property is sold without any outstanding debt. Upon signing this document the buyer normally pays about 6000Eur and it is agreed in the pre-contract that this amount will be lost if the buyer does not complete the purchase (unless part of the contract is not completed – i.e. your lawyer finds outstanding debts) and if the seller does not complete he/she will have to pay back the double amount.

The pre-contract is mainly used to take the property off the market while the buyer gets the outstanding amount ready to finalize the purchase and it also gives the buyer (or his/her lawyer) time to further investigate the legality of the property sale (look for outstanding debts or receipts not paid for, that the seller has the right to sell the property, etc).

If there is a long time span in between the pre-contract and the final contract before a public notary another private and more extensive contract might be signed. This is especially the case when a small amount of money has been paid in the pre-contract.
There are many reasons why there could be a long time span between the pre-contract and the final contract but it is mostly because either the buyer needs time to sell a current property or the seller needs time to find another property or is waiting for a new property to be finished.
This contracts will require a higher deposit (normally up to 20% of the total price) and is as mentioned more extensive setting out all the conditions of the purchase like the agreed price for the property, how it should be paid, what is included in the price, the state of the property (sometimes with photos), date of sale, notary to be used, etc.

Both the pre-contract and the more extensive private contract are fully legally binding but as it is not possible to inscribe this type of document in the property register a final contract will have to be signed before a public notary which is called the signing of the escritura. The escritura have to be signed by both the buyer and seller (or by someone having a power of attorney to sign in their names) whereas it is custom that the estate agents signs the pre-contract.
When signing the escritura the notary officially confirms that the contract is legal and that the money has been paid.

The original escritura in name of the new owners thereafter have to be inscribed in the property register which makes the escritura a public deed, which is the official statement of ownership of a property in Spain.

The last things to do is to pay the property tax, IVA and stamp duty (see below for further information) and you also have to send a notification to the catastral office and the municipality to pay the yearly taxes. For further information and advice about the legal issues involved with buying a property in Spain see – Legal and Property Advice Spain.

Financial Issues

When buying a property in Spain apart from the price of the property you will have to take into consideration that the initial costs are about 10% of the total price. Below you can find further information about the costs involved with purchasing a property in Spain.

One of the most significant fees that a buyer has to pay is the transfer tax or VAT (on new properties). On second hand properties this tax is 6-7% (depending on the location of the property) and on new properties there is a 7% VAT and a stamp duty of 1/2 % of the price.

Apart from the transfer fees to the government the buyer is also liable for paying for signing the official title deed and the registration of this deed at the property register. The total amount of these fees depends on the price of the property but will approx. range between 500-1500€.

The last cost which is not obligatory but can highly be recommended is to seek legal advice. The cost for this help is typically about 1% of the property price.

Annual Costs

Being the owner of a property in Spain is not free and you will have to take the yearly costs and taxes into consideration when buying a property.
There are different taxes you have to pay when owning a property in Spain like the annual real estate tax to the local government and wealth tax based on the value of the property. If you rent out the property you also have to pay an income tax. It is also obligatory to have fire insurance in Spain and owners of community properties like apartments and houses with shared facilities will have to pay a monthly fee for maintenance, cleaning, gardens, etc.

For further information and advice about choosing the right estate agent – see Estate Agents in Spain.

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