buyers guide

buyers guide

The Costs Apart from the actual purchase price of a property, you need to allow approximately 10% of the declared price to cover the fees and costs of acquiring the property. It is normal practice for the purchaser to pay all the fees despite the fact that it is the legal responsibility of the seller to pay the Plusvalia.

Solicitors Fees Normally Normally 1% of the purchase price plus IVA (VAT)
Notary Fees & Registry Fees Calculated against an official scale. Dependent on the declared price, size of property and number of pages in the Escritura. Approx 1% of declared price for both fees combined.
Transfer Tax 7% of the declared price for resale properties. For New Build property 7% IVA plus 1 ⁄2% stamp duty.
Plusvalia A small localised tax based on the increased value of the land since the last sale of the property.

Purchase Price v Declared Price The true purchase price is shown on the private contract but the declared price is shown on all other legal documentation associated with the sale. It is frequently significantly less than the actual purchase price and is negotiable between the buyer and seller. The purpose is no more than a way of reducing the Capital Gains Tax liability of the seller. Obviously the lower the declared price the better for the seller but conversely it will create a potentially higher tax liability for the purchaser when the property is eventually resold.

Historically the Spanish tax authorities have turned a blind eye to this practice although it is becoming a more sensitive issue. Your solicitor will normally recommend you try to negotiate a declared price of around 80%. However, at the end of the day, old habits die hard and with the significant tax saving to the seller the ultimate figure may be a lot lower.

Financial Advice We strongly recommend you get independent advice on raising money for the purchase to ensure that sufficient funds are available at the appropriate times in the agreed currency. This is the one single area that causes most grief during the buying process and results in many failed purchases. Some early planning resolves many of these issues.

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Lawyers It is important to seek professional advice, and we advise that you employ a local solicitor (Abogado) who will be fully conversant with the Spanish legal system. Most lawyers will tell you in advance what their fees will be. The standard fee is 1% of the purchase price plus VAT. This is a small price to pay for peace of mind.

Using a lawyer in your home country could double or treble the bill. The Spanish legal system is very different from other European countries and, to avoid misunderstandings, disappointments and possible fraud, it is essential to seek expert professional advice from the beginning.

The Process
The Private Contract Once you have decided on a property a private contract is drafted which will include a completion date and an assurance by the sellers that the property is sold free of charges, tenants and mortgages. It will also specify any special terms agreed as part of the sale (inventory etc). At this stage you need to make provision for a deposit - normally 10% of the purchase price - which is payable upon signing the contract (Contrato de Compraventa).

This is a binding contract for both sides with significant penalties for breaking it or failing to honour the terms of the contract. The deposit is NON REFUNDABLE if you do not complete the purchase for any reason. Similarly if the seller does not complete the sale then by law he must refund your deposit plus a further equal amount as compensation.

Signing of the Deeds The next stage is to complete the purchase at the Notary's office, usually at least a month after the signing of the private contract. The signing of the Title Deed (Escritura Publica de Compraventa) is completed in the presence of a Spanish Notary (Notario) who certifies that the contract is officially made. It is at this point that you will be required to pay the balance of the purchase money, taxes and Notary's fees.

Registering the Property When the Escritura Publica is signed you will officially become the new owner. The final step is to register the property in your name at the Property Registry Office (Registro de la Propiedad).

Hopefully this gives you a clear outline of what is involved in buying a home in Spain. Please don't underestimate the value of Professional, Legal and Financial advice.