Once you have decided on the property that you want to buy, the process is as follows:
Preliminary check on the property (Learn More)
With a nota simple 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). You should get this document from the real estate agent before giving any downpayment.
The mortgage: part I (Learn More)
In the process of buying an existing property in Spain, the mortgage is going to take the most time, so start work immediately. First, you go about retrieving all the documents that the bank asks for. Then they can pre-approve you, and you can safely sign the pre-agreement and pay the downpayment, knowing that you can cover the money required, and be ready for the closing on the date stipulated in the pre-agreement.
Between the seller and the buyer, it's best to have 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, typically 10%. The typical agreement in Spain (called contrato de 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 mortgage: part II (Learn More)
Once the bank has a copy of the pre-agreement, they hire an appraiser (tasador). The bank requires an appraiser to ensure that their loan to you is safe. The bank will only give you a loan equal to a determined percentage of the appraised value of the house. Note that the seller or broker needs to be available so that the appraiser can get in to see the property. At the closing, you will be charged for the appraiser's work, usually between 300-500 euros. Note that the tasador is by law 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 get an appraisal of the property done.
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.
After the closing
Once the closing is done, the follow-up work is to make sure the utilities are in order, taxes are paid (see Taxes below), and that your new ownership of the property has been registered (see Property Registry below). With a Spanish property in your name, you will need to file yearly income tax and property tax. Even if you have a valid will in your country of origin that includes your Spanish property, we also recommend having a Spanish will drawn up.
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 transfer tax. This tax varies between 6% and 10% of the purchase price, depending on the region of Spain. Some regions like Andalucía have a progressive transfer tax, where the percent increases based on the price. If it's a storefront (local comercial) or parking space sold by itself, the transfer tax will be higher than 10%. 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 10% for housing, 21% otherwise.
For homes, you also pay a stamp tax. The stamp tax also varies depending on the region -- between 0.75% and 1.5%.
For the seller: a local tax called the plusvalia (sometimes it is agreed that the buyer pays this tax). This is essentially a tax on the appreciated cadastral value of a property.
With a copy of the deed in hand, the seller must go to the City Hall (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.
You must register your deed at the local office. This guarantees that your ownership rights to the property are fully protected. (Some small towns don't have an office, some big cities have many -- 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).
Bob and Judy found an apartment in Barcelona and negotiated a price of 340.000€. The seller, Jordi, did not use a real estate agent. Bob and Judy signed a contrato de arras. The seller asked for a downpayment of 40.000€, a bit more than the usual 10%, but Bob and Judy didn't want to argue this point. They then went to a bank for a mortgage of 260.000. The bank offered them a variable-rate mortgage for Euribor + .50%, with no opening fee, no cancellation fee, and a first-year rate of 3.50%. Since Euribor was currently 2.31%, they saw that this would cost them an additional 1300€ the first year. They asked the bank to give them Euribor + .50% for the first year also, which the bank agreed to.
The bank requested the following documents from Jordi:
Once all of Bob and Judy's documents were presented, it took one week for them to be pre-approved. It took another 1 1/2 weeks for the bank to get an appraisal (tasacion) done on the property (no delays on Jordi's side in letting the appraiser in), and another 3 days for the bank to hear back from the appraiser. The appraised value was 413.000€, so the bank approved the loan. Bob and Judy went to the bank to sign the mortgage contract. They were also required to get property insurance (118€/year) and life insurance (which they got on Judy, since it only came to 178€/year for her). Bob and Judy confirmed that after a year they could cancel both policies (since Bob, in fact, already had a life insurance policy). They were also required to domiciliar a few things in the bank account. They called the gas, electric company, and nursery to have automatic withdrawals done through this account. The bank then gave them an estimate of what the mortgage payments would be, as well as a listing of the various retainers (provisión de fondos) that they would need to pay. (Use our expenses calculator to calculate the total costs involved in your purchase.) The provisión de fondos appeared as follows:
|Cancellation of prior mortgage (86.441€ remaining)|
|Com. Ap. PH||Seguros||3% NIE||Otros||Total|
|Receiving party||Amount received|
|Gestor||18.002€||10.128 + 6.989 + 885|
|Bank of prior mortgage||86.441€|
|Seller||212.673€||340.000 - 40.000 (already paid) - (86.441 + 885)|
The total at the bottom says 317.459 €. Bob and Judy already paid 40.000€. Did this mean they actually had to pay 357.459€ in total? Yes, at least initially. The 10.128€ and 6.989€ are the retainers for fees that will need to be paid to the notary, the property registry, to the tax office (Hacienda), and to the gestor. The property purchase, the new mortgage, and cancellation of the seller's mortgage all have to be notarized and registered. This bank contracts a gestor to manage this and make the various payments. The bank/gestor will send you the deed for the property three months after the closing (once the property has been registered). At this time, they should also send you all the notary, Hacienda, and Registry receipts. The bank must refund you the difference between these actual receipts and the retainer that was paid.
Then note the cancellation costs of 885€. Bob and Judy don't pay this. Their bank will charge this to Jordi. Jordi then complains to his own bank, "How come I have to pay this? You told me I had a 0% cancellation fee." His bank responds that this is not a cancellation fee. This is the cost to register the cancellation with the property registry (and all registry changes require a notary's signature).
The bank then charges 300€ to handle the life and property insurance forms. Jordi is a resident of Spain, so no 3% tax to non-residents is withheld ("3% NIE" in the provisión de fondos).
Bob and Judy transferred 57.459€ to the bank to pay the rest of what they owed. Four days later was the closing in Barcelona; 30 days in total from the day they presented the documents to the day of the closing. The closing went smoothly, though Jordi made a long face when he heard the property had been appraised at 413.000€. Jordi received the check from the bank rep and gave Bob and Judy the keys to the apartment.
It took a whopping ten months (instead of the usual three months) before Bob and Judy received the deed from the bank rep, receipts, and refunded amount from the retainers -- 19% of the 17,117€ that was retained.
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The seller wants the declared price to be less than what I'm actually going to pay. Should I do this?
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