In this blog post, I want to take you through the process of buying a house in Spain. Last year, I have purchased a house in Spain myself (Finca Bravo) so I am well aware it can be a daunting process. There are quite a few differences from the process here in the UK and it’s therefore wise to read up and be aware of some of the common pitfalls of buying a property in Spain. I try to cover all the basics below, however make sure to enlist the services of a professional before committing to your dream home.
Logic dictates that before you can buy a property you need to find one that suits your needs…
How to find a property in Spain?
First of all, you’ll need to establish whether you are looking for a sea view apartment, a historic property in a local town or a rural finca set on its own land. Making a list of all your requirements and splitting them out between ‘must have’ and ‘nice to have’ can save you a lot of time and make your search process a lot more efficient. For reference, you can find our list below:
- rural property
- at least 1 hectare of land
- arable land for kitchen garden
- less than 2 hours away from an airport
- less than 20 mins away from nearest town
- access to the property with a ‘normal’ car
- possibility to use as a B&B
Nice to haves:
- at least 2 hectares of land
- access road in asphalt
- school less than 30 mins away
- water supply (well or spring) on the property
Popular online property portals
Below you can find some of the most popular Spanish property portals:
- Milanuncios (Spanish only)
- Tucasa (Spanish only)
- Venta de pisos (Spanish only)
Advantages and disadvantages of using an estate agent
Many of the properties you see online will be managed by estate agents. Some will speak English (certainly in more touristic areas) and most are accustomed to dealing with foreign buyers. Whilst estate agents can help provide detailed information about the area or city you’re looking at, approaching them with some caution is advised.
Regulation is relatively low in Spain and – just like in the UK – unscrupulous estate agents do exist. Always remember the agent is paid for by the seller (more on that below). They are ultimately trying to sell a property and will usually only show the positives of a property, not its shortcomings. Don’t ever provide upfront payments and stay away from agents who suggest cutting corners. Some might propose you make use of their connections but it is strongly advised you find your own notary, mortgage provider and solicitor so you can trust them completely to be on your side.
Buying a Spanish property
The process of buying a property in Spain is straightforward but is markedly different to the process in the UK. In the sections below you will find an overview of the most important aspects that you need to be aware of when buying a property in Spain.
The buying process
Initially, you will make an offer on the property of your choice, usually through the seller’s estate agent (see above). If the offer is accepted, the next step is for the buyer and seller to sign a preliminary contract (called a contrato privado de compraventa) and the buyer then pays a deposit, typically 10% of the purchase price. Any checks (regulatory, construction surveys, soil tests) you would like to make will have need to have be made before this point. This is especially important if you are considering buying a rural property (terreno no urbanizable) where it is not always clear what was built within regulations and what was constructed illegally. Also, you need to be aware that if you are buying a property that is in ruins, or where some of the outhouses are in ruins, it is not always easy to bring these ruins back to living conditions. The exact regulations depend on the region, but in most a ruin will require to have a partial or completely intact roof in order to get permission to renovate it. In any case, it does not matter what the estate agent promises you, it is imperative you check this with a local architect or directly with the authorised council.
The buyer then arranges a mortgage if required, although they should have already discussed their needs with the mortgage provider. As I am sure you are aware, Spain has gone through a very severe property crisis since 2008 which has resulted in banks making it much more difficult for you to obtain a mortgage. See the section on Mortgages below for more information.
The next stage is for the contract of sale (escritura de compraventa) to be signed in front of a notary, at which point the full sale price, taxes and other costs are due. If you are not living in Spain at this point, it is advised you give a solicitor access to your bank account through a power of attorney so that he can go to the bank, collect the bank cheque and then head to the notary to sign in your name, pay the seller and pay any taxes due.
Even if not legally required to complete the sale, it is very much advised to use the services of a notary to ensure a smooth transition of the property. This will also be a requirement for most mortgages.
The seller is officially responsible for any hidden defects in the property, even if they are unknown to them. Though, in practice gaining compensation for such failings can be difficult and costly. If you are unsure about the state of a property, it is best to have a survey carried out by an independent third party either before you pay the deposit or as a condition of paying the entire sum while paying the deposit.
It is your responsibility as the buyer to pay for all the costs and taxes associated with buying a home. If you have decided to use the services of a lawyer, he will be able to advise you of everything you need to be aware of.
The buyer is also responsible for registering the property. The notary may provide this service for a fee, and/or may notify the registry office that the sale has taken place, without completing full registration.
Funding purchase: deposits and mortgages
Following the 2008 credit crisis Spanish banks have been heavily restructured with significant international involvement by the EU and the IMF. As a result of this, banks are approving fewer mortgages and mortgage rates and terms have become less favourable.
One thing to be aware of is that the value the banks place on a property might be very different from the actual market price. Furthermore, for a rural property you will only ever be able to get a mortgage for 50% of the bank’s valuation of the property. It’s therefore absolutely crucial that you go talk to a bank first before putting down a deposit if you are depending on the bank’s money to pay for the purchase.
In Spain, mortgage lenders will not complete on a mortgage agreement until you own a property. For this reason, it’s important to include a clause in the contract allowing you to exit the agreement if you cannot acquire a mortgage.
Fees and charges
Most costs are the responsibility of the buyer in Spain and there will be significant variations in costs from region to region. As a rule, the additional fees and charges paid for by the buyer will be between 8-12% of the purchase price and include:
- Property transfer tax 5–10 percent (existing properties);
- VAT (or IVA) at 10 percent (new properties only);
- Notary costs, title deed tax and land registration fee 1–2.5 percent;
- Legal fees 1–2 percent (including VAT).
The estate agent’s fees are usually paid by the seller, but it is good to verify this at the start with your agent. For your information, estate agent’s typically charge the seller about 3% of the final sale price.
Capital gains tax
In Spain the capital gains tax varies from 21%-27%. Sellers wishing to minimise their taxes will sometimes suggest to agree on a lower sale price, receiving the rest in the infamous brown envelope under the table. It goes without saying that this is not a good idea, but there are very real negative consequences of agreeing to this. Firstly, it can cause legal problems. Secondly, by agreeing a lower sale price now, you will have an increased tax bill yourself if and when you decide to sell the property on. See below for an example of how this could work:
Choosing a reliable lawyer
Several times in this post I have recommended for you to call on the services of specialised lawyer. But I’m sure you’re all thinking; ‘that’s all well and good, but where do I find one?’ For a start, you will want to make sure that your future lawyer is registered with the local bar association (Colegio de Abogados). This doesn’t guarantee competence of course, but at least ensures you are dealing with an official lawyer. A good place to start is a list of English speaking lawyers, divided by region that can be found on the GOV.UK website.
Finally, it’s worth mentioning that estate agents in Spain will often be able to recommend a lawyer. I would advise not to pick them up on this offer as you will want to be 100% confident your lawyer is first and foremost thinking about your interests rather than having the conflict of acting for both you and the seller, the estate agent or both.
How to pay for your house in Spain?
The final step; how to pay for your house in Spain. Firstly, you will need to open a bank account in Spain. There are several banks who provide a bank account specifically aimed at expats, where you can open an account with just your passport and your N.I.E. (see this article on how to obtain your N.I.E.). Some examples are Banco Santander and Banco Sabadell.
Now you probably have a bank account in the UK with your budget in pound sterling and will need to transfer this money to your Spanish bank account in euro. Calling your UK bank asking them to transfer the money would certainly be one way to go about it but this will often lead to inflated rates and potentially carry extra fees. A foreign exchange company like WorldFirst can help solve this problem by offering much more competitive rates whilst at the same time providing you with a quick and hassle free transfer. Just give us a call and we can discuss this with you in further detail.
There you have it, everything you need to know about buying a house in Spain. Do let us know in the comments if you have any further questions or want to share personal stories about buying a house abroad.