Buyers Guide To Property Purchase In Spain
This is not intended to be a comprehensive buyers guide but it will offer the reader some insight into the process of property purchase in Spain which is most likely different from that of your home country.
As is the case anywhere the cost of buying a property is not just the sales price, there are costs to be added for State Taxes, Land Registry, Notary and Lawyer fees along with fees and taxes for financing such as mortgages. Should there be no financing required the costs would be approximately 10% of the sale price, should there be financing required those costs could be as high as 13%.
It is not always necessary for buyers to be in Spain for the completion of the property transaction, if it is not possible then Power of Attorney can be arranged for your lawyer or legal representative to complete on your behalf. It is better to arrange this POA when in Spain as it is quite simple an only requires a visit to the notary with your lawyer. Should you require to arrange POA in your country of residence then it is a more complicated affair and more costly.
In order to buy a property, it is required that you obtain an NIE (Foreigners Identification Number) Your Lawyer (Abogado) can help with this. But buyers must be in Spain to obtain this.
Having agreed on a price for the property it is usual to be asked for a reservation deposit, usually €6000 this is best lodged with the seller's Lawyer or in the case of a new build with the developer’s agent. Once this deposit is lodged, the property will be taken off the market for an agreed reasonable period to allow the formalities of searches, etc to be completed and the sale to be finalised. This deposit is often non-refundable unless agreed otherwise.
These will depend on the price of the property being purchased:
New Built properties require IVA (VAT) to be charged at 10% plus stamp duty of 1.5%.
Existing or Resale Properties require a Transfer Tax to be paid this is calculated on a sliding scale depending upon the price of the property which is 8% on the property value of up to €400,000, 9% on the next €300,000, and 10% for properties above €700,000.
Notary fees are calculated using the property price the number of documents forming the house sale but will be in the region of €500 to €1000. Depending upon the price of the property. Land registry fees are approx. 40% of the notary fees.
Lawyers (Abogado) fees are generally about 1% plus IVA of the property price, in some cases can be negotiable again depending upon how much work the lawyer is required to do, the property price, if financing is required?
Financing and Mortgage costs:
Bank valuation fees in the region of €1000 plus IVA
Mortgage commission as a norm would be 0.5% to 1% of the amount of mortgage required.
Connection or registration for Utilities can be done by the individual, but it is a lot easier for the Lawyer to do it he may or may not make a charge for this.
Plus Valia taxes should be paid by the seller of the property, however, you may be asked to pay these when negotiating the price of the property, however it is best the insist the seller pays.
Annual Costs of running the property once purchased:
IBI or Impuesto Sobre Bienes Inmuebles is the Local Town Taxes these are calculated using the Catastral value of the property.
Basura is the tax payable to the Town Hall for the rubbish collection service it provides.
Community charges, the seller should be able to inform you of these charges in the first instance when negotiating the price of the property.
Insurance for both Contents and the Building, insurance rates in Spain are quite reasonable.
Income tax, even though you may have no earned income in Spain, it is assumed that you will earn an income from your property. The amount is again calculated using the Catastral Value of the property.
It should be remembered that it is generally the buyer and his lawyer who bear the greater burden of due diligence when purchasing property in Spain, Sol Villas will always recommend that the buyer and the seller use the services of a recommended Lawyer.
If after reading this buyer's guide you have any questions regarding potential purchase or an enquiry about a particular property then contact us here.
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