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The Buying process of a Spanish Property Made Easy!

In Spain the purchase of a property is a regulated process and the use of a lawyer (Abogado) who speaks your language is a must. The lawyer will ensure that the property is free of debt and all the relevant taxes and costs are up-to-date and paid by the seller. The lawyer will also be able to help you with other matters such as connecting your utilities and most importantly writing a Will.

STEP 1 - Obtaining a NIE number (Foreign Identification Number)

Your NIE Number is needed to:

  • Purchase and sell a property
  • Insure your home
  • Purchase a motor vehicle
  • Connect to Utilities ie electricity, water, telephone, etc
  • Apply for a mortgage or other loan
  • Pay Spanish taxes
  • Sign into the national Security Health Plan

Two ways to get a NIE number:

  1. Your lawyer can arrange your NIE with a Power of Attorney
  2. If you do it yourself, you must go to your local National Police Station, to the Departmento de Extranjeros (Foreigners Department) and ask for the NIE application form. The following documents must be submitted to the police station to obtain a NIE number:
  • Completed and signed original application and photocopy
  • Passport and photocopy
  • Address in Spain
  • Written justification why you need the NIE (issued by lawyer, notary, bank manager etc.)

The originals will be returned to you and you must ask when to return to pick up the NIE. The turn around time is anything from 1-8 weeks. Return to the Police Station after 2 weeks to check and continue to do so until it is ready. The NIE is issued as an A4 officially stamped document.

Keep this document safe as you may be asked to present the original in the future.

STEP 2 - Find the right agent and property

Find the right agent and property! In these modern times the first communication is usually through email after the client has searched through many websites, requesting more information on the properties they have selected. Then the difficult part! Trying to arrange all the viewings and keeping with the schedule made by the many different agents.

Our advice is to choose ONE agent that you feel has given you the best service and then stay with that agent for ALL the viewings. Most properties are listed with numerous agents and all properties are shared between agents. The commission is then split between the collaborating agents without any costs to the client.

Working the system this way means that:-

  • You will not view the same property more than once with different agents
  • Your viewings will be maximised, easily managed and un-stressful
  • Agent will know after spending time with you, the exact properties to view and to cancel unsuitable appointments
  • Relationship between client and agent will continue for many years

STEP 3 - Reservation contract

Once a suitable property has been chosen, the first step is to make a verbal offer, this will then be presented to the seller by your agent.

Once there is a verbal agreement between parties, the next step will be to formalise the terms of the offer in writing with a Reservation Contract. The reservation fee is usually 3,000€ - 10,000€. The reservation deposit guarantees that the property is taken off the market and is reserved for you at the agreed fixed price.

STEP 4 - Private Contract

Upon acceptance of the offer by the owner the next step in the process is to exchange private contracts of sale or to sign an option to purchase. This normally takes place within two weeks following formal acceptance of the offer.

Your lawyer will have completed his searches and investigations of the property and will have arranged with the owner the procedure for the cancellation of any outstanding debts. The private contract of sale or option will reflect all the agreed terms of the offer and sale and set out the date for final completion at the notary. At this stage it is usual for the buyer to pay a 10% deposit of the purchase price that is non refundable.

It is also a normal practice to skip this stage and go straight to Title Deed if the buyer has the money available and not reliant on a mortgage.

A sale is formally completed in Spain when the public title deeds of purchase are signed before a notary, the final payment made, and possession given to the buyer. On the assigned day, the buyer and the seller (or their authorised representatives) will attend the notary's office to sign the title deed "Escritura de Compraventa". At this point the payment of the remaining balance is made and possession passes to the buyer with the handing over of the keys.

Once the escritura is signed, the notary will fax a note of the title deeds to the local land registry. Your lawyer will arrange payment of all the relevant transfer taxes associated with the purchase and will handle the formalities of registration of your title deeds. Final registration of the deed may take up to two months. Similarly, your lawyer will arrange for the transfer of accounts with local suppliers of utility services, such as water and electricity, and organise their payment through a local bank.

Costs Explained

Purchase Costs for Resale Properties/Repossessed:

Transfer Tax (Accumulative increase) 8% up to €400,000
9% from €401,000 - €700,000
10% over €701,000
Notary Fees and Land Registry Fees 1% average
Lawyer fees up to 1%
Transfer Tax Example Resale worth€200,000Transfer Tax Example Resale worth€750,000
Up to €400,00 at 8%€16,000 Up to €400,00 at 8% €32,000
€401,000 - €700,000 at 9% €26,910
€701,000 + at 10% €4,900
TOTAL Transfer Tax16,000TOTAL Transfer Tax63,810

Plusvalia Tax

This tax is set by the local authorities and based on the increase of the value of the land from the date the owner acquired the property to the time of the present sale. By law the seller is obliged to pay this tax but it is common practise for the parties to negotiate who was responsible for this tax. In the boom days it was usually paid by the buyer but in these times it is now usually the seller who pays. Should the seller be non-resident, the purchaser should withhold funds until such time as proof of payment. This is all usually dealt with by your lawyer.

Purchase Costs for New Developments:

IVA (VAT) on new developments (not registered) 10%
Stamp duty1%
Notary Fees and Land Registry Fees1% average
Lawyer feesup to 1%

Purchase Costs for Land:

IVA (VAT)18%
Stamp duty1%
Notary Fees and Land Registry Fees1% average
Lawyer feesup to 1%

Mortgage Costs:

In the case where a mortgage is required, always check with your chosen bank as to how much are the set up charges and also the Valuation Fee.
Stamp Duty1.8%
Notary Fees and Land Registry Fees1% average

Annual Taxes

Community fees - Community fees differ between urbanisations depending on the services and facilities supplied. By law the Community of Owners (Comunidad de Propietarios) elect their own Chairman (Presidente) and appoint a professional property management company. The Presidente is usually somebody who is an owner within the urbanisation who also has some qualifications or experience to handle this position. The Management company will present the Budget for the forth coming year. Should you be unable to attend the yearly meeting, you can appoint another owner to vote on your behalf. A two thirds majority is generally required for any changes to be made.

IBI (Impuesto de Bienes Inmuebles) Council Tax - This tax must be paid every year between 15th September and 15th November. It is the owners responsibility to check with their local Ayuntamienta (council) as to how much the tax is as they do not send out a bill. Arrange the yearly payment directly with you bank so ensure you do not miss this payment as you will be charged interest.

Basura (Rubbish Collection) - Some councils include this tax onto the water bill and is so paid quarterly. Generally is it a yearly tax that can be paid by your bank as with the IBI.

Capital Gains Tax

This tax is paid at such time as you sell the property and is calculated in the following way.

The amount taxable is the difference between what you paid and the amount it is sold for. You can also deduct work carried out on the property if you have proper invoices. There is no CGT if you sell and reinvest into another property that is more expensive or if you are 65 years and older.

Advantages to buying now in Spain

  • Market at an all-time low but not for much longer
  • Only a couple of hours from all European airports
  • Great climate
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