Spanish Property Buying Process: the 11-Step Guide - What to Do and When

Generally, the process of buying property in Spain is rather simple and includes several steps, that will be discussed further. Of course, there are some nuances connected to buying real estate for mortgage and the off-plan property. These tricky cases will be also described in this article.

Prior to signing all the contracts, we strongly recommend you find an independent lawyer, who specializes in Spanish land law «urbanismo».

Why should the lawyer be independent? Such a specialist will not act in best interest of the developer or agent you choose to work with.

He or she will help you to order and check all the necessary documents. As most of the Spanish government employers do not speak the English language, and foreigners are not aware of the pitfalls in Spanish law, therefore, using the help of a specialist is a must.

Citizens of any country in the world can buy property in Spain. There is no need to obtain a residence permit or any permission from the local authorities. The property can be registered by a physical or legal person.

There are also no restrictions on the types of real estate that may belong to foreigners. It is allowed to be acquired in full ownership apartments in the primary and secondary markets, villas with land, plots and any types of commercial property.

Foreigners are usually very active in the local market: they make about 15% of all transactions. Most properties are bought by the British, French and Germans. Among active buyers, from outside the European Union, are Chinese and Russians.

Concerning the situation with Brexit, there is a lack of clarity in some respects for British buyers of Spanish properties. First of all, there are some concerns about mortgage rates rising. People are afraid that they will not be approved for a mortgage because of the fluctuating currency. What is more, pensions could become void when you will need to prove sufficient funds for mortgage and visa, if there is going to be any. The question of whether the healthcare service will be covered for the Brits is also relevant.

All in all, it is doubtful that Spanish and British governments will not introduce some joint agreement for the largest investors in Spanish resort property (around 15% of all deals with properties among foreigners) and the most-popular country for British pensioners to retire.

For different legal transactions, including the purchase of real estate, employment or starting a business, a foreigner will need an identification number (Numero de Identificacion de Extranjero). You can get it in advance, at the consulate of Spain in your country, or in any police immigration department in Spain.

Documents for NIE:

- the original and a photocopy of all pages of the passport,
- two photos,
- a receipt for the payment of the fee (around € 10),
- a completed application form.

Typically, agents help their clients to get a NIE. You will need to wait from several days to several weeks, depending on the number of applications.

When opening an account in euros, the operation itself will be free of charge, but in the future, with a positive balance, a quarterly (or annual) commission will be charged. The first instalment may even be zero. The same account can be used to pay utility bills. Now all banks give access to the online office so all the operations can be carried out remotely.

It is better to open an account in the bank where you are going to take a mortgage. If a mortgage is not the case, the choice of a bank should be determined only by the attractiveness of its tariffs for individual accounts.

Mortgages in Spain are quite affordable for foreign citizens. However, Spain has tightened the requirements for the necessary documents, because of the increasing incidence of debt on a loan, or the refusal of property for economic reasons.

The loan processing has also increased, instead of 2-3 weeks, your application may be considered within 4-6 weeks. Spanish banks do not have unified requirements for documents, therefore it varies from bank to bank. These concerns, in particular, the issue of translating documents into Spanish.

Many foreigners are interested in how to buy the property, in Spain, for mortgage. In fact, today the Spanish banks are ready to provide up to 80% of the cost of housing for 10 to 30 years at around 3.2% per annum. Mortgage registration is associated with the need to provide various documents on income, such as a certificate of employment, a tax return, bank statements, documents on the ownership of real estate or shares. It is worth remembering that the European rule for payments on mortgages cannot exceed 30% of income. In other words, it is necessary to earn 3 times more than the monthly payment.

After receiving a pre-approval on a mortgage, you can sign a reservation agreement and give a down-payment.

Once you have found your dream property, you can reserve it (optional). The reservation contract is concluded between the buyer, on the one hand, and the owner of the property, a real estate agency, or the developer, on the other.

Both the price of the property and the deadline of conclusion of the deed of sale are set in this agreement (usually within 15-30 days).

Since the contract indicates the intentions of the parties to enclose the deal, after its conclusion the property is withdrawn from the market, its viewings to other buyers stops. The responsibility of the parties for the failure of the transaction are also fixed in the agreement. Make sure that the conditions on legal checks are included in this contract, because if there are problems, then you can return the money.

After reserving a property, an agent or your lawyer orders Nota Simple, in which all owners and encumbrances are listed. For example, typical burdens are, mortgage or obligations to the municipality to carry out restorations or improve the surrounding infrastructure.

This type of contract secures you from possible troubles, whereas, with the preliminary sales contract you could lose your money in case the outcome of the legal checks do not satisfy you. And ultimately, if the transaction takes place, the money goes to offset the value of the property.

Legal status:

Everything must be verified by your lawyer BEFORE any type contract is signed! That is, the buyer should make sure that the property is in the same condition as the seller describes it.

Additional checks:

Documents to ask for when buying a resale property:

After you have provided the bank with all the necessary documents, the bank calls the assessor (tasador), who will draw up an evaluation report (tasacion).

On the basis of this document, the bank may issue a mortgage loan up to 80% of the property value.

The borrower's costs are expressed in the bank's commission in the amount of 1-2% and stamp duty of 0.1-2% of the loan sum. Additional payments are for the property evaluation, performed by tasador (250-500 euros) and property insurance (250-350 euros annually for the real estate of an average price category).

In the case of a positive decision, the signing of notarial documents (mortgage contract and deed of sale) and their registration in the state register.

After expecting the property and making the final decision on the deal, the parties sign a preliminary contract (Contrato de arras). The document contains information about the property, the obligations of the seller (for example, to repair something or leave furniture in the apartment) and the buyer (in how many days the dead of sale should be concluded, and the final price to pay).

Unlike the reservation agreement, the arras contract is a private legal agreement, not yet added to the Registry, but is legally binding, and at the same time, does not require notarization.

At the time of signing, the buyer must transfer 10% of the price of the property to the seller or more, depending on the agreements. Usually, some penalties are included in the contract in case of its termination on the initiative of one party. For example, if the buyer refuses to purchase, he loses the deposit, but if the seller refuses to sale, he must give back the deposit in double amount.

Delaying the sale:

Unfortunately, sometimes the sale could be postponed due to the following reasons:

In case of an off-plan property, there may be delays in the deadline of construction. That is why the deed of sale may be signed a bit later. But do not worry, the payment installments (specified in the arras) will be held on the escrow and there is no possibility that your money will be taken before the actual sale.

If the contract does not cause objections, the notary makes a request to the Property Registry and reserves the property. From this point on, any other operations with it are impossible.

The most common way to pay for property in Spain is checks. First, a foreigner opens an account in a Spanish bank, then transfers funds from their account in their home country (this will require confirmation of the source of income). Before signing the contract of sale, the Spanish bank will issue a check to the buyer, which he will give to the seller.

The buyer hands in the check for the remaining value of the property to the seller. The customer also gives the check to the notary to cover a pre-calculated amount of taxes and fees. The seller submits the keys, property documents and receipts for the payment of taxes and utility bills to the buyer. Also, the buyer receives a copy of the deed of sale, the original can be picked up after registering the property in the Land Registry (1-3 months).

At the time of signing the contract, the owner receives not only the keys, but also documents relating to the maintenance of real estate. In the primary market, they are documents for concluding contracts with service companies that the developer provides. In the secondary market, they are existing service agreements that you need to renew in your name.

The Power of Attorney:

In Spain, you can make a purchase and sale transaction and complete the deed of sale at the notary by the power of attorney. It is convenient in case you do not want to fly to Spain several times just to sign the papers. There are several ways to do it:

Read more about taxes when buying property in Spain here

The list of possible expenses when buying property in Spain:

Purchase (€ 340.000)

Loan (€ 260.000)

The seller pays the difference tax on the cadastral value of the Property (increase in cadastral value). Resident or citizen of Spain, selling real estate, declares the difference between the cost of buying and selling as a parish, and, accordingly, pays income tax on it of 24%. Also, the seller, in most cases, pays commissions to the agency, which assists in carrying out the transaction.