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

How to find a lawyer and get a NIE,open a bank account and arrange a mortgage, preliminary contract and reservation agreement. Legal advice.
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.

1. Find an independent Lawyer

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.
Signing of documents
What is more, the lawyer should speak both Spanish and your language in order not to spend additional money on constant translations.
Why do you need a lawyer?
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.
Spain offers a golden visa (investor's visa, in other words) for those, who have bought properties for €500.000. With this type of visa foreigners can live in Spain all year round.
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.

2. Get your NIE

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.

3. Open a Bank Account

To buy housing you will need an account in a Spanish bank, so it is better to open it in advance.

Many financial institutions work with foreigners, for example, Sabadell, BBVA, Bankia, Caixabank.
Required documents:
Required documents for opening a bank account in Spain
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.

4. Mortgage arrangements

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.
Required documents:
Documents required for mortgage arrengement in Spain
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.

5. Reservation Agreement

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).
The toy house and signing of documents
In this case, the buyer makes a deposit in the amount of 1-1.5% of the cost of housing, usually 3000-6000 euros is enough for any property, except for the luxury options. Money is stored either on an escrow account or in reliable "third" hands.
Remember, in case you are buying off-plan property, ask for the Building License. NEVER pay any deposit before receiving the approved copy of it! In case it turns out that there is no such a License, and you already paid your money, bank guarantees over your deposit are void.
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.

6. Preliminary Property Checks and Due Diligence

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 new property in Spain
Documents to ask for when buying a resale property:
  • Nota simple (a document from the Property Registry, Registro de Propiedad, which can be requested via the Internet. This document indicates the owner and existing charges (for example, a mortgage loan) and embargos (property seizure by a court decision), if there are any.
  • Check out the information on Land Registry (Catastro), the information in the Property Registry on the real estate should be the same as in Catastro. If something is wrong, contact your Notary.
  • Check inventory data. Request a certificate (Certificación catastral descriptiva y gráfica) which includes the description of the property (legal title, built area, location, etc.) and its plan. This certificate can be requested by any interested person.
  • Make sure there are no debts on taxes (Impuesto de bienes inmuebles). To do it, you must contact the municipal tax office.
  • Check if the payment for the condominium (Gastos de comunidad) was regular. The certificate is issued either by the secretary of the board or by an employee of the management company (Administración de fincas).
  • Familiarize with the residential charter (Estatutos de la comunidad). This document regulates the work of the condominium, general standards of conduct, the rules for private construction work.
  • The energy certificate, that is issued by accredited technical services. At the time of signing the deed, the notary verifies the certificate and files a copy.

7. Getting a Mortgage

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.
Residential complex on the hill
The loan processing takes up to one month.
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.

8. Preliminary sales contract (the arras)

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:
  • Delay of the bank decision to issue the mortgage
  • For some strong reasons when the buyer cannot make a payment
  • If the buyer has found some problems with the condition of property that need to be repaired, or to demand a refund
  • If the notary is not satisfied with the package of documents provided
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.

9. The sale contract (Escritura de Compraventa)

When all the documents are ready, the deal is completed. You need to transfer the remaining amount to the seller's account and sign the sales contract (the deed of sale or Escritura de Compraventa) in the presence of a notary, according to Spanish laws.

The buyer signs the documents with the owner of the property or the developer. If a mortgage is used for the purchase, the mortgage provider (bank representative) will also be present.

Presence of the Notary is a formality, but at the same time, the Notary is not obliged to clarify the points of the contract, therefore we recommend you ask for independent legal advice on all the documents with the correct translation.
Hand shake
Generally, if one of the parties is non-Spanish speaking, we recommend you invite a sworn translator.
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.
What does Escritura include?
According to Spanish laws, the deed of sale must be signed by the seller, the buyer, the lawyer who accompanies the transaction, the translator and the notary. This document is stored in the notary office, in which it was signed. Escritura is only written in Spanish, even if the buyer is a foreign citizen.
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:
  • Compiled by a notary in Spain;
  • Compiled by the consulate of Spain in another country.
  • Compiled by a notary of another country. Before this document can be used in Spain, it needs to be legalized with the apostille according to the Hague Convention.

10. Paying Taxes

For buyer
Within 30 days after the transaction, you must pay taxes and send papers to register the right to real estate.

Taxes include:

1. VAT and stamp duty when buying a home in the primary market (10% + 0.5-1.5%) or a tax on the transfer of property when buying a home in the secondary market (6-10%). If you buy land or commercial real estate, VAT will be higher - 21%.

2. Registration expenses (0.02-0.175%)
Calculator and the wooden letters TAX
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)
Additional costs:
  • Agency Services:
    Usually, commission of agents in Spain is 3-5% of the price of the object. This amount is normally paid by the seller, while for the buyer, this service is free.

    But exceptions are possible, especially if the buyer needs additional services. For example, the agency can charge the buyer for 3% of the price of the property, and this sum already includes, not only the search for properties and support during the signing of the contracts, but also the fee of a lawyer, assistance with getting the NIE, opening a bank account, assistance in obtaining a mortgage loan and other services. We recommend discussing this issue with your agent before signing any contract.
  • Lawyer's fees:
    The amount depends on the specialist and the complexity of the deals. Some lawyers take an hourly fee (€ 50-300 per hour), others have fixed rates for checking and conducting a standard real estate transaction (€ 1,500-2,000), while others take a percentage of the price of the property (1-1.5%).
  • Notary fees and property registration:
    The buyer pays for the notary's service and the registration of the property in the Property Registry. This amount is calculated by the notary, as a rule, it turns out 1-2% of the price of the property.
  • Translation services:
    If the buyer does not speak Spanish, a translator must be present at the signing. The basic rate for this service is €100 per hour + VAT. It may take several hours to carefully read the contract. Translator's assistance may be included in agency fees.
  • Mortgage fees:
    It will be necessary to pay a property valuation (€ 300-500), a fee for opening a loan (0.5-1%), property insurance (€ 200-1000 annually, depending on the amount of coverage and property type).
For seller:
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.

11. Property Registry

Registration of real estate in Spain is carried out in the Property Registry, where it is necessary to apply with the original contract and documents on the payment of taxes, and usually this is done by a Notary.

After 2-3 months, the buyer receives the contract back with an extract from the Registry, indicating the right to ownership.

It is also obligatory to inform the Land Registry (Catastro) in case you make some fundamental changes to your property like building or demolition of the wall. In case you do not inform them, you will have to pay some penalties.
Trinket shape house on key
Be aware, that since 2014 this law became binding, so check if the owner of the property has informed Catastro about any changes (if applicable), made to the property, so you will not have to pay their penalties.

12. Conclusion

- Spanish laws do not restrict foreigners to buy property. You can purchase all kinds of real estate in Spain.
- Owners of any property in Spain are eligible for a multiple-entry Schengen visa, and owners of properties from € 500,000 on can get a residence permit.
- The mandatory party to the real estate transactions is a Notary. Without him, the purchase cannot be registered.
- In Spain, there are no fixed rates of payment for the services of an agent, this issue should be discussed with your specialist.
- When buying property, local residents and foreigners pay the same taxes.
- Additional costs for the purchase of the property are 10-15%. This sum must be added to the price of the chosen real estate.
  • Always know what you are about to sign
  • Spain has its own laws, so you need to think carefully about every step of purchase and not try to save on lawyers
  • Engage independent experts for legal advice
  • To find the property of your dream, you have already found some great specialists, our agents!
Thank you for your attention! For more information please contact the managers of our agency. It is our pleasure to assist you on a way to your dream!
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