Once you have found your property, the purchase process begins with a reservation agreement. This is a contract that freezes the purchase price and takes property off the market for, usually, 30 days on payment of a fee between €3,000 and €12,000. The deposit is usually held by your lawyer or your agent in a client or escrow account..
Within 10 days of signing the reservation agreement, the full private purchase contract (contrato de arras) is signed between the buyer and the seller. This is similar to exchanging contracts in the UK buying process. Within this time your lawyer should complete all the searches on the property - confirming that the seller own the property being sold, there are no mortgages or charges and that planning consents are in order.
Once both parties sign the main contract, it is binding. The arras contract or full private contract will usually require a 10 to 20 per cent deposit to be paid. The buyer is then committed to pay the balance of the price, and the seller (once the money has been paid) must transfer ownership to the buyer.
If the seller pulls out of the transaction he must return double the amount of the deposit received by way of compensation. If the buyer pulls out he will lose the deposit paid.
The property sale is formally completed when the title deed (“Escritura de Compraventa”) is signed before a public official called a Public Notary, or Notario. This will happen at their office and be accompanied by the agreed final payment and all the relevant purchase taxes. The Escritura is then presented by the Notary to the Land Registry for registration and the property is passed to the new owner. Final registation of the title deed can take several months.
With a new-build property, obviously completion can take a lot longer, and the payments are split over stages of the build process, and the developer should provide bank guarantees against each payment. This protects your payments in the event the developer fails to complete the property or goes bust.
Spain buying costs
Allow for between 10 and 14 per cent of the purchase price to cover the costs of buying your property in Spain but this figure varies, according to the region. If you have a Spanish mortgage you need to add an additional cost of 2 to 4 per cent.
But this ballpark includes Transfer tax, equivalent to stamp duty, calculated on the property purchase price and between 6.5 and 10 per cent, depending on the region. It also includes the Notario’s fee of around 0.5 per cent of the purchase price, and tends to range from €300 and €1200. Land Registry fees in Spain tend to be between €400 and €600 – or 0.4 per cent of the purchase price.
Legal fees are usually a percentage of the purchase price – generally 1 per cent plus VAT– but with a minimum fee. VAT on new-build properties in Spain is 10 per cent.
Finally, you will need to budget for utility connections and obtaining your NIE number.
You'll also need to find the most cost-effective, safe and easy way to move your money abroad when you purchase. Bank charges and fluctuating exchange rates can both have an impact on your overall cost of purchase - but if you’re well prepared, you can save up to 4% of the cost. Working with a specialist currency firm will help you achieve currency exchange rates better than the banks, and reduce the risk of your international payments increasing.n a £100,000 exchange, a currency specialist can save you up to £4,000 by providing better rates compared to your high street bank. Click here to download your free guide to saving money on your purchase.
In Spain it is not automatically part of the buying process to use your own lawyer or a have a survey done. We recommend using an independent lawyer in every type of purchase but a survey is obviously recommended if you are buying an older resale property. Using a gestor (accountant) once a year to ensure you file all the correct tax returns on your property - at the right time – is also suggested.
If buying on a community or urbanization, make sure you get your lawyer to do due diligence on the managing committee to make sure that the accounts are in good health and the upkeep of communal areas is ongoing and efficient.
If you would like more detail about some aspects of buying a property in Spain, then download our FREE guide to buying property in Spain sponsored by HomeEspaña, which covers the popular regions of Spain, a run-down of the Spanish property market including the types of property and things to watch. We give tips on legal, currency and tax as well as the steps involved in the buying process.
Download Spain Buying Guide now >>