General Information

Indigo Estates

Guide to Buying in Spain

Spanish Property Buyers Guide

Research

Researching the area in Spain that you want to purchase in is very important. At Indigo Estates we can advise you on areas, however it is important that you find an area that you like, and meets all you criteria. Think about why you are purchasing a property and what your needs are, this will help you find the right area and the right property for you.

Some useful questions to think about are:

Are you purchasing a property to rent out?

If you are looking to purchase a property to rent out, you need to choice an area that is popular with tourists, or an area that will appeal to a niche market. You also need to think about what market you want to attract, e.g. family holidays, country retreats …..

Will you be using the property?

Country property or coastal property?

What budget do you want to spend including fees?

Remember to allow 10%-11% of the purchase cost when purchasing a property in Spain to cover purchase taxes and purchase fees here in Spain

Do I need a mortgage?

Are you buying the property as an investment?

Are you looking to purchase a new property or resale property?

Are you looking for a renovation project?

Finding your property

Now you have an idea of what you are looking for, your search for property can begin. At Indigo Estates, we are happy to assist you with your property search. We are members of the Interagency Network (IN) MLS, and have access to over 8000 new and resale properties here in Southern Spain.

Let us know your requirements, we can then search our database and email out a property portfolio for you refined using your search criteria. Your feedback will help us narrow down the portfolio and provide you with a short list of properties to view. If you are still not sure what area you are going to purchase in, don’t worry, by chatting to us at Indigo we can provide you with as much information as possible and help you narrow down an area or a number of areas to search for property in.

Arranging a mortgage

It is very important to choose a mortgage that is right for you. Always take into consideration your personal circumstances. It may be that you prefer to raise capital from a property in your home country before arriving to Spain. Maybe you need a Spanish mortgage, if so we work with Independent Brokers and Spanish Banks to provide you with the best service possible. If you require a Spanish mortgage, remember to bring with you all the necessary documentation to enable a mortgage to be arranged in principle.

If you are using a Spanish lender you will need to provide proof of your ability to repay the mortgage. Terms and conditions will differ from lender to lender, as typically as a non-resident you will usually be able to borrow up to 70% of the value of your property repayable over 10-30 years depending on your age. Some lenders will provide upto 80% of the value of the property, but this is dependant on your circumstances. As a rule your repayments must not exceed 35% of your net monthly income or joint monthly income if two people are applying. The costs involved can amount to 3-4% of the amount you are borrowing.

Viewing your property portfolio

Now you have a short list of properties to view, you need to plan your arrival to Spain and begin the next phase of the process, the hunt for your dream property.

When you arrive to Spain looking for a property, it is always good to arrive with an open mind, always look at each property carefully and weigh up the advantages and how many items it ticks of your wish list. We can’t always tick of every item on a wish list, but can normally find one that satisfies a large number.

We have a wide choice of properties available, not just our database of over 8000 properties, but also using our links with other agents here in Southern Spain, means that we can show you virtually every available property here in Spain, luckily you don’t have to view all of them when you visit!

It is always advisable to look a few properties and make comparisons to ensure that when you have made your decision it is the right one. We want to find you the best property that we possibly can within your budget, therefore when you view a selection of properties you will be sure when you have found your dream home.

I have found my dream home ….. what’s next?

The reservation Deposit

To secure a property here in Spain, you need to place a deposit on the property. A deposit is normally between 3000 – 6000 euros, and can be paid by credit card or bank transfer and will be held in your name. We do not recommend that you carry cash in your pocket, but you should ensure that the sum is readily available as a delay could mean your dream becoming another person’s reality. The payment of a deposit fixes the price, confirms your intention to buy and means that the property is removed from the market and reserved in your name.

When you put down a deposit, terms can be agreed, such as purchase price, which can be negotiated with the seller and Indigo Estates until an agreed price is reached. You may wish to make your offer subject to mortgage, or final completion date, or terms of payment.

Instruct a Lawyer

Once you have paid an initial deposit to reserve a property and take it off the market, you will need a Spanish lawyer. Always choose a Spanish lawyer, who also speaks your language. Your lawyer will carry out numerous checks to ensure that your chosen property is indeed owned by the person selling it and that it has been marketed correctly. Your lawyer will ensure that there are no undeclared debts owing on the property and that all service bills and taxes are paid up to date.

Using a lawyer will ensure that your investment is safeguarded and when you receive ownership of your property you will not inherit any outstanding debts.

If you have decided to purchase an off plan property your lawyer will ensure that the developer has an insurance policy or a bank guarantee in place ensuring that should the purchase not go ahead at the fault of the developer, your money plus interest will be returned.

A lawyer will charge between 1-2% of the purchase price of the property plus VAT at 16% for their services during the sale.

If needed, should you require, a lawyer can arrange a power of attorney should a 3^rd party need to sign for your property on your behalf. This can be particularly convenient if you are purchasing an off plan property as occupancy licenses can sometime be granted a few weeks after the property is officially completed.

Exchanging Private Contract

Once your lawyer has completed all the necessary searches, he will inform you when you are able to sign a private contract with the Vendor. The contract will set out the legal description of the property, the price, the payment terms and the obligations of both parties.

Signing usually takes place between 14-28 days after payment of the initial deposit. If you are purchasing the property using a mortgage, ensure that you have received from your mortgage lender the agreement for your mortgage. You will at this stage have to pay a deposit of 10% of the agreed property price (less the reservation deposit). If you are purchasing a property off plan this sum could be 30-40%.

It you do not proceed with the sale for any reason your money is non refundable. If the vendor fails to complete the sale you should expect to receive up to double the deposit or in the case of off-plan properties the deposit plus 6% interest.

Completion – signing at the notary

This is the final stage of your property purchase and will be formally completed before a Public Notary when the vendor signs the property over to you. You will exchange your final payment for the keys to your new home.

At this point you will sign the title deed (Escritura de Compraventa) at the remaining balance of the payment is made, if this is by mortgage the mortgage companies representative will normally be present.

You may need advice about whose name to put on the title deed. Due to quite complicated inheritance taxes it may be in your best financial interests to discuss this with a specialist in Spanish inheritance tax. Your lawyer will be able to recommend someone to best advise you.

You also have to pay 7% transfer tax (or 7% VAT plus 1% Stamp Duty if your are buying from a promoter or developer) as well as notary fees which range from 200-1500€ depending on the price of your property, and fees to register the property of about 60% of the notary charge. If you are purchasing a property from a non resident, your lawyer will ensure that retention of 5% is paid to the town hall as insurance against the tax liability of the vendor.

The vendor normally pays the Plus Valia tax, however it may be stipulated that you are responsible for all costs as a condition of the sale. This tax can range from a few hundred to several thousand euros because it is calculated on how much the land your property lies on has increased since it was last sold. Your lawyer will find out how much this tax is likely to be before you agree to pay for it.

And now the end ………

Once the paperwork is signed and monies handed over at the notary, you now have the keys in hand and paperwork completed, you have reached to end and are now able to enjoy your new property.

At Indigo Estates we will continue to provide you with any advice and assistance that you need to help you settle into your new home.

ENJOY!

A recap on the fees required to purchase a property in Andalucia:

Fees

Legal fees: Usually between 1% and 2% of the purchase price whichever is the greater, plus value added tax (IVA) currently charged at 16% on the fee amount.

Notary fees: the scale is fixed by law and normally range from 300 euros for lower priced properties to 1200 euros for higher priced properties.

Land Registry fees: Approximately 60% of the notary fees.

Mortgage Arrangement fees: between 2 –4% of the purchase price.

Taxes

VAT (IVA) or transfer tax (ITP)

ITP applies to resale properties only.

IVA applies to Off-Plan properties.

Both are currently at 7%.

Stamp duty (AJD) of 1/2% is payable when purchasing Off Plan and is due on completion.

'Plus Valia' is an 'added value' tax based upon the increase of the Town Hall index value of the land only, from the prior (vendor's) purchase to the present sale. The tax corresponds in principle to the seller, but, in common practice, is often paid by the purchaser. As there are several variable factors used in calculating this tax (area of land, location, building volume permitted, period of ownership of the vendor), the amount payable can vary substantially and should be verified by your lawyer before proceeding with the purchase.