The Buying Process

Q. I´ve identified where I want to buy and how much I want to spend. What should I do next?

The best way of getting a true feel for Spain and the property market in general is to make arrangements to visit your chosen area. You may want to do this independently, but you will really need as much help and guidance as possible. By arranging to meet a real estate agent who specialises in the locations and types of property you are interested in, you could end up saving valuable time, as he/she will have access to a good range of properties and will be able to show you the areas in detail, giving you a unique insight that you would otherwise miss out on if you tried to do things all yourself. Some people are wary of property agents but here at Central Property Bureau who are a Spanish Company with 21 years experience in real estate and with our legal & tax team we can offer you complete peace of mind.

Central Property Bureau can tell you in advance of your visit exactly what will take place, and details of any documentation that you will need in case you wish to make a purchase. We also have a team of experts in the areas of law, accountancy and mortgages for you to consult when you take your trip to Spain.

OFFER & RESERVATION
If you are sure that you have seen your dream property, and you would like to go ahead with the purchase, you will need to make an offer. With most new projects in Spain, the price is fixed by the developer, and the possibility of any price reductions will depend on the popularity of the project. If a developer feels he can sell the unit quickly to another potential customer, he will choose to wait for the list price. With resale property, it is common to make an offer below the asking price, but the success of this strategy can depend on several things, including the market conditions, demand for that particular property, and even the nationality of the vendor, as some buyers may regard an offer of a lower price as an insult!…so tread carefully and be guided by your agent.

If your offer is accepted, you will then be asked to pay a reservation deposit. This varies between 3.000 euros and 6.000 euros, and is normally only refundable if your offer for a resale property is rejected. If your offer is subject to anything such as mortgage approval, make sure your agent knows this well in advance, as he/she can then advise the vendor that this is a condition of sale, and your deposit can be refunded in case the condition isn´t met.

Once you have decided on your property some of the more common thoughts are:

“How am I going to furnish my Spanish property from a distance?”
“Surely I will need to open a bank account and write a Spanish will?”
“How am I going to arrange for my utilities to be connected to my property?”
“Who is going to tend my garden and clean my pool?”

”What have I done!?”

During your visit with Central Property Bureau we will have addressed most of these points while you are still in Spain, and can introduced you to a reputable furniture supplier and our lawyers, who will be able to arrange for the opening of bank accounts, the drawing up of Spanish wills, and the setting up of direct debits and connections to electricity and water supplies. We can also arrange to our rental and management agent who will be able to take care of any maintenance issues while you are away from the property.

Q. What happens next in the purchase process?

SIGNING CONTRACTS
Normally, within 30 days of reservation, you will be asked to sign contracts to confirm your intention to buy the property. This is something that can be done on your behalf by arranging a Power of Attorney we can arrange this with our Legal& Tax team.

At this stage, your lawyer will check that the vendor has legal title to the property for sale and that there is no debt attached to the property (unpaid fines, community charges). In addition, the lawyer will ensure that the plans are in accordance with the building approval granted by the planning authorities, as it has been known for people to build extensions to properties without the required permission.

Once your lawyer is happy that everything is in order, you will be asked to transfer the funds (normally 10% for resales) to the lawyer´s client account. Once the lawyer is entirely satisfied, these funds are transferred to the vendor.

In the case of new developments, or off-plan properties, you will need to pay for your property in staged payments during construction. Payment plans vary considerably, but normally an amount between 20% and 50% is required at contract.

COMPLETION
In the case of resales, completion normally takes place within 4 - 6 weeks of signing contracts. This is the stage when your lawyer performs the final checks and makes sure that any mortgage is in place with the lending bank. Completion takes place at the notary, where legal representatives of the buyer, seller and mortgage provider ensure that the funds are distributed in the right manner, and the notary assigns legal title to the new buyer.

For off-plan properties, completion can take place anything from 6-24 months after the contracts are signed. Sometimes, the developer´s payment plan will specify interim payments that need to be made during construction. At completion, the lawyer will check that the constructed property is exactly as specified in the sales contract, and that the constructors have built the property to the exact size and specification that was agreed.

Q. What do I need to set aside for fees and taxes?
Central Property Bureau will ensure you know exactly what cost are involved and make sure you understand the whole procedure, below is a guide on the break down of costs.

Normally, it´s advised to allow an extra 10% on top of the purchase price for purchase costs. These comprise:

• 7% iva (in the case of new-build properties) OR 7% transfer tax (in the case of resales)
• 1% legal fees
• 1% stamp duty
• Land Registry Fees and Notary Fees - determined by a scale of fees

There are also costs associated with obtaining a mortgage. These include:

• Bank Valuation Fees, calculated as a percentage of valuation (normally 0.1%)
• Arrangement Fees, often 1% of loan amount
• Stamp Duty, usually around 1.8% of loan amount
• Land Registry Fees and Notary Fees - determined by a scale of fees

In a typical scenario of obtaining a 70% mortgage, it´s normally recommended to allow for between 13% and 14% of the purchase price to cover ALL purchase and mortgage costs.

Q. What do I need to set aside for running costs?

• IBI - local town hall charge, similar to a real estate tax
• Community Fees - if living within a community of owners, you will have to pay towards the upkeep of the grounds, gardens, pools, security etc.
• Basura - refuse collection
H• Property Insurance