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Buying a property in Spain

Buying a property in Spain has various steps and considerations. In this guide we will go throught them.

LOCATION

What areas or location you should buy a property. The answer to this is simple. You should buy a property in an area that covers best your needs. Are you planning to move permanently? Alone or with kids? Or do you just want to buy a holiday home for your vacations or a secondary residence? Is it an investment and you wish to rent out the property?

All this should be considered and spoken with your estate agent to nail down the best locations and zones to invest an buy your new property.

RESEARCH

Like everything else in life you should do a profound research of the area. As depending on it there will be several implications like taxing, cost of living, monthly expenses, etc.

You also should consider visit the area for some time in order to get familiar with the possibilities and surrounding’s.

WHY SHOULD YOU USE A REAL ESTATE AGENT?

In the the world we live and with the Internet at the palm of our hand some people may think it would be easy to research and purchase a property independently without needing a real estate agent.

  • An agent's job is to do all the searching and prioritise your home search, so you don’t have to.
  • An agent will help you see what you miss. Say you like a property so much you ignore minute problems and details; an agent would make you aware of them before it's too late.
  • Furthermore, an agent helps you see investment potential in a property.
  • Your agent also acts as your area guide and will inform you of all you need to know about the area.
  • Moreover, your agent will tap into their network to save you hours of research for service providers, contractors and more.
  • Most importantly, the agent Will negotiate for you in your best interest to get the best deal possible.

RESTRICTIONS TO BUY A PROPERTY SPAIN?

Although there are no particular restrictions for foreign non-residents when buying a property in Spain, you will need to meet specific requirements before beginning the purchasing process:

APPLY FOR AN N.I.E NUMBER

An N.I.E Number (Número de Identidad Extranjero) is a identification number to foreigners, needed for and practically doing anything in Spain: opening a bank account, obtaining a Spanish phone number, working or studying, buying a car, etc.

If you are planning from abroad, you can apply for an N.I.E via a Spanish Consulate. If you are already in Spain, you can do this in person at the Police Station or via a legal administrator (this is what we call a gestor in Spanish).

The documentation required to apply for an N.I.E is:

  • If you have a European Passport: show your main identification page and have a photocopy of it.
  • All Other Passports: show your full passport and have a photocopy of all the pages at hand, two ID photos and two copies of the Ex-15 application form filled out and signed.
  • A valid reason why you need an N.I.E (e.g. for work, buying a car, buying property, etc.).

OPENING A SPANISH BANK ACCOUNT

Once you have obtained your N.I.E, you can apply to open a Spanish bank account. You could do this also before with a passport but due the inconviniences the change creates we recommend do it afterwards. You should look into banks that accommodate to foreigners: Sabadell, CaixaBank, Santander, and Bankinter, to name a few. It must be noted that banks in Spain require you to be physically present at a bank branch to open a bank account.

However, other requirements need to be met to open an account:

  • Proof of identity (e.g. passport or ID card) is usually asked to be presented in person.
  • N.I.E
  • Proof of Funds / Tax Declarations
  • Any other documents the bank deems necessary

As well as the standard documentation, you may be asked for proof of address (rental contract, recently paid community bills, etc.). Some banks (like BBVA) ask to provide a certificate of non-residency (Certificado de No Residente). To obtain one, you must apply at a Spanish police station, which typically takes 10 days to process.

The documents may need to be officially translated into Spanish, and if they are from abroad, they may need to be authenticated using an Apostille stamp. Most banks don’t charge for opening an account, but you will pay an annual fee for administration (monthly or quarterly).

When looking for your bank, you should pay particular attention to the fees that banks charge for receiving transfers from abroad, making transfers to foreign countries and issuing banker's drafts (the standard form of payment used in Spain when purchasing a property).

An important point worth mentioning is that, in our experience, there have been occasions where people have lost out on a great purchase opportunity due to not having the correct paperwork in place in advance. So we highly suggest people check their legal, financial and fiscal status before viewing properties in

NEGOTIATION WITH THE PROPERTY OWNER

Once you have found a property that suits your expectations the negotiation phase starts. Prices are generally open to negotiation and offers are always welcome as long as they are reasonable and serious.

You should always put an offer in writing proposing the offered price, proposed payment terms and deadlines. You can also include some special conditions that should be amended in the next phases in form of the contract.

SIGNING CONTRACTS

When the seller accepts your offer, you move on to the legal phase of the purchase process. When buying property, you will be asked to sign a reservation contract and an official deed at the Notary on the day of completion. This is not the only way to proceed, but the most common.

RESERVATION CONTRACT or Private CONTRACT

Depending on the property, the price and the seller you will be asked to sign a reservation contract where the buyer pays a fee to reserve the property for a certain period of time, the norm is from 7 – 21 days. The amount of this reservation is generally a 1% of the purchase price. This tends to be the norm for New Build properties and Luxury properties.

After the reservation contract is signed, you sign a private contract and then make a payment that amounts generally to 10% of the purchase price, which includes the reservation fee paid prior (if you pay 1% at reservation, you then pay the other 9%). A point worth mentioning is that, on occasion, it is possible to jump straight to a private 10% contract without signing a reservation contract. However, this is usually done if the purchase price is high and the seller cannot take the property off the market for a small reservation offer.

There are three different types of contracts you may sign that are all similar when making the 10% payment:

  1. Penitential Deposit Contract - Contrato de Arras Penintenciales
    This is the most common contract and it penalises the vendor if the property is not sold under the agreed terms previously set by the vendor. If the seller decides not to sell you the property, they have to pay you double what you originally paid. Technically, this means the vendor can break the contract anytime; even though the penalty fee is high, the risk is low. If the buyer does not follow through with the property purchase, he loses the 10% paid, and the contract is no longer valid.

  2. Private Purchase Contract - Contrato privado de Compraventa
    This contract is typically less used as it obliges both parties to buy and sell, which means that the loss of the 10% paid or the reimbursement of double the amount by the vendor might not be enough to cancel the contract. If one of the parties doesn’t want to sell or buy, the other party can still oblige them to do so through court. The vendor can be obligated to sell (even if they refuse to go to the notary) or the buyer to purchase (even if they do not want to). Of course, such scenarios are infrequent.
    It is important to note that each of the previous descriptions of the 10% private contracts are a general summary of what each contract entails. Each contract is also subject to additional clauses and penalties that affect the contract. The law states it is not the title of the contract that defines its intention but how a contract is written.

  3. Purchase Option Contract - Contrato de Opción de Compra
    This contract does not allow the vendor to back out of the deal. There is no penalty established, as the vendor has no right to back out in the first place. The buyer chooses to execute the option during the contract and make the purchase. If the buyer doesn’t buy the property, they lose the 10% paid, and the contract is no longer valid.

COMPLETION OF A PROPERTY PURCHASE 

All parties involved in the completion must attend: buyers and sellers and their legal representatives or lawyers, bank personnel for redemption or subrogation of an existing loan, a bank providing a new mortgage, etc.

The moment you sign the title deed at the notary's office (notaría pública), an immediate transfer of possession and full responsibility for the property is passed over to you. The payment for purchasing the property is also made at the same time via bank cheques. In Spain, this payment method is the safest for both parties, as the payment is made when the property is passed on to the buyer, and banks can give a fast and verified confirmation that the payment has indeed been made.

Once you have signed a notarial sale deed and paid all required taxes, the deed is registered at the Land Registry. This process can take up to three months. After registration, the original deeds and all invoices relating to the transaction will be available. You are then at liberty to change all utility bill contracts such as water, electricity, gas, telephone and HOA bills into your name and bank details.