GUIDE TO BUYING PROPERTY IN SPAIN
As a buyer, we understand that, not only do you want to find the right property for you
and your family, but you will ultimately be seeking the best advice available, whether from
friends, family, acquaintances or third parties, with first hand experience to guide you
through the do’s and dont’s of buying property in Mallorca.
The information that follows is aimed at providing just that, a step by step guide that will
help you every step of the way. From the first step of familiarising you with the possible
location of your new home, to making an offer right through to the final step of completion – nearly as personalised as first hand experience from a friend or family member, and
certainly more precise.
1. Look before you leap!
If you live here, or have visited several times you probably know where you want
to buy your new home. But if not – don’t waste your own precious time, or the
time of the owners by visiting lots of houses without knowing anything about
the location in which you’re looking! You wouldn't do that at in your
own home country. Our advice is to hire a car for at least
3-6 days, if not more – tour
around the Island, take a look around. Visit the village square and
have a drink in the bar. Take time to chat - you’ll be surprised at what a font
of information the local barman or waitress is (best to aim for a place that
looks likely they’ll speak your language). Decide upon your key criteria –
if you want a home near the airport, Palma and golf courses – don’t bother with
Pollensa or Esporles, try instead Bendinat or Son Vida. If you don’t want to
be overlooked by anyone go inland a bit to one of the many still unspoilt villages.
Narrow your criteria down and take another look, and only then start calling.
2. Have you sorted out your financing?
If not, it is imperative you do. If you are a cash buyer – great!
If you require a loan, as a rule of thumb a resident is permitted to borrow up to
80% of the mortgage company’s official evaluation as opposed to the amount you are
wishing to pay. A non-resident can only borrow between 60 and 70% with a maximum
term of 15 to 20 years. To begin with you will require your passport, followed by
a bank reference from your home bank and proof of income; taking on average between
3 and 4 weeks for a mortgage to be arranged. At the moment Spanish mortgages are
offering very attractive rates, and some banks can be more flexible than others,
so our advice is to shop around - click here for a list of recommended banks and contacts
for a free appraisal - please mention mallorcapropertydirect.com. For more expensive
properties (ie 1 million plus) there can be certain benefits to buying a property
through a holding company - for further information and advice please contact your legal
advisor or alternatively we recommend a company called Blevins Franks who specialise
in tax advice, contact Peter Worthington on tel: +34 971 719181
or email; email@example.com for a free consultation.
You must also take into consideration you need approximately 10%
on top of price of the property to cover all purchase costs - see “Buying Costs of Property
in Spain” for a breakdown of costs.
3. NIE Numbers
All EU non-residents require a personal identification and tax number to buy
either property or a car, referred to here in Spain as an NIE or NIF number.
This can take some time (estimated between 3 and 6 weeks) so we recommend you
apply early – this must be in your hands within 1 month after your purchase/completion
date for payment of taxes, or you will be liable for a fine of approximately 5% of the
amount to be paid. Please note this does not affect your status in the UK. You can either
apply for an NIE yourself at the Department of Estranjeros (Foreigners Department-see
Mallorca/Useful Information for details) ensuring you take your passport, or through
your chosen legal advisor. Alternatively, for 75 euros you can apply to a company called
Network tel. +34 971 403703 who will tell you what you are required to bring with you.
Non EU applicants should contact their embassy for details of application.
4. Found a property you like?
The great thing about buying property over here is that it’s very unlikely you’ll be
gazumped, at least not after the Option Contract is signed which can be in as little
as 2 days after the offer is accepted! But firstly we recommend you ascertain the
following information prior to making an offer:
• Ask if the owner is aware of any extensions or renovations made without the relevant building permissions (ie. do they have a planning permission certificate). If there are known
issues with planning permission – get your legal representative to contact the owner. If nothing
is declared, rest assured your mortgage provider or legal representative will ask to check the
Land Registry certificate which will answer your questions.
Of course, if you like the property enough, some buyers have been known to turn a blind eye once informed of works without the official permissions-but that is up to the individual.
• What property taxes are currently being paid by the owner (there is an annual tax on the value
of the property, the IBI, which quite often bares no relation to the value of the property,
but for taxation purposes, the lower the better).
• Are there any community charges?
• What is the stated price on the Escritura (title deed) – is it too high or too low for
you (we recommend you discuss this with your mortgage lender or your legal representative – click here for recommendations).
• Check the supply of water and electricity and ask for the last few bills.
• Is your financing organised? We would highly recommend BEFORE you put in an offer,
that you have the financing pre-approved. For a list of recommended mortgage providers
please click here.
• What will be included in the price? It is important to stipulate what you would specifically
like to be left behind in your new home. Key items to think about are curtain rails, light fittings,
flooring, air-conditioning units, kitchen white goods such as dishwasher, and anything else which
is important to you. These must be negotiated with your offer.
5. The Option Contract
Once all the questions to the above have been answered and you are happy
with the outcome, and if your offer is accepted, you will be asked to sign an Option Contract which is normally drawn
up by the buyer's legal representative. Normally this can be anything from 2 –10 days of the offer being accepted.
You will then be expected to put down a 10% deposit of
the agreed price at the time of signing or within an agreed time period -
again normally this is within a week of signing the Option. The Option
Contract details the specifics of the agreement, the parties
involved (you and the owner), the agreed price and
the agreed date of completion . In addition it should state
that the property is to be sold free from charges, tenants, town hall fines
and forced sale orders, and where appropriate that the water and gas are legally
At this time we would highly recommend you ask the owner to detail
everything that is to be left in
the house or apartment, or for you to list the items you would like to be left behind in the form of
a contents list – sellers have been known to take the kitchen units, and even every light bulb and
fitting in the house! Make sure you read it through carefully, get your bank to study it or your
chosen legal representative. Then all you have to do is make sure to get the final balance to them
on time – otherwise you stand to lose your entire deposit. Equally, if the seller decides to back
out, they are required by law to pay you up to twice the deposit.
6. Legal Advice
There are many peculiarities in Spanish Law – don’t even try to understand them.
Get your mortgage provider's lawyers or your chosen legal representative (click here for a recommended legal advisor) look at the property Escritura (Deeds), otherwise you could end up buying a property that allows
Great Aunt Maria Jose, from a family twice removed, to just turn up and legally stay in the back room
until she decides to pack her bags – permanently! At the same time they will look to see if all of
the additions to the property are legal, and whether there are any outstanding
debts - here in
Spain you can be liable for the previous owner’s debts if you’re not careful, for example property tax,
community fees, water bills, etc.!! The good thing about the option contract is that, if there are
any discrepancies in the Escritora with which your legal advisor isn’t happy you are legally entitled
to cancel the Option Contract.
Completion can take place on what ever date you and the seller agree upon, from
as little as one week (as long as you get the mortgage company to agree) up
to one year if desired, from the date of signing the Option Contract. This date
will be detailed in the Option Contract.
If the purchase is financed by a mortgage, the bank representatives will be present in order
to authorise the new mortgage and pay the seller. If you are not able to attend on the specified
date you are able to grant your solicitor/lawyer power of attorney so he or she can complete on your
Completion will take place between the relevant parties in front of the Notary who will witness the
signing and transfer of the title deed or Escritura de Compraventa. The Notary acts for neither party
specifically, but is a government official responsible for the execution of public documents; He/she
will confirm the identity of both parties, and will check the Land Registry to verify legal ownership
and that there are no out-standing debts or orders against the property.
The balance of the purchase price will be paid to the seller at this time, and any remaining purchase
tax and fees will also be paid if going through a mortgage provider (if paying in full these taxes need
only be paid within the month). The Escritura will then be registered by the lawyer in the corresponding
Property Register. Once the Deed is signed you will be given the keys to your new property and a copy
of the title deed, until the formal deed comes to you from the land registry (or via you Mortgage
provider if they have acted on your behalf). Congratulations! – it’s yours…home sweet home.
Sit back and raise a glass of bubbly or two in celebration!
8. Transfer of utilities
After completion you need to instruct your legal representative or mortgage provider to transfer
all utilities into your name and arrange direct payment through your Spanish bank account.
9. Get planning!
If you are one of the lucky few to find a property which requires no redecoration, that’s wonderful.
However, more often than not it will require some form of redecoration or refurbishment. There are
numerous contacts who can help you – plumbers, electricians, designers, all who speak your language.
Click here for a comprehensive list, detailing the languages spoken.
In order to make things easier for your family or your chosen beneficiary upon the event of your death,
we would highly recommend you make out an official Spanish will. This will ensure there are no long
drawn out procedures required between your home country and Spain. Speak with your legal representative (click here for a recommended legal advisor).
As already mentioned, when buying a property in Spain if you allow approximately 10% on top of
the asking price you will normally end up with change in your pocket.
Spanish law in fact states that the seller should pay part of the notary
fee and what is known as the "plusvalia municipal"
agreed otherwise. In fact here in the Balearics it doesn't work like this
since it is understood that the BUYER pays all charges. If however the plusvalia
is a substantial amount this can be a point of negotiation. A summary of
the costs are as follows:
- allow between 1-3% of the purchase price for Notary fees, legal fees and property registry.
- a municipal tax paid each time a property changes hands, usually paid by the BUYER. Complicated to calculate, it directly relates to the length of ownership by the seller and increase in value on the land, but is usually less than1% of the price
new homes carry 7% IVA + 0.5% stamp duty, and “second hand” homes carry a 7% transfer tax. PLEASE NOTE – When determining the amount to be declared on the Escritura, the purchaser should ensure they do not under-declare. Guidelines have been laid down by the tax office for the minimum value they will accept, approximately twice the rateable value quoted on the latest rates invoice for the property ( IBI
). If it is deemed too low, they may reassess its' value and send a demand for the additional tax due. It may be difficult to argue otherwise! We recommend you ask the advice of a legal advisor.
Plots – plots with multiple sub plots with building permissions, 16% IVA + 0.5% stamp duty is due. Otherwise the normal taxes apply.
-Mortgage Fees –
your mortgage lender will detail their fees, this is normally between 0.5% and 1%.
Once purchased there will also be annual Spanish property taxes
to take into consideration, but in general they are not too prohibitive. For example a two bedroom apartment can have total annual costs of between €1500 and €2500, which will include charges for water, electricity, waste disposal, insurance and annual property tax. It also includes a payment to Spanish representative who will have to submit these payments officially. Ask your legal advisor to assist you with this.
For any other unanswered questions click on FAQs
(Frequently Asked Questions).
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other visitors or Members please click here
|Disclaimer - This information has been provided merely
as a guide and not as a substitute for professional advice; we highly
recommend you contact a mortgage provider or an independent legal advisor
for more detailed information.
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