Estate Agents

The first thing you should bear in mind is that estate agents come in all shapes and sizes and in varying degrees of legality but whoever you chose to work with, you must feel confident that the person at the other end of an e-mail or telephone knows what he or she is talking about, has first hand knowledge of both the property and the area in which it is located and can answer your questions quickly and professionally.

Agents commission

This can vary from as ‘little’ as 2/3% up to10% or even 15% in some areas and it is not unusual to see the same property with several agents all at different prices. What is clear though is that agency fees are high but the work involved and services provided are far more complex than in the UK. When enquiring about a property, regardless of the Agent, always ask if the advertised price includes ALL commission as some agents advertise a property at a lower price than others to draw your custom and then add their commission.

You have found what you want

Once you have found the property you wish to purchase then you will be expected to sign a preliminary private contract between buyers and sellers which will reflect the negotiated price, the amount of deposit to be paid and the deadline for completion. It is at this point that you should appoint a lawyer to carry out searches in the land registry and local town hall to establish that there are no debts against the property (which will become your liability if not cancelled prior to signing the new ‘escritura’) and whether or not the property is subject to eventual urbanization or other development for which you may also be liable. This information comes in the form of a ‘Nota Simple’ and shows the property registration details and charges attached thereto, including any mortgage. Financial obligations in respect of the current owners should be paid off beforehand or at latest in the Notary’s office on the day of signing. In respect of an existing mortgage (unless you agree to take this over – see separate information) the Bank holding the mortgage will be present at the signing and the appropriate amount paid by you directly to the Bank and off-set against the total amount due to the sellers. The Bank will sign off the mortgage and the new ‘escritura’ will show the property to be mortgage free.

The amount of deposit to be paid can vary from as little as €3000 up to 10% of the total price however we do recommend waiting until the searches are carried out before handing over any money to the sellers. If need be try to negotiate a condition whereby your lawyer (or mutually acceptable third party) holds the deposit in the meantime as generally speaking searches take only 3 to 4 days to accomplish and if the sellers are fair people they will allow you this time. Any such deposit is non-refundable in the event that you pull out, likewise if the sellers pull out they are liable to give you back double the amount you paid them with neither party having any further redress. In a way it is a double-edged sword as the bigger the deposit you put down the less chance there is of someone else cutting in and buying the property from under you but the more you lose if a change of circumstances means you can no longer proceed with the purchase.

Generally speaking a period of up to 2 months is allowed from the date of signing the private contract up to the time of completion but if a mortgage is required or you are waiting for the sale of another property to go through before being able to complete then you should insist on a longer delay. You will need to obtain an N.I.E. number (Identity number for foreigners) from the nearest police station offering this service and open a Spanish bank account prior to purchasing a property in Spain. This N.I.E. number will later be required for contracting services such as electricity, telephone and buying a Spanish registered car. We offer our full assistance in these respects.

Remember, once you have signed the new ‘escritura’ or deeds to your property, whatever may have been written in the private contract becomes null and void and what is stated in the new ‘escritura’ becomes the legally binding document. Whilst the private contract can be in Spanish and/or English the ‘escritura’ is only in Spanish so if your knowledge of Spanish is incomplete you should have a translator present and this will be insisted on by the Notary. The lawyers we recommend all speak fluent English so this is not a major problem but if you use an in-house lawyer working for an estate agent he or she may do the translation but not necessarily explain the eventual consequences of a certain clause unless you specifically ask.

Do not over-estimate the role of the Notary in purchasing a property in Spain. The Notary will not recognize the payment of any ‘black’ money nor will he assume any liability for the property you are purchasing. He is strictly impartial and will assume that both parties are aware of what they are selling and purchasing and their respective liabilities and obligations. He will verify the identities of all parties mentioned in the new ‘escritura’ and both sellers and buyers must be present with valid passports or Identity cards and N.I.E / N.I.F. number, unless represented by a person with a notarized Power of Attorney. A private Power of Attorney is NOT permitted. The Notary will check that the property registration details are correctly transposed from the old ‘escritura’ to the new one as every property in Spain has its individual ‘Finca’ number which never changes from one sale to another, whilst other information such as registration volume and page number are updated to reflect new ownership. Within 2/3 weeks of signing the new ‘escritura’ you will be able to obtain a copy whereas the final stamped and legalized document can take anything up to 6 months to be processed but nevertheless the property is yours and can be re-sold if necessary.

Purchase Costs

Whilst purchasing a property in Spain can be relatively quick and simple, it is certainly very expensive. Apart from higher agency fees than in the UK, the costs related to the purchase are approximately 10% of the price declared in the ‘escritura’ with Property Transfer Tax of 7% (or 7% IVA in respect of new-buildings) accounting for the majority of these costs. On top of this you have notary fees of 1%, land registry fees, stamp duty and other assorted smaller charges and this increases if the property is purchased in part by a mortgage where you will pay a further 2% (approx.) in notary and land registry fees on the amount borrowed plus whatever the bank may charge to set up the mortgage in the first place. Depending on the amount of money you wish to borrow, the borrowing period and the Bank’s mortgage conditions this can be anything from 0.75 up to 2% of the amount borrowed. We can offer you more detailed information in respect of mortgages on a case by case basis and can negotiate mortgages on very attractive terms with several local banks.

If you add the commission and purchase costs it confirms what we have said previously, buying in Spain is expensive so you must be sure that the price to begin with is in line with the local market. What happens if you have to sell in the near future? You will expect to recover your initial outlay to which the agents will again add their commission and on top of which any new buyer will also have to pay 10% in costs. If you paid too much to begin with you will never get your money back so BE CAREFUL!!

Summary

Whilst this is just a relatively brief introduction to buying a property in Spain it does give you a basic idea of the process and cost involved and some guidelines to follow. We can go into more detailed advice on a case by case basis as each client is different and what applies to one may not apply to another so if there are specific questions you need answering then drop us an e-mail and we will do our best to give a quick and accurate reply or refer you to one of the lawyers we use in Gandia for him to answer you directly.

Many of the hard luck stories you read about in the local press or on television in the UK are basically due to people cutting corners to save money on lawyers and/or estate agents or listening to and trusting the wrong people. A lawyer will charge around 1000/1300 euros for a standard conveyance and this is a small price to pay for security and peace of mind. You would not cut corners or try to do it yourself in England so why do it in Spain??

We are at your disposal for further help or information and look forward to seeing you in Spain.