The Spanish system for property purchases can be a bit daunting for newcomers, who may be used to completely different buying process in their home country. For that reason, at Sotogrande Exclusive, we decided to set out the process here, so that you have a clear idea about what is involved before you even start looking for your dream property in Sotogrande.
As other agents will tell you, new home hunters in Spain are targets for the ruthless who will try to take advantage of you and your money, which is why you should always use a reputable agent. Watch out for “friendly strangers” in bars and clubs who just happen to know the perfect property for you: they most likely don’t.
This is where our expert local knowledge plays a very important role. Write down all the things you need to consider, such as schools, transport, hobbies and interests, must-haves and absolute no-nos and bring them when you sit down with us to discuss what you’re looking for. Property size, style and number of rooms also needs to be stated. Price is of course an important consideration and we can help you get a clear understanding about the historic and potential future market conditions in Sotogrande. You’ll also need to tell us if you need a mortgage. Once we have a complete picture, we can proceed to find the right properties for you to view.
You will need to choose a lawyer to handle your purchase. It is best if you choose a lawyer, although we can recommend several reputable firms for you to choose from. Your lawyer must be able to speak your language and make you feel comfortable.
During the buying process, the lawyer will check for any debts on the property or other encumbrances. If such problems arise, the lawyer will advise you about whether or not the situation is solvable or if you should stop the purchase.
On completion, your lawyer will register the title deed at the land registry and deal with payment of transfer taxes and set up accounts with utility companies.
Once you’ve seen a property you want, the first step is to agree the purchase price and any other conditions of the sale. These are then written down in a letter of intent (LOI), which also states a reservation period. During this reservation period, your lawyer will inspect all the property’s legal documents to make sure everything is correct. We also recommend that if you are buying a resale property rather than a “new build” that you get a structural report from an independent surveyor, engineer or architect.
Apart from the purchase price, there are additional costs, which you need to bear in mind when you are planning to buy house in Spain. In total, these costs amount to about 9 to 10% of the purchase price if you’re buying from a private vendor, and 12.5% if you’re buying from a property developer or similar legal entity.
The information that follows is only a guide: please take legal advice from a lawyer regarding any costs attached to your property purchase.
Transfer tax is paid by the buyer. The amount of transfer tax is based on either the purchase price, the fiscal value, which is the rateable value determined by the Town Hall, or the “bank valuation” of the property if there is a mortgage and the valuation is included in the mortgage deed.
Check the probable amount of transfer tax you will have to pay on a property before making a commitment to buy.
The transfer tax or (I.T.P.) is set at 8% for properties up to € 400.000, 9% for properties with a value from € 400.000 up to €700.000 and 10% for any amount over €700.000.
Value added tax (IVA in Spanish) is set at 10%. This is paid on “new build” property purchases direct from property developers instead of the transfer tax. You will also have 1.5% stamp duty to pay. Do make sure that the company selling the property applies IVA to the sale before you pay. Even if they are not entitled to charge IVA, you may still be liable to pay the tax.
Land, commercial premises and commercial garage space sold by a developer or legal entity attracts IVA of 21% plus stamp duty of 1.5%.
You need a notary to verify all your legal documents and check that the lawyers involved have done everything correctly. The notary fees are set by the Spanish government and depend on the value of your property purchase. Generally the cost is no more than 0.5% of the purchase price, but the cost may increase if the title deed is excessively complex or the documents are longer than usual.
The registry fee is set by the government and is usually 0.5% of the purchase price, the same as the notary fees. This fee is paid by the buyer.
In general your lawyer’s fees should be around 1% of the property’s purchase price, although there may be some variation on this between lawyers, which is why it is worth finding out how they charge before using them.
The estate agent’s commission is 5% plus IVA.
Arrangement fees are approximately 1 to 1.5% of the mortgage value. Transfer tax on the mortgage value is approximately 1.2%. Notary and registry fees come to around 0.5% each of the mortgage value.
This tax can be as little as a few hundred euros or as much as several thousands of euros, depending how large the plot of land is and the length of ownership. By law this tax should be paid by the vendor, but sometimes the vendor tries to make the buyer pay it. Check with your lawyer before agreeing to pay this, and find out the correct amount that is payable.