No matter the country, buying a property can be a real headache if you don’t know the key steps and the different pitfalls to avoid. That’s why we have created this guide for expats with the 10 most important steps to follow to buy a house in Spain.
1. Get your NIE
One of the very first steps is to get a NIE (Número de Identificación de Extranjeros), which means you are registered with the Spanish authorities. This identification number is required when signing the deed title and opening a bank account in Spain.
It can sometimes take a few weeks to get this number so it is recommended to apply for it as soon as possible. For more information on the NIE, you can read our article How to get a NIE.
2. Open a Spanish bank account
This step is not mandatory but opening a Spanish bank account is recommended in order to facilitate the purchase and to pay the different taxes.
3. Budget and financing due diligence
One of the crucial steps in buying a property in Spain is to define clearly your budget and the way you will pay.
If you need a mortgage loan, you should know that Spanish banks only lend up to 80% of the price of the property (excluding taxes and notary fees) and it can go down to 50% for non-residents. It is therefore necessary to have some savings before purchasing a house in Spain. We recommend you to go to the different Spanish banks and ask for a simulation in order to get the best mortgage deal.
Depending on where you are coming from, it might be possible to apply for a loan in your home country and obtain better conditions.
4. Home research with a Personal Shopper
Once the budget and the financing mode are defined, the search for your new property can begin.
There are thousands of properties for sale in the Valencian Community and it can sometimes be difficult to do your own research especially if you do it remotely. That’s why we advise you to call a Personal Shopper if you are living abroad to make the research on your behalf.
A real estate personal shopper is also useful if you are already living in the area but you don’t know the local property market well or if it is the first time you buy a house in Spain. This will prevent you from falling into certain traps (overvalued property, poor condition of the property, hidden works, etc.) and will avoid you a number of unnecessary viewings and time loss.
We can help you in finding your new property in Valencia and its surroundings. For more information on our services, you can contact us at [email protected].
5. Reservation of the property or “Contrato de Reserva”
You have made an offer on the property of your dream which has been accepted, you will now need to agree a “Contrato de Reserva” with the owner. This is a private contract indicating to the seller your intention to buy the house at a previously agreed price.
Even if this contract is not logged on an official registry, it is considered to be legally binding, that’s why it is important to carefully read it and to include all the purchase conditions and obligations from this stage.
This contract comes with a small deposit (usually between 1,000 and 3,000 euros) and is valid for a set period of time. During this time, the buyer needs to remove the property from the market and you can make all the required property checks without the risk of someone else buying it.
If you, as a purchaser, break the contract, you will lose your deposit. However, if the vendor breaks the contract, you are entitled to twice the amount of your deposit as compensation.
6. Property checks
In Spain, the notary doesn’t carry out any legal, administrative or town planning checks during the purchase of a property. This is your responsibility to undertake all the relevant property checks to avoid a bad surprise. You can also ask a specialized solicitor to do this task on your behalf.
Before signing the sales agreement, you must therefore check:
- The legal status of the property.
- It is free of debts and charges.
- The utilities and communities fees are paid.
- There is correct planning permission and licences for improvements.
- The energy certificate.
To make the relevant checks, you can request the “Nota Simple en el Registro de Propiedad”.
7. Mortgage approval
You did earlier some due diligence on your budget and the financing of the property. It is now time to validate the funding (eg finalizing the mortgage loan) in order to buy the property. In case of a mortgage loan, the bank hires an appraiser to ensure that their loan to you is safe.
8. Purchase agreement or “Contrato de Arras”
The “Contrato de Arras” commits the buyer to buy the property and the seller to sell it to the buyer. It sets out the price, the conditions, describes the property, sets outs timescales. This is a private contract which needs to be presented to the notary when signing the title deed.
When you sign this contract, you will have to pay a 7 to 15% deposit of the purchase price.
In Spain, there are three types of purchase agreement: confirmatorias, penales y penitenciales. For real estate, we often speak of penitencial arras which mean that if you, as the purchaser, break the contract, you will lose your deposit. However, if the vendor breaks the contract, you are entitled to twice the amount of your deposit as compensation.
The “Contrato de Arras” must contain at least:
- Personal information of the seller and the buyer.
- Description and identification of the property.
- Final price of the property.
- Payment method.
- Amount of the total deposit (which will be deducted from the final price).
- Timescales to finalize the sale.
- Distribution of notary fees.
- Penalties in the event of withdrawal by one of the two parties.
- Signatures of the seller and the buyer.
This is a non-exhaustive list and it is important to list all the terms and conditions you would like to include.
9. Sign the Title Deed at the notary’s office or “Escritura”
The purchase of the property becomes official during the “Escritura” which is signed in front of the notary. During this act, are present the buyer, the seller, a representative of the bank (if a mortgage was required) and the real estate agent if applicable.
At this stage, you will make the final payment for the property and will get the keys to your new home.
You will then need to register the property in your name at the nearest property register (registro de la propiedad) to inform the change of owner. This task is most of the time done directly by the notary.
10. Pay the transaction taxes
If you buy a property in Spain, whether you are resident or not, you are entitled to some taxes. These taxes depend on the nature of the purchase (new / resale) and on the location of the property.
A- Buying a new property in Spain
If you buy a new build property in Spain, you are liable for the following two taxes:
- the VAT which amounts to 10% of the sale price of the property.
- the tax on documented legal acts (AJD) which amounts to 1.5% of the value of the property in the case of the Comunidad Valenciana.
B- Buying a resale property in Spain
If you buy a resale property in Spain, you are liable for the Property Transfer Tax (or Impuesto de Transmisiones Patrimoniales, ITP). This tax differs depending on the region. In the Valencian Community, it corresponds to 10% of the value of the property except in specific cases for which it can be reduced to 8 or 4%.
Conclusion
Once all these steps have been completed, you will now be able to enjoy your new home in Valencia.
At Vivre à Valencia, we are Personal Shoppers and we can accompany you through the whole process of buying a house in Spain : from obtaining your NIE to the taxes payment. If you need further advice or have any questions, you can contact us at [email protected].
