You may think that buying a home in Spain is similar to buying in your home country however it is not. The laws, the standards and the procedures as to the purchase of a property in Spain are very different. Not to mention the potential scams!
Our purpose is to clarify and help you with the most complete list of what you will face before, during and after buying a home in Spain. Our main recommendation is that a competent Real Estate Advisor accompanies you. They are responsible for visiting and selecting real estate that corresponds to your wishes, they are responsible for the negotiation of the price of the sale, the control of the legal and contractual aspects, they are also the facilitator of the financing and, could assist in overseeing improvements or needed updates, once the purchase is made. We are available at your convince with these services which will save you time and money. Do not hesitate to contact us. Send us an email firstname.lastname@example.org..
In this article, we present what to be thinking about during the purchase. In an earlier article, we discussed the pitfalls to avoid before purchasing and, in a third, traps to avoid after the purchase. Good reading!
What to think about during the purchase
We will share best practices, mistakes to avoid and information on scams to be aware of, from the selection of your property to signing and closing.
1. YOU DID NOT TAKE INTO ACCOUNT LOCATION, LOCATION, LOCATION
You have found the apartment in Barcelona or the beach villa you’ve always dreamed of. But have you thought about the location of the property? During the purchase, before you contract and pay the last Euro, it is essential that you educate yourself (with our help) in detail on the urban, legal, taxes, financial and physical location of the property, at national, regional and local level because the notary will not do it! It is essential to know that Spanish notaries have in no way the same role as American title companies and notaries or legal advisors in other countries, who carry out all the legal and title checks on the property before the sale. For example, the Spanish notary does not guarantee the legal status of the property. In Spain, the notary will only verify the civil status of the buyer and the seller.
And the list of verifications to be carried out by the buyer during the purchase can be very long. We are here to help you through this process. Your Real Estate Advisor
In Spain, the buyer is responsible for the inspection of the property during the purchase. More on this later on.
In Spain, a standard clause in the Notary act of purchase stipulates that the buyer knows the legal and urban status as well as the physical condition of the property.
This clause can make it difficult to prove that the fault lies with the seller for having obscured certain information, in particular the property classification. In Spain, the notary does not do this. As in the United States, home inspections, pest inspections, liens are requested and paid for by the buyer.
The “Cédula de habitabilidad”
The owner must give you, during the purchase, the “Cédula de habitabilidad” or Certificate of Occupancy, which will inform you that the property is intended for residential use and that it is habitable: in many cases, the absence of this document simply means that it is not a legal dwelling or that the real estate has been built without a building permit! Be aware, this document has a validity of 10 to 15 years and it must be updated.
The “Nota simple informativa“
In Spain, the debts are not related to the owner, but to the property, and again it is up to you to be informed because the notary will not do it. It is necessary to ask during the purchase the most recent “Nota simple informativa” in the Register of the Property. This document will inform you among other things that the seller owns the property – and how he acquired it (inheritance, divorce, widowhood…). Information on its civil status, and even if the owner is one person or a group of people, it is possible that other people’s signatures are required in order to waive any rights they may have on the property. The presence of legal advice, with our help, can insure that you are protected.
The “Certificado energetico”
To sell or rent a property, an energy certificate has been mandatory since June 2013. It provides information on the energy consumption and CO2 emissions of housing. It is the responsibility of the owner who must engage the service of a certified technician to obtain his energy certificate. The energy label indicates the degrees of emission and consumption that the property has obtained, on a color scale from A, the most efficient to G, and the least efficient. The energy certificate must be included in the sales contract. In case of rental, a copy of the energy certificate must be given to the tenant.
Receipts for payment of local taxes, charges and invoices
It will then be necessary to ask the seller to provide a copy of several documents such as the last receipt of payment of IBI (“Impuesto sobre Bienes Inmuebles”, the Spanish property tax), the last minutes of the assembly of co-owners (who will show you for example that you will have to pay for the rehabilitation works voted at the last General Assembly, the last receipts for electricity, gas, water and homeowner association fees. These documents will allow you, among other things, to know if the property is free of all charges and if the meeting of co-owners has planned future work.
The previous bill of sale
Ask for the previous bill of sale if the owner had already bought it from another owner. It will enable you to verify in particular that there have been no changes to the real estate (expansion or internal modification). In the case where there is a significant change (extension of the property for example, swimming pool, garage, substantial modification of the internal architecture, etc.), check that there has been a declaration made to the appropriate government services in the absence of this declaration, you risk having to pay taxes for the former owner.
The “Certificado de aptitud” for properties over 50 years old
Since 2012, in buildings older than 50 years (45 years in Catalonia), a technical inspection (Inspección Técnica del Edificio – ITE) is mandatory. The owner must provide you during the purchase the “certificado de aptitud” of the building.
Physical state of the property
You have to inspect the house and do it thoroughly. If you have decided to buy the house, before giving your agreement, you need to make an inspection to the smallest detail. Make sure there are no cracks in the walls, check for roof tightness, common facilities (elevators, central heating, etc.) and quality of materials. Particular attention should be paid to ceilings and floors, to the quality of carpentry (windows and doors in particular) and parquet or tile flooring, to the conformity of the electrical system and the distribution of water and gas, lighting, air conditioning, boiler, bathrooms and kitchen. And check that the bathtub or shower has no cracks; it could spoil your first bath!
In case of doubt about the condition of the property, it is important that an architect makes a visit to ensure that the property conceals no defects. In addition, if you want to carry out work, it can also confirm the feasibility of the potential work.
Ask the municipal technical services about planning or public works in the area that can benefit or harm the housing and its environment.
Okupas (Squatters): danger!
Last trap related to the neighborhood especially in buildings, specifically in Barcelona: the presence of Okupas in the building: they will pay no common expenses, and you will have to support this financial burden. Some municipalities, including Barcelona, are more than benevolent with them and it will be very difficult for you to deal with this problem. Very often when you see accommodation offered by banks at unbeatable rates, you can be sure that they are in buildings inhabited by okupas.
Check the promoter’s financial health
In a purchase off plan, (buying a property off the architects drawings) do not forget to check the financial health of the promoter and visit his past achievements. At the time of the crisis, 10 years ago, many promoters declared bankruptcy and left “As Is”(meaning no repairs or updates done before the property is offered for sale) their customers often lost all their advances and deposits.
Some examples of disappointments…
A debt-ridden housing sold: the 80-square-meter apartment in Benidorm had been pledged as security for a debt contracted by the former owner. The Swiss buyer, who had not done the necessary verification during the purchase, had to assume all the debts of the previous owner.
A villa with an undeclared extension: it is a villa in Valencia of 200 m2 to which was added a terrace of 40 m2, but without authorization for extension and no works filed in the town hall, and no taxes were paid. This property has been sold to a French couple without specifying this extension in the contract. In this case buyers are liable for the tax and a fine. In case of a sale, this terrace has to be removed!
A house built on agricultural land: in the Alicante region, a Belgian couple has bought, on the edge of a village, a very pretty little house of 150 m2 with swimming pool and a large garden … Three years later, they go to sell their house and find out it is illegal, as it was built on farmland. It can be demolished at any time! How is it possible? Bribes paid to the communal authorities for example.
A beautiful apartment with unpaid charges: an American expatriate acquired a house of 170 m2 in Barcelona in the beautiful Sant Gervasi district, but he realized just after the signing at the notary, when meeting with his next door neighbor, that the seller had not paid his charges and co-ownership work for 3 years including a facelift. It cost him close to 10.000 €!
The villa was built on the edge of a future high-speed lane: the case was exceptional. 150.000 € for a villa of 120 m2 5 minutes from Malaga. Too good to be true! The new Canadian owners had not been at the town hall during the purchase to learn about the future urban projects of the area. Two years after their purchase, a fast lane was built just in front of their home!
The developer went bankrupt: between Marbella and Malaga, a Swiss couple was seduced by this subdivision under construction with swimming pool and community activities, near a large golf course. They buy “off plan” their semi-detached villa of 100 m2 and pay about 30% of the property in advance. Unfortunately, the developer is in serious financial trouble and goes bankrupt. Four years later, the villa is still not finished.
Three okupas in the building: again, a superb deal with a 60 m2 apartment in a 6-story building near Barcelona’s Sants train station, sold at an unbeatable price by a major Spanish bank which also provides you with a mortgage. The young Belgian who bought it thought it was the best deal of the century. Two months after the sale, he realizes that his neighbors are okupas, that on the ground floor and above him, there are also okupas. He must pay his charges but also those of the okupas pro rata shares he has in the building.
The fake seller: the case is too beautiful, a retired couple on vacation in Seville falls under the spell of an old apartment on the edge of the Guadalquivir in the Tirana district. The view and the price are exceptional, it will go very quickly, it must be booked, 3000 € in cash, it is not much. Except that once paid, the pseudo-seller does not reappear anymore and that this accommodation was actually rented on Airbnb with a stolen credit card!
If you go to court for any of these cases, you will lose because the judge will determine that you were responsible for all prior research and that you were fully aware of the actual condition of the property that you purchased.
Our 2 tips to close this chapter on the control of the property:
For all these checks, searches and all these tasks, the intervention of a Professional Real Estate Advisor during the purchase is essential if you do not want to take any risk. Your Real Estate Advisor
Never pay a deposit until these checks have been done, otherwise you will lose!
2. IF YOU DO NOT SIGN A SPECIFIC CONTRACT FOR “PAY AND SIGN”
The “Paga y señal” or “reserva” is a small sum of money (usually between 1,000 and 5,000 €) paid as a temporary reservation of the property. The payment of the reservation deposit guarantees that the property is removed from the market and is reserved for the price agreed to. It is better (1) to pay this down payment to the real estate agency rather than to the landlord, (2) that the real estate agency is API certified (Colegio de Agentes de la Propiedad Inmobiliaria) and (3) pay by bank transfer (or by bank check) rather than cash (so there is a record of the payment).
This step is not essential; it is mainly used to obtain the mortgage agreement from the bank. If the bank loan is not granted, the deposit is still made, but it must absolutely be specified in a private deed and the negotiation period must not exceed 1 month. If neither condition is fulfilled, you risk losing the deposit, even if you go before a judge.
3. IF NEEDED, YOU DO NOT HAVE FINANCING BEFORE THE SALES AGREEMENT
The contract of sale (contrato de arras penitenciales) is a private contract between the buyer and the seller in which the seller confirms his intention to sell, and the buyer confirms his intention to buy the property at the agreed price and specified conditions.
By mutual agreement, this contract stipulates the date on which the sale must be made. The buyer must ensure that he will have the necessary time to choose the notary and gather all the documents necessary for the signing of the notarial act of purchase, as well as obtaining the financing if needed.
It is especially important at the time of the signing of the agreement that we must be vigilant in the negotiation and drafting of any conditional precedents (obtaining a loan, purging easements or charges on the property, etc.).
At the signing of this contract, the buyer must pay a deposit to the seller, usually up to 10% of the selling price of the property. If the seller finally decides not to sell you his property, he will have to pay you double the amount of the deposit you paid him. If it is you (the buyer) who decide not to buy anymore, the amount of the deposit will be lost (unless the contract contains a clause stating that the purchase of the property is contingent on obtaining a bank loan.
This means that if you do not get a mortgage, you will lose the 10% down payment! That’s why we’ve advised you in our previous article to find out about mortgage loans before searching for your home. For all the financing pitfalls (in particular the underestimation of the duration of obtaining the mortgage and the total acquisition cost), refer to our previous article. Potential Pitfalls to Avoid Before the Sale
Our advice is not to take any risk, put a long enough deadline in the contract of sale (4 months), in order to avoid losing your money.
Attention, if you have the money available and the purchase is not dependent on a mortgage, then it is common to skip this step and go directly to the closing.
4. YOU UNDER-ESTIMATE THE TIME TO OBTAIN YOUR NIE
The Spanish law requires any foreign property buyer (even if he is a citizen of a member country of the European Union) to obtain an NIE (Número de Identidad de Extranjero) to buy real estate in Spain.
Normally, residents in Spain have one. Non-residents can apply directly to the Embassy or a Spanish Consulate in their country of origin. Attention, it is better to take care of it from the “Paga y señal” because it takes 3 to 4 weeks to get it. And without NIE no purchase is possible! Contact us for more information on this critical step.
5. YOU DO NOT HAVE CURRENT ACCOUNT IN SPAIN
Although this is not a legal requirement, it is recommended that the person who will acquire property in Spain open an account with a bank in Spain. The payment of taxes and expenses related to the purchase will have to be paid from an account in Spain. This will also allow you to avoid transaction costs when paying ordinary bills (common charges, gas, water, electricity). If you have acquired a mortgage in Spain, the bank will ask you to open an account.
However since 2014 the SEPA payment allows to pay the Spanish bills (and therefore the automatic water / electricity withdrawals / etc.) from your bank account. Likewise one can pay all his Spanish taxes (IBI / Basura / non-resident tax) from your Spanish bank account.
6. YOU MAKE AN ERROR AND TAKE A VARIABLE RATE LOAN
10 years ago more than 90% of the loans granted by Spanish banks were at variable rates, which is one of the main factors of the Spanish real estate crisis. This is no longer the case today. If you make a loan with a Spanish bank, you will ask for a fixed rate loan. Do not forget also that the Spanish bank will lend max of 80% of the value of the property, but for non-citizens the loan could be maxed at 60% to 70%.
7. YOU ARE PRESSURED TO TAKE OUT EXPENSIVE LIFE INSURANCE DURING PURCHASE
The bank will also take the opportunity to take out life insurance, know that it is not mandatory (even the Spanish do not know this). Past a certain age and for large loan amounts, it can be very expensive, up to 4000 € per year! If you want to take out life insurance to secure yourself, our advice is to compare the prices because they vary from 1000 € to 3000 € depending on the company!
8. PUSHED TO THE SELLERS NOTARY
Under Spanish law, a Spanish notary chosen by the buyer must certify the transfer of ownership from the seller to the buyer. Do not let the seller, agency or bank impose a notary unless it has excellent references.
9. YOU DO NOT STUDY THE SALES CONTRACT AND THE BANK LOAN
Copies of the notarial deed (“Escritura”) and the bank loan agreement are available 3 days before the final signature at the notary. We must study them under a magnifying glass and especially not forget to mention that the propertypurchased must be free of charges, liens or other debts.
10. Don’t PAY 100% OF THE PROPERTY TO A SELLER RESIDING ABROAD
You buy an existing property whose owner does not live in Spain. In this case, you must withhold 3% of the amount of the sale as a withholding tax for persons who are non-residents, which you must pay to the Spanish tax authorities. You therefore pay the notary the balance of the amount or 97%.
11. YOU FORGET THE KEYS DURING THE NOTARIAL PURCHASE ACT
The delivery of the keys is obligatory after the signature and the payment of the balance of the sale. Seems like a simple thing to remember, but you would be surprised how often it happens.
Please note that cash payments cannot exceed € 15,000.
It will take you up to two months for the final registration of your title to be made.
12. YOU DO NOT USE A PROFESSIONAL DURING PURCHASE
If you are not familiar with the Spanish language or the Spanish legal system, if you do not know what is the control of the chosen property, if you do not know the different stages of the procedure of acquisition of the property, it is absolutely essential for a Real Estate Advisor to assist you during the purchase. Normally, after reading the previous 11 points, this must be obvious to you!
For your peace of mind, the Real Estate Advisor is required before the purchase, during the purchase and after the purchase.
Real Estate Advisor, this is our business please contact us by sending an email to email@example.com.
With more than 20 years of experience in real estate acquisition procedures in Spain, we are at your disposal to assist you with all the necessary steps from the search for a property to services offered after the acquisition. When you are buying a home in Spain we help with organizing the visits of properties, the legal verification of the properties, the obtaining of a mortgage, the administrative procedures and the signature of the different notarized documents.
Do not hesitate to contact us!
Send an email to firstname.lastname@example.org.