“The 12 traps before buying a home in Spain” is the first updated article from three of our most read articles on the traps before buying a home in Spain, but also during and after.
In three articles published in October 2019, we had presented to you the list of the various traps, errors and even scams, to which candidates can be exposed to when buying a property in Spain. Over the past 2 years, new national and local laws (in particular on rentals and mortgages) have come into play and we are publishing an update. This article is the update of the one on traps before buying a home.
A lot of people think that buying a house in Spain in the same as in their respective countries. This is a serious mistake because the laws (national and local), taxation, standards and procedures for acquiring property in Spain are very different … not to mention the scams! As a Real Estate Advisor, we take care of all the steps during an acquisition in Spain and we protect you against these traps.
In this article, we present the pitfalls to avoid before buying a home in Spain. In a second article, we discuss the pitfalls to avoid during the purchase and, in a third, the pitfalls to avoid after the purchase. Good reading!
The 12 traps before buying a home in Spain
Here are the main mistakes, pitfalls, problems and scams most common before buying a home in Spain. That is to say during the definition, research and selection of real estate to visit.
FIRST TRAP – WASTING TIME…
Now is the time to research, your first reflex is to go to websites intended for the Spanish property market. And then you start to dream, but have you clearly defined what you want and the means you have to acquire it?
The first mistake is to start all over, look at everything, and see hundreds of apartments and villas scrolling across the screen across Spain. Obviously it’s a waste of time! How will you, for example, go to visit property that is often hundreds of kilometers apart from each other?
Before embarking on internet searches, the most important thing is location. As people often say, “location, location, location”. You must first define in which zone, in which city and even in which district you want to live, if you want accommodation in the city center, on the outskirts, in the interior, or by the sea…
When you have defined the location, then remember to check:
- Accessibility: how long is the journey from your main residence, by car, plane or train? Is there an airport nearby and sufficient air options at reasonable prices? Do you need a vehicle locally to get around?
- Local services: urban transport, shops, food services, health centers, leisure activities, etc.
- Educational establishments for your children if you wish to make it your main residence: distance to middle schools, high schools or daycare centers. Do you need to check prices and availability?
For all this information, Google Maps will be of great help to you. This first selection will help you define your search area.
And remember, in some areas, fall, winter, and early spring can be downright depressing.
Also take the time to define the characteristics of the desired property: the style of the property, the surface, the number of bedrooms and bathrooms, air conditioning, terrace, floor, pool, garden, view, garage are the most usual criteria. This will reduce the number of offers.
SECOND TRAP – WANT TO DO IT ALL ALONE
Will you be able to visit all the properties you have selected? Obviously not! Or if you do, it will cost you a lot of time and money.
Like many who want to buy in Spain, you think that by being in the European Union, the laws are identical to those of your country. This is a big mistake: know that the laws, rules, taxation and administrations are different but in addition they vary depending on the Spanish autonomous regions. For example, the ITP (tax on the sale of old homes) varies from 4% to 11% on the value of the property depending on the region where you buy! On a property at 200,000 euros, the difference is 14,000 euros…
Wanting to do everything alone before buying will ultimately result in more costs, more lost time and more worry for you … And often, this will discourage you and you will abandon your project. The solution is to have it done by a real estate advisor who will accompany you throughout the acquisition process.
In the real estate sector in Spain, the main difference is the role of the notary: it is essential to know that Spanish notaries absolutely do not have the same role as Escrow companies or notaries you are used to dealing with. In some countries all the property verifications are done by the notary, in Spain, no! Verifications are the responsibility of the buyer. They must be carried out in advance by the buyer, or if necessary, by a real estate advisor, who will have to ensure that the national, regional and local legal, administrative and town planning rules have been respected. To sum up, the role of Spanish notaries is reduced to that of the editor and registrar of the deed of sale. We’ll cover this in more detail in the article on errors during the purchase phase.
But there are also other important differences in real estate in Spain:
The Spanish m2 is smaller than the way it is measured in other European countries.
You also think that the areas displayed in the advertisements are the same as in your country. In the vast majority of European countries, the area announced is the living area or the useful area. In Spain, the area of which owners and agencies speak is most often the built area, with in particular the common areas included! So be careful, because an accommodation in Spain advertised with an area of 100 m2 can turn out to be accommodation with a useful area of 80 m2 or a living area of 70 m2, or even less. It is obvious then that the price per m2 varies widely. Before buying, take out your tape measure!
Another way of operating real estate agencies
Spanish real estate agencies rarely have exclusive properties or listings.
A new construction project can be sold by several agencies, but the prices are the same for everyone. If the price offered by one agency is lower than the others, you should beware. Some agencies mention the introductory price on their website and “forget” to adjust it later.
On the other hand in the former, you can have prices that differ from one agency to another as from one website to another, and even between agencies and the owner! The majorities of Spanish agencies do not have a license and do not have professional insurance, except in a few autonomous communities (including Catalonia)
“Double commission” real estate agencies!
Beyond the advertised sale price, some agencies charge the seller a commission and another will charge the buyer, especially if he is a foreigner. This is the case for example in the Valencia Community, in Andalusia and in half of the cases in Madrid. But it is rather rare in Catalonia. Difficult to escape, but everything is negotiated (and you can always ask to reduce this commission, or sometimes even cancel it). Ask the agency or seller for the total sale price (including agency commission).
A special “foreigners” reward
Before buying a home in Spain, negotiate! Certain property and certain real estate agencies are specially oriented towards foreign buyers. These agencies sometimes take advantage of the buyer’s lack of knowledge of real market prices. It is essential to know the local real estate prices of similar properties in order to start trading on the best possible basis. Today in Spain, with a few rare exceptions, the price displayed is negotiable. The negotiation margin can vary from 5% to 10% depending on the price displayed.
THIRD TRAP – OVER-ESTIMATE FINANCIAL CAPACITY BEFORE PURCHASE
Before buying a home, you make the (classic) mistake of being interested in the only price of the home and not to consider the taxes on the purchase, the additional costs of the purchase contract, of renovation work, maintenance… and the monthly costs you will have to bear (mortgage, water, electricity, gas and garbage fees). Not making the right calculations before buying is a big mistake.
Many people forget that it is necessary to add to the purchase price of a house from 10% to 15% for the taxes, charges and associated costs: taxes on the acquisition value (ITP for an old house or IVA for a new housing), notary’s services, costs of a lawyer or real estate advisers, entries in the property register, bank charges linked to the mortgage, real estate agency commission possibly, renovation costs, moving and installation, etc.
Count an overall financial need of 120% of the sale price for housing without renovation to 150% for housing with renovation.
In addition, other costs will exist after the acquisition. You will need to furnish your accommodation. You will have to insure the monthly mortgage payments (beware of variations if you have taken a variable rate loan), fixed and variable costs of co-ownership, local taxes (IBI, the annual property tax of 100 to 200 euros per purchase investment of 100,000 euros), electricity, water, gas, telephone or internet charges (much more expensive in Spain), the costs of maintaining the pool and garden of your villa, insurance and various repairs…
FOURTH TRAP – DO NOT ASK ABOUT MORTGAGE CREDITS BEFORE THE RESEARCH
In the event that you cannot finance the property out of equity, a very common mistake is not having a prior bank agreement for the mortgage before purchasing a home. For this loan, you have two choices: make a loan in your home country or make it in Spain. And these are two very different choices, which are far from being obvious and for one and the other.
Often buyers go to their bank after selecting their home to buy. The banker may not follow you, or may delay you by asking for a time to study your file or other supporting documents, which will delay your purchase and could also cancel it if the times are too long and exceed the terms of the conditions of sale.
Also remember that few banks in other countries will accept a mortgage in Spain!
As for buyers who choose to apply for a loan in Spain, they do not often compete with the banks and this is all the more detrimental since the rates are higher in Spain than in the other countries but lower than you find in the US. There is access to mortgage brokers who can help find financing options for you. We must also study the terms, conditions, services and additional costs.
Spanish banks are more stringent today for loan concessions (half of the loan applications are refused), and if the solvency requirements are met, they offer at best up to 80% of the purchase value or evaluation of the property (the “tasacion”). Most often it’s 70%. Gone are the days when Spanish banks lent up to 110% of the value of property without studying a file. So if we refer to what we wrote above (“Count from 120% of the price for housing without renovation to 150% for housing with renovation.”), You will have to self-finance from 40% to 70% of the property value!
Normally, the debt ratio (income / debts and monthly fixed charges) cannot exceed 33% of your net income, unless there is a significant amount of cash flow left. The best way to buy a home in Spain right now is to have some savings and you only use 50% of those savings to buy the home. So you reduce the amount you have to pay monthly for your mortgage and you can easily cover the costs of purchase and possible renovations, decoration, furnishings and moving.
As a real estate advisor, we can help you put your bank account in the best position.
FIFTH TRAP – DON’T MIX ELECTRICIAN, PLUMBER OR TILER!
If you buy a home that needs to be reformed, it can cost you less, including adding the cost of the work. But it can also quickly become a headache and take much longer than expected. You have to either delegate the monitoring, or follow the work, or do it yourself, which is difficult if you live abroad. It mainly depends on your initial budget and your availability.
Before buying a home to renovate, you absolutely must have a very precise idea of all the work to be done to avoid surprises that are costly in time and money. Otherwise the investment savings, which could be between 10% and 20%, can very quickly turn into … additional costs!
SIXTH TRAP – DON’T THINK ABOUT RESALE … BEFORE PURCHASE
Obviously, a lot of people who want to buy a home do not think about reselling before buying. This is still a mistake because you never know what can happen: you can no longer cope with mortgages, you get tired of your accommodation or its location, you want to invest in new housing, you separate from your spouse, you lose your job, you don’t use it, etc.
So choose the homes that are most sought after and that will be the easiest to resell. They are first of all small apartments (between 60 and 100 m2), in large cities or by the sea, with two or three bedrooms, two bathrooms, a terrace and a beautiful view (a terrace is always a plus). It will also depend on the area and the use. It can also be a studio or an apartment with one bedroom and bathroom, these are the easiest to rent for tourist use. But also very large apartments (over 300 m2) in the central areas of Barcelona and Madrid.
SEVENTH TRAP – VISIT TOO QUICKLY
From abroad, the Internet is an excellent ally for identifying interesting real estate. Unfortunately, some real estate agencies resort to deceptive practices such as the publication of very attractive real estate at a good price but which are no longer for sale, in order to attract the interest of potential buyers and try to sell them another property. They may use very beautiful photos that do not reflect the reality of the property and its environment.
Visiting is obviously an essential step before buying a home. You have made your selection of real estate and you will visit it on site. But you have little time, 2 or 3 days, so you concentrate all your visits on this short period. You will not be able to visit and check more than 5 or 6 properties per day. It is not in 30 minutes that you can judge an accommodation: there is a whole series of physical controls to be carried out, the environment to be appreciated and to know in detail the situation of the building (technical inspection, last renovation, work to be carried out, etc.), community conditions and rules (in the case of a condominium apartment) and maintenance and upkeep costs (electricity, water, swimming pool, garden, condominium fees, etc.). You will also need to check the private and public documentation of the accommodation.
Managing visits is not easy in Spain. First the language barrier, then you have to make appointments and often call several times before setting one. We also advise you to call back your contacts the day before. Several advantages to this. For example, this will prevent them from “forgetting”, or having recorded a bad hour, or from going there for nothing because you were not warned that the accommodation had already been sold (a classic!). It will then be necessary to recall them several times to obtain the administrative and legal information requested on the property.
An analysis of the local market, in particular of prices, is compulsory. A first analysis can be carried out with real estate sites offering accommodation with similar characteristics. Companies are also specialized in housing price assessments.
Call on a real estate advisor, he will visit the real estate and will control those likely to interest you.
EIGHTH TRAP – UNDERSTANDING PARTICULAR SITUATIONS OF SPANISH REAL ESTATE
Often, property visits by foreigners are much too quick, due to lack of time and organization, which does not allow to realize “some disadvantages” of the Spanish property market.
Everyone dreams of a beach villa, but it can quickly turn into a nightmare. Many seaside houses were built on marshy land taken from the sea or without crawl spaces or slabs. The result: permanent humidity outside of summer that rises to the ground and makes life hellish. And when you visit them in summer, you absolutely do not realize it. Ideally, this is a villa near the beach (you can walk there) but a little higher up.
Also for villas, check that your electricity and water connections are up to code! For you, they seem correct to you, but to a professional, they will be considered illegal and even dangerous.
A quality of construction that leaves something to be desired
In some constructions of the 90s, the materials used do not meet the standards and are not always made to last.
The environment is changing
Avoid buying near vacant lots. Always carefully observe the environment and, before buying a home, go to the town hall to consult the Land Use Plan or future town planning projects. The view seems breathtaking, but have you thought about checking the urban planning projects to come in the town, and in particular this building which will block your view in 2 or 3 years or this future expressway which will pass by your place!
Avoid empty buildings and lots
Do not buy in a new but empty building or subdivision, even if the price is very attractive. In particular, all banks will immediately offer this kind of property they want to get rid of. The price will be attractive, but the building or subdivision may take years to fill up, the developer may go bankrupt and you will be the one or only one to pay the condo charges which you will end up paying no more. At best these properties will end up in social housing, at worst filled with squatters.
Soundproofing that does not work
A big flaw in many constructions in Spain is the soundproofing. Very often done wrong, you hear everything your neighbor does in the bathroom or … in his room. So avoid the huge towers where you are surrounded by neighbors at the top, bottom right and left. Also avoid choosing accommodation above a business or a bar otherwise you will experience hell!
Protect yourself from the sun!
Have you thought about orientation? We often think of the sun and therefore exposure to the south when we want to buy in Spain, but believe us, we must also think of cool space for the summer.
Check the use of the property before purchase
A small passage in the property register can teach you that the loft on which you fall in love has no “cédula de habitabilidad” (habitat certificate) because this property is intended for commercial or industrial use, and not for a residential use. And outside the big cities, it can also happen that the houses were built on agricultural land; they are therefore illegal and can be demolished at any time! Bribes paid to the authorities were likely the reason.
Check that the area registered corresponds to the area sold
The area registered in the Property Register is often less than the area sold. Work has been done but has not been declared. In the best of cases, you can regularize them with time and money. In the worst case, it will be necessary to destroy the extensions carried out.
Check what the price includes
Sometimes you have to buy a parking space or a cellar separately, but this amount (20,000 euros for example) is not included in the price announced by the agency.
Take into account the seller’s susceptibility
Avoid criticizing or disparaging the property in front of the seller, some people may take it wrong and will not sell you their property even if you offer an attractive price.
NINTH TRAP – DO NOT INQUIRE ABOUT THE USE OF YOUR PROPERTY
Many foreign buyers want to invest in tourist accommodation or plan to rent their property from time to time for tourist stays, such as those offered by Airbnb. The situation has changed in recent years in Spain with regard to the regulation of tourist rentals. You must educate yourself before embarking on research that will be useless.
Many large cities have implemented total or partial bans and / or operating constraints: Barcelona (March 2017), San Sebastian (March 2018), Valencia (June 2018), Palma de Mallorca (July 2018), Alicante (August 2018), Madrid (March 2019), etc.
Even in cities or towns where this is allowed, there can be another prohibition factor: co-owners. With the implementation of Royal Decree 7/2019 in March 2019, the property law (“Ley de Propiedad Horizontal”) is modified. From now on, the majority of three-fifths of the owners of a building can decide to limit or ban tourist apartments in this building. Until now, this decision had to be unanimous. The co-ownership can also impose an additional cost in the distribution of the co-ownership costs to the detriment of tourist apartments (up to a limit of 20%).
If your goal is to rent long term, also know that the rules have changed. Since the decree of March 2019, the duration of rentals has increased from 3 years to 5 years.
TENTH TRAP – WAIT TOO LONG TO DECIDE AND TO MAKE AN OFFER
The impulse purchase of a home is risky, but the opposite also makes it take too long to decide, especially in today’s competitive Spanish market.
So that’s it, you’ve found the accommodation that’s right for you. But you are still hesitating; maybe we should still see other accommodation? What if your brother or sister, or your parents, or your children or your best friend also gave their opinion? What if we made the seller wait to get him to lower his price? By waiting, the accommodation is gone, bought by a decisive buyer. Before buying a home, set yourself rules: a visit, a counter-visit with possibly a professional, document control, etc.
ELEVENTH TRAP – WAIT TO GET YOUR NIE
Having a NIE is a prerequisite before buying a home in Spain.
Without a NIE, you will not be able to buy your apartment or villa in Barcelona, Madrid, Valencia or Malaga! This is the first step to take before all others if you decide to invest in real estate in Spain and it will cost you … less than 10 euros. Outside of Spain, it is requested in Spanish consulates and in Spain, in police stations. If you are not resident in Spain, you must do this well in advance because requesting an appointment to obtain it can last up to two months! This can be the case, for example, to get an appointment at the Spanish Consulate in Paris or at the Barcelona Police Station.
In some cases, an attorney can process your NIE request as part of the purchase process. As Real Estate Advisors, we can help you with this process.
TWELFTH TRAP – DEPEND ON THE SERVICES OF A REAL ESTATE ADVISOR
What is the alternative to avoid all the previous pitfalls? Before buying a home, it is simply a matter of speaking to a real estate adviser, preferably one who speaks your language, also known as a “real estate hunter”. It is he who will research and select the real estate for you, according to your financial possibilities and according to the indications and choices you have provided. The real estate advisor will save you a lot of time, avoid unpleasant surprises and very often, it will save you money before, during and after buying your property.
During all this prospecting phase, before the purchase, your real estate advisor will avoid all the errors we mentioned earlier: in particular, he will take into account the environment of the property, he will check the physical condition of the property, but also their legal and economic situation, it will make an estimate of price in relation to the area. At the end of this phase, he will offer you a list of accommodation to visit with all the necessary and available information and you can then choose your future accommodation in Spain on site with full knowledge of the facts.
Real estate advisor, it’s our job consult us and protect yourself by sending an email to firstname.lastname@example.org
We will see in the next two articles to appear that the role of the Real Estate Adviser is also essential in the purchase phase and after the purchase! The continuation in: The 12 traps during the purchase of a housing
This article is an update to a October 2019 article.
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