BUYING ABOARD TIP
FROM MURCIA PROPERTY SOLUTIONS
Keeping your wits about you is essential when buying property abroad. Horror stories can be easily avoided by using a little common sense, doing some research before you go and most importantly finding a good lawyer on arrival. Buying a new home or a property to rent in Spain remains a lucrative investment and, as long as caution is exercised in the early stages, there will be no nasty surprises later in the day.
Don’t let the sun affect your common sense when deciding on a Spanish property. If possible, plan a return trip to your dream location during the winter months so that you can see how life will be out of tourist season. Don’t let estate agents push you into a sale with threats of rising prices. Remember, the property you wish to buy is not the last property in Spain and it is worth taking your time to make sure your investment is attractive all year round.
Don’t take legal advice from friends and acquaintances; with the best will in the world it is likely to be incomplete or inaccurate. Always seek independent legal advice before making any decision, as you would at home. Always get the approval of your lawyer before signing a Spanish contract, even if you have an English translation. You may not understand the implications, and often the translations are poor or even have missing details. Many Spanish lawyers speak excellent English, and are accustomed to dealing with foreign buyers and advising on property transactions. Don’t commit to purchasing a property in Spain if your finance is not in place, without making sure you can have your deposit refunded if finance is refused. Before going on a buying trip, try to obtain an agreement in principle of the amount available to you from your lender and remember you need not only the purchase price of the Spanish property but the purchase costs (fees and taxes) as well to be able to complete.
Don’t pay large amounts of money to developers who do not offer you the security of a Bank Guarantee for these payments. Reputable developers will always offer guarantees as it is the law.
Don’t be tempted to declare a lower property value than the actual purchase price of your Spanish property. Until recently it was common practice to declare a low value for the property in order to minimise the transfer tax. The authorities are beginning to clamp down on this activity and now most lawyers advise both parties to declare a realistic market value. If the Spanish tax agency discovers that the value was under-declared by more than 20% they can apply heavy fines. If and when you resell the property, you will be liable for Spanish capital gains tax on any profit made. And you will be liable for tax on a much bigger profit when you sell later. The safest way is to ask at the payment office of the nearest tax agency and they will give you the exact value of a particular property.
Do not confuse a Notario with a lawyer. The Notario is a public notary and an official of the State who ensures that contracts are legal. He does not verify or guarantee the accuracy of the statements made in the contract. You still need a lawyer representing your best interests.
Do make a Spanish will for your property. Spanish Bureaucracy can delay your heirs from taking control of their inheritance if you have no Spanish will.
Do consider the financing options offered by developers if you are buying a brand new property or ‘off plan.’ The developer will often have the most attractive financing options to offer to buyers. The paperwork will be standardised but make sure you check the terms and conditions carefully. Make sure that the developer is reliable and solvent, and that he is able to bring the project to completion. (You can check the status of most developers at www.oppspain.com). The developer must offer a bank guarantee that assures the return of your total investment if the project stalls or fails. It is important that this guarantee does not cost you anything and details of the guarantee must be documented in the contract.
Do make sure that if you are buying a property in an urbanisation it is legal and registered by asking to see the approved ‘plan parcial’ at the town hall. If the property is on the beach, make sure the development is also approved by the Jefatura de Costas. For a new property, make sure that it has been declared for IBI (lmpuesto sobre Bienes lnmuebles, the municipal property tax) and that the developer has made the ‘declaracion de obra nueva’. Also ensure that the escritura mentions the house you are purchasing as well as the plot of land on which it stands.
Do look at the lBI, before purchasing a resale Spanish property. Ideally, you’ll be able to see the IBI receipts for the last five years because that is the limit of liability for unpaid back taxes and is attached to the property, not the owner. A new property bought from a developer will not have an IBI receipt (because it has never been ‘owned’) so it will be your responsibility to register the property for this tax.
Do remember that there is no law in Spain regulating the real estate industry and anyone may, quite legally, act as an intermediary in property sales. There are, however, two professional associations that promote a voluntary level of regulation for their members – API and GIPE. Ask an Estate Agent if they have professional indemnity insurance, and, if so, for how much. Estate Agents dealing with Spanish property typically charge commissions of between 5% and 10% of the sales price. Very few agents in Spain have exclusive rights to sell a particular property, so you may find more than one agent showing you the same property, with prices often varying.
Don’t be put off buying property in Spain! With a little planning and a good lawyer you will be able to fulfil your dreams of a life abroad with minimal worry. Buying property abroad is exciting and the prospect of a new lifestyle can sometimes cloud even the best judgement. Remember to take a step back from time to time and think about the practicalities of your investment. Once you know where you stand with taxes, fees and finance you can begin to enjoy the search for your ideal home in the sun!
PRICES & FEES
All the prices on our website are listed before taxes and legal fees.
The following is a guide to expenses for any purchase of Spanish property. You should add:
Either 8% ITP(*) when buying a resale property or 10% IVA on new off-plan property / any property which has never been previously owned.
Land registry, notary costs 1% to 2%.
Solicitor/Legal fees. Typically €1,000 to €1,500 + VAT.
1% – 2% Stamp duty on new off-plan property / any property which has never been previously owned.
Clients may have other expenses on completion. e.g. first years’ insurance, first quarter’s community fees.
If buying with a Spanish mortgage then you should also factor in set-up fees and life insurance.
(*) ITP is charged by the regional government and applies to the majority of the properties on our website. However If the property is direct from the developer (such as our beach properties) this is taxed by the national government and not the regional government. IVA (VAT) and not ITP then applies and this is 10% (not 8%).
2017 update MMV Minimum Market Value. All properties in Spain have a MMV which the Spanish government set on each property. At this moment in time the vast majority of properties sell for slightly more than the MMV so the chances are this will not effect you. In some rare cases e.g. If the property has been purchased at a heavily reduced price it is possible the MMV is higher than the purchase price. In this case the total tax you should pay is at the MMV price.
All our properties can be reserved with a €5.000 deposit which can be paid with a credit/debit card, this removes the property from the market. You wil then be required to pay a second deposit 21-28 days after the first deposit to cover 10% of the total cost of the property.
See example below:
Property price agreed €200.000
First deposit of €5.000 – on agreement of price
Second deposit €15.000 – 21-28 days later
However on occasions the completion can be within four weeks, in these circumstances your solicitor and the sellers solicitor can negotiate the second deposit being paid at the time of completion.
If the price of the property is less than €100,000 then generally no second deposit is required, only the original €5,000.
When buying property in Spain you will require an NIE number (National Insurance Number). These are obtained from the local police station. We recommend that you give your solicitor Power of Attorney. Once registered your solicitor can collect your NIE certificate on your behalf.
Whenever buying a property we would always recommend independent legal representation. There are a number of local solicitors that speak many languages including English. If you do not want to keep flying back to Spain during the buying process we would recommend you grant your solicitor Power of Attorney. With POA your solicitor can obtain your NIE number, open a bank account and also set up your utilities. The solicitor will only action anything once they have written approval by you. The costs of a solicitor varies between 1% – 1.5% of the purchase price with a minimum fee of €1000 – €1,500.
You well need to open a Spanish bank account when buying a property. We have negotiated free banking and other special offers which are exclusive to customers of the resorts with one ot the biggest banks in Murcia Spain. However you are always free to use whichever bank suits you best.
If you decide you would like to apply for a Spanish mortgage, we can help you. There are currently some fantastic offers with various banks. In general a non resident can receive a 60% – 70% mortgage.
It normally takes five to eight weeks from the time of your deposit being paid to completion. If you are taking out a Spanish mortgage then you should add two more weeks. If you have gave your solicitor power of attorney you do not need to be present for the completion.
Once you have your keys we can give you guidance on local key holders. Your keys holders will look after your property offer cleans, laundry services and general maintenance.
The Resorts remain at your disposal after completion. Maybe you would like a new swimming pool, extension, etc we can give you recommendations on the best local builders.
If you decide to rent out your property for holiday rentals we can help. We have vast experience to maximize your properties potential.
The costs of running a property will vary from one property to another. To give you a better idea on costs, below is an approximate guide for an apartment. Please Note that the community fees stated on our website are for guide purposes only, they could be more or less. You can find out the exact fees via your solicitor.
Apartment Monthly Running Costs
€120 – Community fees
€60 – Standard charges for Gas, Electric and Water
Apartment Annual Costs
€250 – Key holder fees
€250 – Council Tax
€200 – Insurance
Total for the year €2.740
We are here to help you make an informed decision before buying your dream property.
Even though we have covered the majority of question we are frequently asked there may be something we missed. If you have any questions regarding the buying process please do not hesitate to call us UK 01425 657555 SPAIN +0034 699 03 95 74.