Reservation contract and purchase agreement
 

The buyer and the seller sign a reservation contract of sale in which the buyer pays a deposit as a gesture of good faith. This confirms the agreement between the two parties, and the seller removes the property from the market for an agreed period of time keeping it reserved by the seller for the buyer. During this time, the lawyers will prepare a Private agreement.

 

If buying off plan, the private agreement will describe the terms of payment, obligations from the developer, finishing dates, bank guarantees, dates for completion, etc.

Completion

Completion of the purchase takes place at a notary where the deed of conveyance “Escritura Publica” is signed by both parties, the balance of the purchase price is paid and the buyer takes vacant possession of the unencumbered property. Your lawyer will then lodge the deed at the property registry to assure legal title.

Taxes
 

Taxes will depend on the type of property and on the autonomous community where it is being bought. New houses have a 10% of VAT plus a 1.5% Stamp Duty.

 

In case of a plot, commercial units or parking space, VAT increases to 21%.

 

There is no VAT on second-hand properties but the ITP (Transfer of Ownership) taxes must be paid. This tax amounts to 10% in Valencia, 8% in Murcia, and starts from 8% in Majorca.

 

There is an additional tax to be paid annually; IBI (property tax). A local council tax which value depends on the cadastral value of the property and the local town hall, it is generally between 0.3% and 1.1% of the plot’s value.

Notary

There is no fixed price but as an estimate, it is generally 0.5% of the selling price.

Registration office
 

The cost of the registration can’t be determined until the deed is presented to the Property Registration Office but, should be approximately 0.5%.

Legal services
 

In Spain, hiring a lawyer is not mandatory to buy a property, but we would recommend you to hire one. Some lawyers charge a fixed percentage based on the selling price (around 1%), while some others charge a fixed price starting from around 900 euros for a basic service.

 

When buying a property in Spain you will require a NIE number (a compulsory number that recognises you as a foreigner in the Spanish tax system). These are obtained from the local police station. We recommend to give your solicitor a power of attorney.

Additional costs
 

If you are planning to take up a mortgage in Spain to buy a property, you should calculate additional costs of 13% or 14%, depending on the Terms and Conditions of the mortgage offer. This would cover the setup fee and official bank valuation of the property.