Property Purchase Information
The Initial Costs
Whether you are buying a property for cash or with a mortgage there are some costs you are going to have to fund yourself.
The Deposit as your agreement to the purchase - On the day you sign the reservation contract you will be required to pay your deposit, usually 3.000â‚¬ and the balance of 10% of the purchase price within 14 to 28 days when a Purchase Contract is signed. For new properties under construction the payment terms are made in stage payments as the construction is completed. These terms will be negotiated through your agent or directly with the constructor. It is advisable to pay your deposit to your agent who is representing you and not directly to the vendor. The deposit is held by the agent until completion.
Purchase Costs - For all property and land you will pay 10% of the purchase price, which is a property transfer tax that goes to the Spanish Treasury. In addition you will have Notary fees and land/property registration fee, which varies according to the purchase price of the property, costs of changing utility contracts, and legal fees. In total add on approximately 12.5% to 13% of the purchase price
Agency fees - Normal commission is included in the sale price unless an agreement has been made between the buyer and agent.
The costs of a mortgage can be a further 3% to 4% of purchase price which includes additional notary and administration costs
Documents Required â€“ The agency will require copies of passports for those purchasing and details of home address. The Spanish Notary will also require you to obtain an NIE number (National Identity number for foreigners). All agents can assist you with this; it means an early morning visit to a National Police Station with a translator. The cost is approximately 85â‚¬ per person. Real Estate Solutions will arrange all this for you.
Once a property is found that is suitable and the vendor has accepted the offer, a reservation agreement is signed and a 3,000â‚¬ deposit paid.
In Spain a Nota Simple is applied for which will show any outstanding debt on the property. If a property is purchased with outstanding debt then the new purchasers will inherit this. It is therefore very important that this is checked!
OpciÃ³n de compra
The seller (vendor) or agent can draft the opciÃ³n de compra, which will be written in Spanish, but will usually have an English translation. The name(s) on the mortgage (if applicable) must also be the name(s) on the opciÃ³n de compra. The following details will be included in the contract:
Details and identities of the vendor and purchaser
A full description of the property
The land registry number from the deeds
The purchase price, the breakdown of deposit payments
Details of the sales agent
Details of any fixtures and fittings included in the sale
Details of the mortgage, the date of when the mortgage offer should be available and the date of completion
Any let out clauses (conditions) and the penalties that will be incurred by the purchaser or the vendor if completion doesn't take place.
The Mortgage Procedure
Lenders are obliged to ensure that any person applying for a mortgage is financially able to meet the mortgage repayments.
Apart from a completed mortgage application form, life insurance form and a copy of the opciÃ³n de compra that has been signed by both purchaser and vendor, the purchaser will need to provide photocopies of:
proof of identity - passport or Residencia
if employed or receiving a pension - payslips from previous 6 months, P60s or tax returns, proof of any other income
if self-employed or director of a company - 3 years trading accounts and tax returns
bank statements (3 months) proving receipt of income and payment of loans, and adequate funds for the mortgage deposit
Credit report (Experian)
Insurance is mandatory to cover all the terms of a mortgage. Most of the banks and lenders insist their own in-house policies are used
When the application has been thoroughly checked and approved by an underwriter, the lender will request a valuation of the property. The valuation is not a survey. It is merely a valuation of the property to confirm the amount the lender is prepared to lend is acceptable.
If the mortgage application is approved, a mortgage offer (hipoteca) will be issued in writing.
Some lenders will want their arrangement fee paid on acceptance of their mortgage offer and the life insurance policy will be valid from the date the mortgage offer was accepted.
When the lender sends you the mortgage offer they also inform the agent of the details of the mortgage. The completion date should be within 3 months of receipt of the buyer's acceptance to the mortgage offer.
Once the completion date is determined, the buyer will need to make sure their Spanish bank account is open and funds are transferred into it in time for the completion date. Arrangements for building insurance will also need to be arranged as the buyer will need to provide details of the insurance policy.
If the buyer is unable to attend the signing of the Escritura (final deed of sale) power of attorney (a poder) may be given to a trusted person or friend, which authorises them to act on the buyer's behalf.
The Escritura is signed by the buyer, the vendor and one Notary.
Once the Escritura has been signed and witnessed the buyer must pay all required taxes, land registry fees and the purchase price. A few months later you will receive a certificate informing you that the title has been registered. The original title deed is returned to the If and you can collect the deeds and the Notary is able to make authorised copies
The Notary is a public official and given the title of Notario. The Notary is highly qualified in the Spanish legal system and is able to advise about the property transaction as well as family, succession and corporate laws. The state confers powers on the Notary to legalise property purchase transactions that cannot be enforced by any other means. Notaries are Public Officials and provide legality to the contracts they supervise. They are liable for their professional actions. A Notary is responsible for the conveyance, preparing the various documents and confirming the seller's title to the property, checking that there are no other mortgages on the property, etc. The Notary is responsible for the legality of all documents that are signed before him in his personal capacity, which provides a guarantee for the client.