Now that you’ve made the decision to purchase property in Spain, RJH Estates are ready to help and assist/guide you through the entire process from start to finish.
Our local knowledge and 15 years of experience here on the Costa Del Sol can provide you with help, advice, and recommendations for local Independent Spanish Lawyers, Financial Advisors and Currency companies to ensure that your purchase goes smoothly, and stress-free.
Finding The Property
Finding the right property is just the start of your journey! After making the trip to the Costa Del Sol, and after numerous viewings you find yourself in the position where your dreams have suddenly turned to reality, so what now?
The next step is to make a formal offer verbally and in writing, followed by negotiations on price, furnishings, or any other questions raised until Buyer and Seller are both in mutual agreement.
When everything has been agreed at the Negotiation Stage, the next step is for RJH Estates to draw up a Reservation Contract.
A Reservation Contract is a temporary document outlining the details, terms and conditions of the property purchase that have been agreed by Buyer and Seller. At this stage, the Seller will agree to remove the property off the market, to not allow any further viewings and fix the price agreed. This gives your Lawyer approximately 2 weeks (Sometimes less) to carry out their necessary due diligence and searches, ensuring the property has all deeds/documents, any outstanding debts (If any) are known, and that the Seller is the legal owner of the property.
The Reservation Contract is standard practice here in Spain, and is used to reserve or “hold” the property off market for an agreed period of time. It will outline basic terms and conditions of the purchase, and would then be approved and signed by both Buyer and Seller for your Lawyer to take over the next phase.
This document usually includes:
Full Name of Buyer and Seller.
Agreed Price of the Property.
Full Address of the Property.
Estimated Date to sign the Private Purchase Contract which is a Legally Binding Document.
Any other special terms/conditions (Subject to finance, Subject to Viewing, Furnishings to be included etc)
Deposit amount required to secure/reserve the property.
A €6,000 Euro Reservation deposit will need to be paid while the necessary due diligence is carried out. This Deposit can be paid via Credit Card or Bank Transfer, and we always recommend for it to be paid directly to your Independent Lawyer, and held in their Escrow/Client account.
The Reservation Deposit, along with the Reservation Contract holds the property while your Lawyer checks the paperwork, and gives you time to apply for a Mortgage if required.
This Deposit is FULLY REFUNDABLE should your chosen Lawyer discover any legal impediments relating to the property, which they will inform you of immediately.
Should you decide to continue with the purchase after your Lawyer has carried out their due diligence, the Reservation Deposit will be used towards the purchase price. It’s not an additional payment and will be accounted for by your Lawyer throughout the Purchase Process. Once your Lawyer has conducted their full and thorough due diligence, they will inform you of their findings, and discuss with you directly to prepare and move to the Private Purchase Contract stage.
We mentioned Due Diligence above, however it’s necessary to know exactly what this includes. Your Lawyer will carry out all of the following searches/checks and be in contact with you at every step with regular updates until their searches are complete:
Legal declaration from the Seller proving that they are the owner/s, and positioned to sell as outlined and agreed in the Reservation Contract
Exact Address, dimensions and details of the Property, it’s features and what’s included in the Referencia Catastral. The Spanish Government’s registration of the property.
Coordinate with the Sellers Lawyer to agree a completion Date and handover of keys, signing at Notary etc.
Obtain a copy of the Escritura or Nota Simple (Title Deed) showing any Mortgage or Loan secured against the property.
Obtain copies of the current accounts from the Community of owners (If applicable) showing outstanding debts if any.
Obtain copies of IBI and Basura payments (Council Tax and Refuse Collection) from the local Town Hall, again showing outstanding debts if any.
Obtain copies of bills and Account Numbers for Utilities (Electricity, Water etc) to show any debts, and to change service for uninterrupted connection after completion.
Obtain copies of Passports, NIE Documents and/or Identity Documents for both Buyer and Seller.
Anti Money Laundering documents, proving or tracing the funds used for the purchase and where the money originated.
EPC (Energy Performance Certificate) showing the Energy rating of the property, this is now a legal requirement in Spain and provided by the Seller of the property.
Apply for Mortgage if applicable.
Apply for NIE Numbers (Spanish Identity Number for non residents/foreigners).
Open Bank Accounts if necessary.
Transfer of utilities (Electricity, Water etc) and Direct Debit payment set-up.
IBI, Community Fees, Basura payments set-up for Direct Debit.
Application or advice on Buildings and Contents home insurance.
Arrange to sign a Power of Attorney, giving your Lawyer the Power to obtain and sign any Legal Documents on your behalf with your written authorization.
This list is to be used as an example, most or all of the Due Diligence above will be included as part of your Lawyers Legal fee for conveyancing and services provided will be included in the Schedule/Breakdown of costs.
Private Purchase Contract
When all of the above has been checked, agreed, and both parties are ready to move forward, your Lawyer will prepare the Private Purchase Contract ready for signing and instruct you to start making preparations for transfer of funds. If there is a Mortgage involved, they will be in contact with the Bank in question to arrange a date for completion and access to the funds ready to transfer. All transactions are handled through your Lawyers Escrow/Client account.
Depending on the type of purchase, a further deposit will need to be paid (Less the Reservation Deposit) as a percentage of the purchase price. The Reservation deposit forms part of this payment, and will be deducted from the total balance outstanding. Any applicable taxes will be added, and your Lawyer will provide you with a FULL Breakdown of costs associated with the purchase.
After signing of the Private Purchase Contract and transfer of Deposits, the completion date will be agreed by both parties in preparation for completion at Notary.
On completion at Notary, your Lawyer will handle the property transaction in full, pay off any existing or outstanding debts, and sign on your behalf with Power of Attorney if necessary. The entire process takes approximately 6 to 8 weeks depending on the purchase and if there is any Mortgage/Finance application involved.
At Notary, after signing and hand over of keys you will be the new legal owner, the property will be free of any/all outstanding debts and unencumbered.
At this stage we always recommend a Locksmith to change the locks, there could possibly be other Family Members, other Estate Agents or even past Tenants with sets of keys that we are unaware of. This is for your own peace of mind and security, it’s not a necessity yet advisable and we can point you in the right direction of a local Locksmith to organize.
Congratulations!! you are now the New Legal Owner.
Costs to Purchase in Spain
Purchase costs vary depending on the property, if it’s a Resale or New Build and of course the purchase price. As a guide we have outlined below, however total costs can vary from 11% to 15%, your Lawyer will provide a full and concise Schedule and Breakdown of costs associated with the purchase:
Some of the costs applicable, percentages are based on the agreed purchase price.
10% IVA (VAT) – On New Build/Off Plan properties.
8%, 9% or 10% IVA (VAT) – On Resale properties, depending on the purchase price and works on a sliding scale.
1% Legal Fees (Plus 21% IVA on the 1%) – Your Lawyers fee to carry out the Due Diligence above
1% Notary Fees – Scales depending on the agreed purchase price and will be worked out exactly in the breakdown of costs.
1.5% Stamp Duty – Tax charged to make all documents legally effective.
1-1.5% Mortgage Set-up costs – Only applicable if the purchaser requires a mortgage.
We hope you found the above guide useful and informative. If you have any further questions, or if any of the points were unclear in any way, please let us know.
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