From the sunshine and the outdoor lifestyle to the lower cost of living and the year-round budget flights, the reasons for purchasing a property in Spain are compelling – but deciding to buy there is the easy part of the process.
Whether you want a holiday home to make memories with family and friends, a retirement residence among an established expat community, or an investment opportunity with a steady rental return, you’ll have to navigate the Spanish property buying process first.
Before you take your first confident steps into the Spanish buying process there are several things you must tick off your to-do list:
- Establish a realistic budget.
- Apply for a visa – if necessary.
- Assemble your team of specialists: estate agent, English-speaking solicitor, currency specialist and independent financial adviser.
- Arrange viewing trip(s).
With your viewing trip, or trips, completed and a property with bags of potential firmly on your radar, it’s time to work with your estate to make an acceptable offer – be aware that they are working for the seller and paid a higher commission the higher the price.
Once you have an offer accepted, you’re finally at the business end of the Spanish buying process, which is not completely unlike the UK, but with some significant differences.
It is mandatory in Spain to choose a notary (notario) for any property transaction. Different from a lawyer, this legally trained professional is employed by the government – meaning they don’t represent you or the seller. It’s their job to authorise the necessary paperwork, ensure the taxes are paid, and register the property with the Spanish Land Registry.
Your NIE number
You will need to register for a Número de Identidad de Extranjero (NIE) at the local police station – a tax identification number that’s mandatory for buying a property in Spain.
With your offer accepted it’s time to sort the paperwork in partnership with your solicitor.
It’s common practice for the estate agent to ask you to sign a reservation agreement (contrato de reserva) and pay a reservation deposit – typically around 3,000 to 10,000 euros – to ensure the property is taken off the market while you complete the necessary checks and legal procedures.
If you back out of the purchase at this stage, your reservation deposit could be lost – depending on the terms – and the property will be placed back on the market.
Shield the deposit from any issues by making the agreement subject to legal checks, mortgage availability and a building survey.
Private purchase contract
Once the due diligence is complete, you and the seller will sign a private purchase contract outlining the terms and conditions of the sale, including the purchase price, payment schedule, and completion date. This commits you to buying the property and the seller to selling it to you.
A deposit contract (contrato de arras) is typically the next step for British buyers – although other legal options are available. This requires you to put down a deposit – usually 10% of the full price – until the sale goes through, which should be secured in a separate account that’s presided over by the lawyers and not transferred to the seller until the final agreement.
If you pull out now you will lose your deposit, while if the seller withdraws from the agreement, they must pay back double the amount.
It’s now time to complete the buying process by signing the contract of sale (escritura de compravento) in front of a notary – or you can give your lawyer Power of Attorney to do this on your behalf.
All that’s left for you to do is pay the balance on the property price and the relevant taxes, such as the Property Transfer Tax (ITP) or Value Added Tax (VAT) – depending on the property type and location. The notary will register the sale with the Land Registry and provide you with a copy of the registered deed.
How Lumon can help
There’s another factor that has the potential to erode your budget or even derail your plans if left unaccounted for: fluctuating exchange rates. Between putting in an offer and completing, the price of your property will be changing by the minute in pounds under the influence of these unpredictable market movements.
As specialists in property currency exchange, Lumon understands how to mitigate the political and economic variables that make exchange rates volatile. Using tools that allow you to lock in a rate for future transfers, we can help you secure the price of your property when the time comes to pay.
Don’t take a financial gamble by hoping the pound to euro exchange rate moves in your favour during the buying process, work with us to protect your buying budget.