10 Steps to buying a resale property in Spain
Once you have decided on the property that you want to buy and have reached an agreement with the vendor on the price and conditions of the sale, it is a good idea to find a local solicitor that speaks your language that can do all the legal checks for you, handle the registration of the sale and act on your behalf when you aren’t here. At Cumbre Villas, we can also carry out all the legal checks and necessary procedures, as we have experienced solicitors and accountants in-house, so that you can buy your dream home with peace of mind.
If you are taking out a mortgage on the property, a solicitor isn’t imperative because between all of the documentation required, by both the bank and the public notary, every aspect of the sale and property will be thoroughly checked before proceeding (with the exception of the step 2 which should be confirmed separately) and the bank will handle the registration of the sale.
Step 1: Check the Nota Simple Informativa
The Nota Simple is a summary of the Title Deed that is registered with the local land registry office (known as the “Registro de la Propiedad”). The Nota Simple is dated and should be less than a month old so that you can verify the actual owner of the property, see if there are any debts on the property and ensure the description of the property matches the property you are interested in buying. When you are purchasing a detached villa, there is just one Nota Simple which covers both the plot and the home which is built upon that plot.
In the event the owner has a mortgage on the property, the mortgage will be cancelled immediately prior to the signing of the Sales Deed (“Escritura”). In fact, both documents are signed in front of the public notary and part of your payment will be a cheque made out to the bank that the seller has the mortgage with. This way you are ensured that part of your payment will be used to cancel the mortgage. The property is then sold free and clear.
Step 2: Verify what future development plans exist for the area
The Town Planning Department of the Local Council can inform you of the zoning status of any empty land that may surround the property you are interested in and of any roads or other building works that are planned. At Cumbre Villas, we are able to assist you with this by submitting these requests to the Town Hall – serving as the intermediary between both parties – thanks to our experience in the sales process and our new developments projects.
Step 3: Have a technical survey done
It is a good idea to have a technical survey/inspection done of the property you are interested in. This way you can be aware of the current state of the property and address any concerns with the vendor prior to completion.
Step 4: Exchange private contracts
Once you have verified that you are dealing with the legal owner of the property and that the property is properly registered in his or her name, and a price has been agreed, it is time to sign a private purchase contract in which the seller expresses their intent to transfer the property to the buyer, and the buyer expresses their intent to purchase the property at an agreed upon price and conditions. At this point (unless a holding or reservation deposit was paid previously), the property is removed from the market and reserved for the purchaser. A date for completion will be stipulated in the contract, and the seller commits to clear any outstanding debts prior to completion. (As an aside, the estate agency or the solicitor, if one has been contracted, will obtain certificates from the community where the property is located to prove that the property is current in all fees and similarly a certificate will be obtained from the town council to prove the property is current in property taxes, building licenses etc. These certificates are inspected by the notary and integrated into the purchase deed.) The contract will also specify whether the purchase is subject to any further conditions or checks.
A deposit, which is typically 10% of the purchase price, is paid. Normally in Spanish law, this deposit is paid directly to the vendor or to the developer. The deposit is non-refundable if the buyer backs out of the transaction for his/her own reasons. If the vendor pulls out, s/he must pay you double the amount of the deposit. This really gives a high level of protection to the buyer.
To ensure an immediate refund in case of a problem, some buyers request that the deposit is held in the client account of a neutral, trusted third-party. Often times, this third-party is the estate agency that is brokering the deal. This way if one of the parties were in breach of contract, the money is safe and available to be refunded to the buyer if the case dictates or to be given to the vendor as an indemnification if the buyer backs out of the deal for a reason that wasn’t contemplated in the contract. In any case, any person or company that holds the deposit in their client account, must be a party to the private contract so their role and responsibilities are clearly defined.
Step 5: Secure financing & have a valuation done
If you will be obtaining a mortgage, then the bank or mortgage provider will have an official valuation of the property done. This is the lender’s way of confirming the value of the property.
The surveyor uses two methods to calculate the value of a property. Firstly, they visit the property to determine its exact location and they measure the property to verify the actual number of square meters. They then multiply the number of square meters by the value per square meter that applies to the area where the property is located. This is very important because each city, town and even urbanisation has a different value per square meter. This value then gets adjusted by various factors, such as whether the house can be moved into immediately, if renovation is required, how good the views are, how private the property is, and the location. The second method used in the valuation is to find similar properties that have been sold in the area recently and check the prices they have been sold for.
Each lender tends to work with a specific survey company, so it is best to wait to have the valuation done until you know which bank you will work with. You will need to pay the lender for the cost of the valuation. The valuation can cost in the range of 250 to 1,000 euros depending on how expensive the property is that is being surveyed and the company doing the survey. The surveyor (“tasador” in Spanish) is a licensed architect, so they also take note of the quality of the building work although they don’t do a detailed technical inspection of the property.
Step 6: Apply for your non-resident identification number (NIE)
It is a legal requirement that everybody has a Spanish fiscal number before they can conduct a transaction which has tax implications, such as buying a property. This number isn’t required for signing the private contract, or for opening a bank account as your passport number can be used initially, but it is necessary for completion of the sale. Your foreigner’s identification number can be easily obtained by visiting the Foreigner’s department of the police station – the nearest one being in Motril. You need to come in person to apply for this. You must bring your passport, a copy of the passport and a letter stating why you need the NIE number. Additionally, you must complete an application form. We can prepare the letter and complete the application form for you as well as accompany you to the police station. Normally, the NIE number is issued immediately, but if there is a delay or if you don’t have time to wait, we can collect this for you. If you are using a solicitor, then they will handle this for you. When you apply for the NIE number, you must pay 9,74 euros per NIE number.
Step 7: Prepare the transferring of funds
Prior to completion at the notary, we advise you to open a Spanish bank account, especially in case you don’t use a third-party client account, or in case you don’t have a European IBAN bank account. This way prior to completion you can transfer the funds for the purchase to this account. A day or two before completion, the local bank can prepare a banker’s draft for you to give to the vendor. Some vendors insist on having cheques drawn on a local bank.
However, there is an alternative. The second option is to transfer the purchase price to the third-party account of the real estate agent or the solicitor. The agency or the solicitor will prepare the banker's draft to give to the vendor, or if the parties agree so, a bank transfer can be made simultaneously to the granting of the title deed. This option will save commission the bank charges for the cheques and commission to the vendor when clearing their cheques.
In case you don’t have a European IBAN account, you need to open a Spanish bank account so that you can have the utilities bills, property tax and community fees paid via direct debit. We can give you a list of some good local banks that speak English, French, German and in some cases Swedish.
Step 8: Complete at the notary
The next stage is completion. This is when the purchase/sale title deed is signed before a public notary. If you are not able to be there in person, then your solicitor (or a representative of Cumbre Villas) can sign on your behalf as long as s/he has a power of attorney. The power of attorney can be obtained in advance from a public notary. If the power of attorney was prepared outside of Spain, then the document must have an apostille stamp and be translated into Spanish by a sworn translator.
If your purchase is (partly) financed by a mortgage that is obtained from a Spanish bank, then the bank’s local representative must be physically present at the notary to sign the mortgage formulation deed. If the vendor has an outstanding mortgage, a representative of their bank will also be there to cancel the mortgage and collect the amount due. At this point, your final payment is made and the property is yours.
Step 9: Register your purchase
Immediately upon completion, the notary will notify the land registry of the transaction so that a block is put on the title and no other transaction can be done involving the property that isn’t related to this purchase. This prevents the previous owner from attempting to sell your property to someone else since all public deeds require an up-to-date version of the title deed that the notary must obtain directly from the local land registry office. This is an important safeguard that is built into the system.
You (or your solicitor or the person that is responsible for registering the sale) have 30 days in which to pay the transfer tax and the 3% retention (the 3% retention is only required if you have purchased the property from a non-resident) and to present your title deeds to the local land registry office. Final registration may take up to two months. Your solicitor or the agent handling the inscription will give you the original deed once the registration process is complete. S/he will also give you all of the supporting invoices that have been paid on your behalf to register the property.
Step 10: Transfer the utility contracts into your name
Once you have signed at the notary, you are now able to transfer accounts with the local utility companies and, in case the property belongs to a community, inform the community that you are the new owner so the community bills can be sent to you. Directly after the deed has been signed, the notary notifies the land registry office and the town hall that the property has been transferred to the new owners, so that the property tax can be transferred into your name as well. The easiest thing to do to ensure your bills are paid on time, is to organise direct debits through your bank.
At Cumbre Villas, we offer excellent after-sales support and we can help you with everything after the sale has been completed. Our services range from transferring services, setting up the payment of bills on standing order, obtaining homeowner’s insurance, to arranging pool and garden maintenance, and so on. Additionally, we can also assist you with all legal and fiscal affairs, inheritances, and tax declarations.