BUYER'S GUIDE

WHAT IS THE PURCHASING PROCESS IN SPAIN?

Buying a property in Spain can appear to be very complicated, but in reality is very similar to purchasing property in any other country. The main difficulty is the language barrier, which is easily overcome by only utilising the services of professional multilingual Personnel. Once we have found you your ideal property, Casares Estates will be able to provide your Solicitor with all the information and details that he or she will require in order to proceed with the sale. Please always remember, when you purchase a property in Spain you are liable for several one off payments, so always allocate 10% of the purchase price to cover this and if you are raising the finances for the purchase in Spain, please allocate 13%.

Basic Costs:
Purchase Price + 7% I.T.P. + Notary + Land Registry + Legal Fees = Total Purchase Price

Extra Costs if Spanish Mortgage required:
Valuation Fee + 1% I.T.P. + Notary + Land Registry

Using the inscripcion (registration details) from the Escritura (Title Deeds), your Solicitor will arrange for a Nota Simple (property search) from the Registro de la Propiedad (Land Registry). This search will give the full history of the property, together with any mortgage charges, debts and any encumbrances on the property. This document would normally be applied for prior to paying the deposit and again prior to completion.

IMPORTANT LIABILITIES ARE DETAILED AS FOLLOWS:

Escritura (Title Deeds). When you reach your completion date stipulated in your purchase contract, you will be required to pay the balance of the money and sign the Title Deeds in front of the Public Notary. The Notary is an official witness to the sale and will ensure that each party has sufficient legal authority to buy or sell the property. He will also inform you of the actual situation of the property in respect of any debts, charges or encumbrances. This information is supplied to the Notary directly from the Land Registry. The charge made by the Notary will depend on the length of the Title Deed the price declared.

Taxes. After you have signed the Title Deed, you are required to pay taxes of 7% on the transfer of the ownership of the Declaration Price.

Land Registry. Once your Title Deeds have been collected from the Notary and the taxes paid, they can be presented to the Registro de la Propiedad (Land Registry) for registration. This process can take up to sixty working days depending on the workload of the Registry. Should you not have received your Title Deeds after six months, you should contact your Solicitor.

After you have purchased your dream home you will have certain expenses to pay throughout the year, and these may include:

* Community Fees. Many properties are situated within a Community of Homeowners. The Community takes care of a number of services within a development and the level of services will vary from place to place. Some of the factors that are commonly included are maintenance of the community gardens, lighting, security, building insurance, etc. The Community will hold annual meetings, during which a budget is approved by the owners covering the expenses for the year. This budget is then divided between owners depending on the size of their property. This division is mentioned in the Title Deeds (cuota). It is important to try and attend these meetings and vote on any matters that may affect the Community, or to make any suggestions.

* Your local Town Hall makes a charge to each property owner which is Impuesto sobre Bienes Inmuebles known as I.B.I., equivalent to local rates. The amount of this tax will vary depending on the assessed value, Valor Catastral, and is paid annually. In certain cases, discounts can be obtained for early payment of these charges.

* The Town Hall will also make a charge for the Basura collection (rubbish) from your property or development. In certain cases this may be included in your Community Fees.

* There is also an annual payment of Patrimonial Tax. This tax is paid by non Spanish tax payers and is based on the value of the property and is about the same amount as your I.B.I. payment.

* Most properties have electricity and water meters and you will be charged according to the amount of each consumed. These payments should be made by Bank Standing Order. Some communities include the water in the Community Fee.

* These are the main expenses that a property will incur. However, other charges such as telephone, alarm companies, gardeners, etc., should also be taken into account.

After you have completed the sale it is strongly recommended that you establish standing orders with your Spanish bank for the payment of many of these items. This avoids any possibility of non-payment and the related problems of surcharges, re-connection fees, etc. Also, Town Halls sometimes do not send out reminders.

INVESTING IN A PROPERTY

What to buy if you are looking to invest in a property depends firstly on your priorities. If you are buying a home to live in, but want it to be a good investment, follow your own preferences, but stay wise to the longer- term potential of both the property itself and the area you are buying in. In this case it is good to look out for up and coming areas that will outpace other areas in value over the longer term.

However, if you are buying with investment foremost in your mind, chances are you will want to sell on in the short to middle term. The investment potential of a property is then not only represented by the immediate desirability of the property (type) and area, but also by the actual urbanization and its rental potential. Casares Estates are able to tell you which developments are most in favour and offer the best returns. Newly constructed properties offer the most upward potential over the shorter term and if you can find a good off-plan development to invest in, so much the better. It is hard to predict actual rates of return, but even below the peak performances of 20 – 25% it is clear that property currently offers a better investment outlet than the capital markets.

PROPERTY RENTALS

Those who have a property to let, from the largest finca to the smallest apartment, will have a very good chance of making money out of it. The main point is not to be too “greedy” and your expectations will be realised. Some sales people convince prospective buyers that they will be earning fortunes through rentals. The rental market, however, has its seasonal fluctuations and whereas you will be able to name your price in the summer, you may struggle to fill your home the whole year round. Moreover, there is competition, so set your targets realistically and make sure the rental price is attractive to all parties involved. Charging a competitive rate should ensure a high rate of occupancy and thus provide for stable annual income.

REAL ESTATE TERMINOLOGY

The world of real estate has a terminology all of its own. This can be confusing enough in your own language, let alone when you are trying to buy a property in a foreign country, so the following list attempts to shed light on the terms you are most likely to come across:

Administrador - Administrator
Agencia Inmobiliaria - Real Estate Agency
Abogado - Lawyer
Arquitecto - Architect
Asesor Fiscal - Financial Advisor
Aval - Person who underwrites loans
Community de Propietarios - Com. Of Owners
Con. Compraventa Privado - Sales Agreement
Deposito - Deposit
Director de Banco - Bank Manager
Escritura de Compraventa - Purchase Deed
Escritura de Hipoteca - Mortgage Deed
Gastos - Costs
Gestor - Professional who arranges paperwork
Hipoteca - Mortgage
I.B.I. - Local Rates
Impuestos - Taxes
I.T.P. - Transfer Tax (7% in Spain)
I.V.A. - V.A.T.
Notario - Notary
Nota Simple - Land Registry Report
Plan General - General Plan
Plus Valia - Capital Gains Tax
Registro - Land Registry