This guide helps make that dream come true, avoiding troublesome issues and complying with all of the legal requirements that are required for property purchase.
Below we detail our 6 step plan to purchasing on the Costa del Sol.
1 Look – Make sure this is where you want to live o have a holiday home
2 Search and find – Select from a range of properties to find the one for you
3 Appoint a lawyer –Independent local lawyer with local knowledge
4 Contract preparation with a holding deposit – Covers the transaction between the parties and removes the property from the market and secures it for you
5 Completion- payment of final monies and taking vacant possession
6 Fees- cost of purchase and annual ongoing fees
The Costa del Sol is a broad costal belt and is varied in terms of history, culture and amenities. Prior to buying it is imperative that you do some research to help decide on the area (link to key points on Blog). Be clear in your own mind what sort of property you are looking for, what life style you are looking to adopt.
Once that is clear we would urge you to visit the Costa del Sol. research on the internet is very effective as is asking friends who may already have a place here but there is no substitute for actually visiting, feeling the sunshine on your face, meeting the warm and friendly people of the coast and soaking in the ambience.
Spain like much of Europe has suffered from the financial crisis with property values falling by up to 30 %. The property market is recovering and the Costa del Sol is increasingly popular with Europeans looking to experience the warmth of the 320 days of sunshine. Consequently demand and prices are rising. NOW is the ideal time to buy.
Search and Find
To find your ideal home you should work with a specialist agent who has extensive knowledge of the area. They will help you select from a range of properties the one that suits your needs and aspirations. There are no constraints to foreigners buying in Spain, indeed it is welcomed by the Government with a Golden Visa Scheme. This is not a work visa but allows you to live in the country and is predominately for retired and holiday home owners.
Choosing a lawyer
Once you have found a property you should appoint a local lawyer, who has local knowledge and can ensure everything is as it should be. In the past there have been instances of homes being sold that were not legal or did not comply with regulations. Thankfully this is now mostly a thing of the past and with the right checks and legal advice any such issues can be avoided.
You should appoint a lawyer who speaks either your own language or one that you are comfortable enough in to understand. The lawyer must be independent from the vendor and be working in your best interests. Costa del Sol estate agents would be happy to recommend competent bi lingual lawyers the principals have worked with for many years. Any practicing Spanish Lawyer will need to be registered with the local Bar Association ( Colegio de Abogados).
Contract Preparation and paying a holding deposit
When your legal team have checked everything is in order, as your estate agent we would work with your legal team to assist in the production of a contract which both you and the vendors will sign.
At the signing of the contract you will have to pay a small holding deposit which removes the property from the market. This fee will be held in escrow and will subsequently be deducted from the purchase price. If for any reason you as the purchaser do not proceed with the purchase this fee would be non-refundable.
Therefore it is important that before making an offer you are fully committed to the purchase. If a mortgage is required it is not uncommon for the fee to be held subject to a mortgage offer.
The contract drafted will cover:
- Property details as per the registry
- Details of the property
- Any additional items included in the sale
- Sale price
- Terms of payment i.e 10 % deposit on exchange ( this is different from the holding deposit) and balance on agreed completion date
- Completion date
- That there are no outstanding mortgages and vacant possession will be given.
Please note that in Spain any debt or mortgages tied to the property that have not been settled are transferred to the new owner of the property. It is therefore critical that your lawyer confirms there are no debts or that if they are they are covered in the terms of the contract. This is achieved through the granting of a Nota Simple
Your lawyer will need to be in receipt of cleared funds prior to the completion date. They will work with the bank if a mortgage is being granted to ensure monies are received. The bank will transfer funds to your Lawyers client account. Given the need for future ongoing payments you should have a bank account in Spain and Costa del Sol agents would be happy to help you open an account.
The contract will be signed at the public notary’s office and your lawyer as well as a representative of Costa del Sol agents will be there to support you through the process.
Over and above the purchase price there will be fees to pay and these are based on the value as well as the type of property. As a new property owner there are also ongoing fees which for clarity are detailed below.
When purchasing a resale property there is a 8% transfer tax, known as the Impuesto de Transferencia de Propiedad (ITP).
For off-plan purchases the tax is 10% and is referred to as IVA (VAT).
Stamp duty, known as Impuesto de Actos Jurídicos Documentados (AJD) is currently 1.5%. This tax is paid upon signature of the public deeds
If a mortgage is required, an official valuation must been done.
Most property assessors charge around 280€ to perform an official valuation before the bank can advise what funds would be available.
If a mortgage is granted there will be an administrative set up charge of c1% based on the valuation.
In addition the bank will insist upon a minimum level of buildings insurance with their interest in the property noted.
The lawyers fee is generally 1% of the purchase price.
Ongoing Annual fees
An annual property tax (IBI) is a municipally levied tax. It varies widely from one area to another and from one type of property to another. It could be 50 euros a year for a simple property in a rural area, while a luxury property in prime urban area might be 1.500 euros a year.
Rubbish collection tax (basura) is annual paid tax for rubbish collection
If your property is part of a community or complex there will be community fees that need to be paid.
The Costa del Sol Team are well versed in addressing all of these issues and are here to support you.
Please feel free to contact us should you have any further queries.