A step-to-step guide to buying a property

1. Choosing a lawyer

Buying a house is a major investment which can be complicated and involves legalities of property purchase which may be particularly daunting. Choosing a lawyer is the crucial first step. A good lawyer can guide you through all the steps of house purchase, from ensuring that the purchase contract is correct through negotiating payment terms, taking care of the title search, discussing any tax & legal implications and ensuring that your house is registered in the property registry. A lawyer is cheap insurance against possible future problems and will only cost you around one percent of the purchase price, plus VAT. It is standard practice that a lawyer will ask for a pre-payment, called a “provision de fondos” to cover expenses and fees.

2. Choosing a real estate agent

At VA Property we can help you through the entire process of buying a home, from the crucial first steps continuing right through closing – and beyond. A professional real estate agency - like VA Property will also be able to provide critical information and advise about the local market, property trends and future developments plans which may affect where you choose to live.

3. Financing

Do you have your finances ready for purchase and approved? Otherwise we can advise you and assign you to one of our financing specialist partners. It is advisable to get your finances, including your mortgage, agreed in principle as early as possible, as having to organise finances after you have found a property can result in losing out to another person who is ready to go.

4. What is it you are looking for?

Understanding our clients buying criteria is essential at VA Property. We will evaluate important requirements such as your budget, preferred area, size, type, outdoor space, amenities, living area, views, beds & baths, furniture and other features you may require. We want to make sure you find the home that meets the lifestyle needs you are searching for.

5. Searching, evaluating and reporting

This is when we begin testing the market to find the right property for you. There will be some touring, analysing and decisions to be made. This will help you narrow your search to a select few properties which match your criteria.

6. Performing a title search

At this stage, your lawyer must check at the local Property Registry to ensure there are no outstanding liens or mortgages or other charges against the properties you are interested in, or whether it has been embargoed for non-payment of a mortgage or taxes. If the property is on an urbanisation or part of a residential complex, then you will automatically become a member of the Community of Property Owners, responsible for general maintenance, gardening, etc. Make sure that all fees are paid up to date and that you are aware of how much your annual community costs will be.

7. Check with the Town Hall

Property in Spain is subject to an annual municipal tax - IBI - and the seller should provide you with up-to-date receipts, which will state the exact amount of this annual tax, as well as the "Valor Catastral", which is the official value of the property as assessed for tax purposes and necessary when you prepare your annual tax return. There may be additional rates, such as for rubbish collection or other services. You will receive a copy of the entry for the property in the registry books. This Nota Simple shows who owns the property and includes a detailed description with boundaries. Some properties are held in the name of an offshore company, which used to be common practice as it avoided Spanish transfer and inheritance taxes.

8. Making an offer and negotiating

When you've identified the home you want to buy, we will help you prepare a formal written offer quickly. Our agents will be familiar with market values and will help you arrive at a price that gives your offer the best chance of being accepted. At this stage, it is key not to become emotionally attached to a home. Your offer may not be accepted for any number of reasons. Have backup homes in mind and be prepared to negotiate through your agent with the sellers. Any offer is subject to a contract so there are no legal obligations on either side until contracts are signed from both parties. Once your offer is accepted, you will need to instruct your lawyer to proceed immediately. At this stage it is a good idea to discuss exchange and completion dates. This is also the time to instruct your mortgage broker to proceed with your mortgage application and make arrangements for a survey.

9. Securing your home with a deposit

Normally the purchase is initiated with a reservation agreement, which takes the property off the market. Once your offer has been accepted, the most important next step is to secure it by paying a deposit. This is generally a non-refundable amount equal to 10% of the purchase price and normally held in a client account by the agent or lawyer. The next step is to begin making moving arrangements (select a mover, obtain change-of-address cards, inform friends and relatives). Have the property professionally inspected and if necessary, request repairs. Other basic steps include, obtaining homeowner's insurance and contact utilities (phone, water, power, etc.). A few days before closing, stage a walk-through. Obtain a cashier's check for the down payment and closing costs.

10. The cost on the top of the price

The law states that the seller should pay a part of the notary fee and what is known as a Municipal Tax known as "Plúsvalia Municipal". All other costs are to be paid by the buyer. However, the practice of assigning all taxes and fees to the buyer is so firmly established in resort areas like the Costa del Sol that it is more usual for the buyer to pay the Plúsvalia, though this is a point which your lawyer can negotiate. The reason being that this is more practical as the buyer will probably remain here and it is likely that the seller may leave the country. In any case, the purchase contract should state whether the seller is paying all fees and taxes. Plúsvalia is paid every time a property changes hands and is assessed on the difference in value of the property now and the last time it was transferred. This varies according to the time elapses since the last transfer. Property purchases are also subject to a transfer tax of 7% if you are buying from an individual. If you are buying from a promoter the tax is VAT and is also 7%, but in these cases there is an additional 0.5% document tax. If you are purchasing from a non-resident, Spanish law requires you to withhold 3% of the purchase price and pay it to the Spanish tax department, Hacienda, as a guarantee of payment of the seller's Capital Gains Tax.

11. Exchange of contracts

The contract then needs to be signed by you and the seller. The completion date is also set at this stage.

12. The Contract or "Escritura"

The completion of the sale is generally set a few weeks after the exchange of contracts, depending on each party's personal requirements. The contract must be in Spanish, although you can obtain a translation if necessary. A legal property purchase contract in Spanish is called "Escritura de Compraventa" and is signed by both parties in the presence of a Spanish Notary Public who will keep the original copy of the contract in his files. The contract should describe the property and its location in detail, as well as the identity of the purchaser and seller. If the purchase is financed with a mortgage, the bank representatives are present in order to pay and sign the mortgage. The final step is to take your copy of the Escritura to the Property Registry and have it officially registered, at which time you will obtain your Escritura Pública, the title deed. For the closing, make sure the terms and conditions of the loan statement are correct. Carefully read everything before you sign. The approximate cost for the notary and registry is 1% of the purchase price. The costs shall be slightly less as the purchase price increases as they are not calculated as a percentage. Both the seller and buyer's lawyers, together with the agent, should determine all outstanding debts and rates in order to arrange the payment of these according to the agreement. These could be property tax (I.B.I.), community fees, telephone, electricity, water bills, etc. The residual monies (usually 90% of the purchase price) are now transferred from your lawyer to the seller's lawyer's account.

13. Closing

Congratulations, enjoy your new home! You are now officially the legal owner.