Overseas Buying Guide
The following information is provided for mousesale by SVS Projects International:
We have set out below a clear, open and accurate buying guide to owning a property abroad. It covers the stages of the process along with the paperwork and information required to make your dream become a reality.
Below is a detailed buying guide for Spain, which is similar if not the same for all countries.
Nota simple informativa.
With a nota simple from the Property Registry (Registro de la Propiedad), you'll find out if the property is free of debt, if it really belongs to the seller, and if the description of the property matches what the buyer has been told (to avoid surprises about missing square meters).Welcome to SVS Projects.
Between the seller and the buyer there has to be a contract in place until the public deed of purchase is ready. It's usually a simple document in which the seller expresses their intent to transfer the property to the buyer, and the buyer expresses their intent to buy at the price and conditions agreed upon. At this time, the buyer also gives to the seller a percentage of the agreed-upon price. The typical agreement in Spain (called contrato de arras) is if the buyer backs out of the contract, they lose the deposit; if the seller backs out, they have to pay double. Of course, the buyer and seller may choose another type of agreement if they prefer.
The documents typically required by a bank are:
Your contract of employment
Your last 3 payslips
Your latest income tax return
Your pre-agreement with the seller
Proof that the property tax (IBI) on the house is paid up.
Details of other mortgages or loans that you may have
All property titles, both in Spain and overseas
Certificate from work authorities (vida laboral), showing your past work history
Records of your current assets (bank/mutual fund statements, etc.)
Prenuptial agreements, if any
Non residents: A certificate of non residency (form available from the bank)
If self-employed: Local tax on economic activities (IAE)
If self-employed: Records of your assets during the last two years
If self-employed: VAT tax you paid for the last quarter and last year
If you get a mortgage, you will become acquainted with an appraiser (tasador). The bank requires an appraiser to ensure that their loan to you is safe. You will need to pay for the appraiser's work, usually between 300-500 euros. Note that the tasador by law is a licensed architect, so even if you don't need a mortgage, but have doubts about the structural integrity of the house, you might want to hire an appraiser.
The property transfer must be certified by a notary. The deed of purchase will be given to the buyer after the notary reads it and the parties present agree to the contents of the deed. The following must then be presented: proof of identity (or power of attorney) of both parties, the seller's title of property (a form that reports the investment to the Central Register), and the buyer's payment. The buyer and seller sign the contract; beneath their signature, the notary signs using his firma protocolizada and the deed is ready for taxes.
For the buyer.
Transfer tax(impuesto de transmisiones patrimoniales) and stamp tax(impuesto de actos jurídicos documentados). If the seller is an individual, the buyer pays a tax of 6% (7% in some regions) of the price specified in the deed. If the seller is a real estate developer and the building or land to be built on represents a first-time transfer, then the buyer pays VAT tax instead, meaning 7% for housing, 16% otherwise. If for housing, you have to add a stamp tax, in this case reduced to 0.5%, depending on the region (for Madrid it's 1.5%). Some special conditions apply for the Canary Islands.
For the seller.
A local tax called the plusvalia.
With a copy of the deed in hand, the seller must go to the City Hall (or wherever local taxes are paid). After filling out the form, the seller will receive in the mail a notice of how much they have to pay. This amount is calculated based on the number of years the property was held, and on the property's valor catastral. Be aware that each town has a different procedure regarding payment of this plusvalia. It's best to ask at the notary's office about this payment.
If you want to be sure that your rights to the property are fully protected, you must register your title at the local office. (Some small towns don't have an office, some big cities have many - check the original deed of the seller to find out which office corresponds to you). You will be charged a standard fee (about .4% of the first 6010 euros, going down to .02% for over 6,010,121 euros).
What are some pitfalls in buying a property in Spain?
The property is not registered, most likely because it was illegally built. Many unregistered properties are being sold to foreigners, since foreigners are less likely to check the registration. If you find a bargain, chances are it's not registered. Here at Solvivienda we guarantee that every property we sell will have the necessary paperwork and licences in place. We also give, free of charge, to all our clients our Safe Purchase insurance which covers you for 20 years against any claim against Title Deeds as well as many other areas giving your total peace of mind.
How can I find out the market price of a property?
For a detailed analysis of the property's value, you should hire an appraiser. They will charge you roughly 300 euros (depending on the value of the property). The appraiser uses two approaches to calculating the value of a property.
- They will measure the property to draw up a floor plan and calculate the square meters, then multiply this by the value per square meters in the area. This value then gets adjusted by a number of factors, such as whether the house can be moved into right away or needs renovation.
- They will find similar properties that have been sold in the area recently.
Regarding price per square meter for apartments, make sure whether you're dealing with m2 construido (constructed) or with m2 util (usable). Construido includes common space: stairs, air shafts, walls, etc. The difference between the two numbers can vary widely, but on average m2 construido is 27% more than m2 util.
If you're getting a mortgage, the bank will require you to pay for an appraisal, though they choose the appraiser. This step comes after you pay the downpayment on the property, though, so if your offer is significantly higher than the appraiser's value, you'll lose this downpayment if you back out now. For that reason, you might want to pay for your own appraisal before paying the downpayment.
Some of the largest appraisers:
Sociedad de Tasacion
If I'm buying a spanish property can I save on taxes by creating a company?
In some cases, yes.
Stan is a resident of Spain and earns a 100,000 salary from outside Spain. Stan has two choices:
Pay personal income tax in Spain (if he's paying income tax elsewhere then this can be reduced). Stan is in the 42% income bracket, so he will pay around 40,000 euros.
Establish an SL, and the SL pays him. Stan's company pays a corporate tax of 30% (after the first three years, this rises to 35%). However, corporate tax deductions are extensive in Spain. Stan deducts housing, car, and food for 50,000 euros. 30% of the remaining 50,000 euros is 15,000 euros, so the savings are well worth the costs of SL creation and accounting.
With an SL, there are more options: money that Stan doesn't plan to spend in the near future can be put in the company reserves, making it nontaxable.
What information should I get from my real estate agent?
For a new construction, you should get:
A registry listing (nota simple) of the full plot of land.
The CIF and full name of the construction company.
The construction permit (licencia de obra).
For an existing house, you should get:
A registry listing (nota simple) of the property.
A copy of the deed (escritura).
When I sell my house, are there any required inspections?
Not in Spain.
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"Thank you for your the friendly help and advice you gave us which enabled us to sell our house and avoid those high estate agent fees. Wishing you every success in the future."C & A Baker