As an American citizen, you will find cheaper properties in Spain compared to ones with the same quality in the US. Numbeo.com also supports this. According to the website, compared to New York, you will save an amount of 81% for an average three-bedroom apartment if you buy it in Barcelona. It demonstrates that when you buy a property in Spain, even in the most expensive city like Madrid, you can save up to 70%.
Both residents and non-residents can buy property in Spain. The properties can be residential, commercial, or they can be plots of land. Before elaborating on the details of property purchase, it is worth mentioning some regulations. Although anyone can buy property in Spain, as an American citizen, you may not be able to live there for more than three months. Citizens of the EU, Switzerland, and Norway can do that by proof of their health insurance and sufficient financial means. Yet, citizens from countries other than these need to get a visa for longer periods of stay. If you want to both buy a property and live in Spain, Spain Golden Visa may be quite useful in that sense.
This guide will inform you about the process of buying a property in Spain, and what to look for when buying it.
Finding a property in Spain
You should first decide on the type of house you want. If you want to live in an apartment with a sea view or a house outside of city centers, and so on. After you determine your needs and preferences, you can start looking for them. In this way, you will save time and energy as well. You will find many online platforms to search for properties in Spain. Many of them also offer an English language section as well.
Using estate agents
When you look for properties on online websites, you will see that estate agents manage most of the properties on these websites. While some of them speak English, most of them are able to communicate with foreigners.
It is advisable to be cautious about them as well. In Spain, sellers pay the estate agents, so they try to sell their flats regardless of their quality. You should also refrain from advance payments. Also, it is better to find your own notary and solicitor, and mortgage provider. You may not want to trust the estate’s suggestions.
Steps for Buying a Property in Spain
Step 1: Make an offer and sign a preliminary contract
As a first step, you make an offer on the property you choose. In general, you can do this through the estate agent of the seller. Next, you and the seller sign a preliminary contract (a contrato privado de compraventa), if the buyer accepts the offer.
Step 2: Have checks done if necessary
If you want to have checks done, you can do it at this point. The checks include construction and regulatory surveys, soil tests, etc. This is crucial, especially for the properties in rural areas in terms of whether they obeyed the regulations while constructing the property. After the checking process, you pay a deposit, which is usually 10% of the purchase price.
Step 3: Optional mortgage
If you need a mortgage, you can arrange the process at this step. It is also important to note that the banks in Spain do not grant mortgages easily, especially after the property crisis in 2008.
Step 4: Sign the contract of sale
If you live in Spain, you can sign the contract of sale (“escritura de compraventa”) before the notary. This means that you should have paid the full sale cost, related taxes, and other expenses. If you are not in Spain, then you can appoint a solicitor to act on your behalf. This means that if you give permission, your solicitor can collect the bank cheque from the bank, pay the price to the seller, and pay the related taxes due.
Required fees and taxes
As a buyer, you will be responsible for most of the costs. The costs range from region to region. The additional charges for buyers are between 8% and 12%. You can see their rates below:
Taxes regarding the acquisition of property
For newbuild residential properties, the VAT is 10%. It is 21% on plots, garages, and storage rooms. Stamp duty is 1.5% for almost all Spanish regions. In addition to this, there are some other fees to pay. For example, the notary fee. For the purchase of a residential property, it varies between €500 and €2500. Also, the land registry fee can be 50-70% of the notary fee and legal fees. The legal fees are between 1% and 2% including VAT.
Regarding resale, the transfer tax varies between 8% and 10%. It will be different for each autonomous community though.
As stated above, the seller pays the estate agent’s fees. However, it is advisable to check this before you work with the agent. Sellers pay around 3% of the sale price.
Taxes regarding the ownership of a property
If you don’t rent your property, the fixed tax rate is 1.1% on the cadastral value of your property. As an American citizen, you need to pay 24% of that value.
If you rent your property, you are subject to a 24% tax on your gross income as a non-EU citizen.
Capital gains tax
Capital gains tax ranges between 21% and 27%.
Important Legal Issues
- Notary: For most mortgages, using notary services is a must. For property sales, it is not. However, it is advisable to do this for a safe transaction process.
- As a buyer, you need to pay all the taxes and expenses regarding the purchase process. Your lawyer can inform you about the amounts and related issues. You are also responsible for registering the property. Notaries may provide this service for a fee, and they may inform the registry office about the realization of the sale, without completing full registration.
- Officially, sellers are in charge of the defects in the property, whether they are aware of them or not. As a buyer, it may be a difficult process for you to get compensation for this. So, as a precaution, you can have a survey carried out by a third party before paying the deposit or the whole property price.
Deposits and mortgages in Spain
As mentioned above, banks in Spain have started to accept fewer mortgages since the crisis in 2008. In addition, the rates and terms of mortgages have also become less favorable.
Normally, until you buy the property, mortgage lenders do not complete a mortgage agreement in Spain. So, it’s advisable to include a clause in the contract. The clauses must grant you the right to exit the agreement if you can’t take out a mortgage.
You should also note that banks may put a value quite different from the normal market price. So, before you pay the deposit, you had better go and talk to the bank.
Also, the mortgage rate for a rural property will be only 50% of the bank’s valuation of the property.
Choosing the lawyer
It is highly advisable that you find an independent lawyer who is an expert in Spanish land law (urbanismo). It is also important that the lawyer you’ve chosen is registered with the local bar association (Colegio de Abogados), that is, an official lawyer.
In Spain, estate agents may also recommend a lawyer. However, you should be very careful about this because in case of an issue, you can’t be completely sure if the lawyer will protect your interests or the seller’s.
Paying the property price
In order to pay the related amount, you need to open a Spanish bank account. You can easily find banks serving the expats, such as Banco Santander and Banco Sabadell. You need only to bring your passport and NIE (Foreigner’s Identification Number) to open your bank account. You can get your NIE number at the US consulate, or in Spain. Alternatively, your lawyer could help you to obtain it as well.
Properties in ruins
There are some regulations regarding the renovation of ruins. They can differ from region to region. However, mostly, the regulation is that the ruin must have a partial or fully intact roof to get permission for renovation. So, it is important to check the situation with the official council or with a local architect.
Your marital status while buying a property in Spain
If you are married in the US, you need to confirm your marital status and marriage system if you want to buy property in Spain. The standard wedding contracts in the US differ depending on where you live. In some parts of the US, the standard contract is the community of assets. While in others, the standard is the separation of assets.
Documents to provide
If you are married in “separation of assets” in a state where the regime of “community” of assets is the legal matrimonial regime, you need to provide one of the documents below:
- Original marriage contract: It is advisable to get the apostille for this document
- Copy of the notarial marriage contract: This has to be authenticated by a public entity because it is a document from a notary.
If the buyer does not provide the marriage contract, they can still buy the property. In this case, the notary will authorize the sale. Yet, some situations like the ones below may occur:
- If one spouse buys the property privately, it may be registered in the name of both spouses (in “community”)
- The bank may refuse to approve the loan if the buyer takes out a mortgage and if the matrimonial regime is not proven.
To sum up, if your profile matches with the one described above, you need to provide your original marriage contract which is authenticated by a public entity. If you cannot provide the original, go to a notary to prove your matrimonial regime by notarial act. Then, you can certify it, or obtain an extract from the Civil register then certify it. If the notary requires, translate the documents into Spanish with an official translator.