The Process of Buying Property in Spain for International Buyers: Key Considerations and Steps

Buying a property in Spain offers great opportunities for international buyers. This country, with its rich culture and beautiful cities, attracts people from all over the world. 

However, as with any real estate transaction, there are a number of key considerations and steps you should be aware of in order to make the process of buying a property in Spain a success. 

We have prepared a guide for international buyers, with the essential steps to follow when investing in long term rental in Spain as a foreigner, with valuable tips to help you avoid potential barriers that may appear in the process of buying a property.

The process of buying a property in Spain

The Spanish real estate market is open to international buyers without any restrictions, both for investors and for buyers looking to live in Spain.

The process of buying a property in Spain can be split into several phases or steps, as we will explain below:

Preliminary steps

• Step 1: The earnest money contract

The earnest money contract is a preliminary agreement between buyer and seller that is usually formalized at the beginning of the purchase process. In this contract, both parties agree on the terms and conditions of the purchase, including price, delivery date and any other circumstances. 

The buyer must provide a down payment as a guarantee that he is committed to the purchase. In general, it is typically agreed that 10% of the purchase price will be paid as a deposit. 

The buyer is required to sell the property, according to the earnest money contract. If the buyer does not fulfill his/her obligation and does not want to sell the house, he/she will have to return the earnest money doubled, as a penalty. In case the purchase is not finally formalized due to a cause for which the buyer is responsible, he/she will lose the amount paid as earnest money.

It is very advisable, in this phase of the process of buying a property in Spain, to be assisted by a real estate agent, since this type of contract is usually written by a lawyer.

• Step 2: Search for financing

If the buyer needs to finance the purchase of the property, he/she should start the paperwork to apply for a mortgage loan before moving forward in the process, by going to financial entities and providing the necessary economic documentation to evaluate the available options based on the buyer’s ability to afford.

The purchase

• Step 3: Notary public deed

Once the conditions established in the earnest money contract have been fulfilled and the financing has been secured, the next step is the signing of the purchase deed in the presence of a notary. 

Both the buyer and the seller, together with their legal representative or real estate advisor, meet with a notary to formalize the transaction in a public deed. 

At this point, all the terms and conditions of the purchase are reviewed, and it is verified that the property is free of charges and expenses. In short, to make sure that everything is in order to proceed with the purchase. 

The Notary is in charge of writing the public deed, which is then signed by both parties. After that, the buyer will pay the purchase price and the seller will hand over the keys of the property.

• Step 4: Property Registration

After signing the public deed, it is necessary to register the property in the Property Registration Office. This registration ensures that the buyer is recognized as the legal owner of the property. This step is essential to protect property rights and provide legal assurance.

The registration process consists of presenting the purchase deed to the corresponding Property Registration office (the location where the property is) and, once registered, the buyer obtains a copy of the registration as proof of ownership. 

It is highly recommended that this whole process is done with the assistance of a real estate agent specialized in real estate transactions in Spain for foreign buyers. In order to ensure that all the steps in the process of buying a property are carried out correctly and that the foreign buyer is protected and advised at all times. 

Each of these steps may involve certain costs, such as taxes, notary and registration fees, which must be properly planned and budgeted for.

What taxes and expenses are involved in buying a property in Spain?

The process of buying a property in Spain involves several taxes and associated costs that must be taken into account:

• Transfer Tax (Impuesto sobre Transmisiones Patrimoniales, ITP): This tax is applied to the acquisition of second-hand properties and varies from one autonomous community to another, but fluctuates between 6% and 10%, approximately.
• Value Added Tax (VAT or IVA in Spain):  This tax is applied upon the purchase of newly constructed properties. It represents 10% of the amount stated in the public deed of purchase.
• Tax on Documented Legal Acts (AJD): This tax is applied to legal acts formalized in public deeds (notarial documents). It is a tax set by each autonomous community and, in its absence, it is charged at 0.50%.
• Notary and Property Registration fees:  Notary fees are incurred for the preparation and signature of the public deed, as well as the costs associated with the property registration to officially declare the transaction as registered.
• Real Estate Agency Fees:  If you use the services of a real estate agency to find a property and provide assistance in the process of purchasing a property in Spain, you will have to pay a fee to the agency, which is usually calculated based on a percentage of the purchase price, which you will negotiate with the agency directly.
• Real Estate Tax (IBI): After the purchase, the buyer must pay the IBI, which is an annual municipal tax assessed to the property.

The costs associated with buying a property in Spain can vary depending on the region and the price of the property, therefore, it is essential to talk to a real estate advisor specialized in foreign purchases to get an accurate estimate of the taxes and expenses that your purchase will generate. At Monserrate Inmobiliaria we have a wide portfolio of luxury properties in the best urbanizations around Valencia. Our consultants will help you through the whole process of buying your property in Spain.