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Home Property

Process you must follow to buy a home in Spain

by Oliver Mcaninch
26/05/2020

According to data from the Spanish Ministry of Development, in 2012 the number of foreigners who bought a home in Spain was 12.2%. In 2017 it was 17.2% and in 2018 it was 15.7%. And in 2019 it reached 16.5%. This confirms that in the last 7 years more and more foreigners have acquired homes in Spanish territory.

Many reasons have led to this situation: the sterling/euro exchange rate that favored British buyers before the Brexit and investment opportunities for German, Belgian, Russian, Chinese, and other buyers from other countries. If you are considering investing in a property and you are interested in the real estate purchasing process in Spain, read on.

Steps to buying a property as a foreigner

To buy a property safely while being a foreigner, you only have to add the obtaining of the NIE to the steps that we explain below, as established in article 206 of BOE 103 (April 30, 2011), about rights and freedoms of Foreigners in Spain and their social integration. This number is known as the Foreigner Identification Number (NIE).

You can request the NIE in person at the General Directorate of Police in Spain (as long as you are not irregularly in Spanish territory) or at the Spanish consular offices in your country of origin. In addition, you must inform about the reason for requesting the NIE, in the case of real estate purchase, it will be enough to include in the request ‘Home purchase’. 

Looking for the property

Possibly it is the step in which you need to invest more resources, especially time and energy. Searching for a property involves approaching the market where you want to invest, knowing its streets, its neighbors, and comparing prices. To reduce risks, it is advisable to have the help of a real estate consultant who knows the area where you want to buy well. 

Verify

 Once you have found the property you want to buy, and before making any money outlay, you will have to:

  • Evaluate the physical characteristics of the property: verify the meters built, degree of conservation, luminosity, height, views, etc. Again, it is helpful to have an expert, whether a real estate consultant, architect, or surveyor, independent of the seller.
  • Evaluate the legal situation of the house through the corresponding Land Registry: It is advisable to have the support of a real estate advisor or independent lawyer of the seller. 

Formalise the purchase-sale contract

The operation of buying a property is formalized with a public deed by signing it before a notary. This contract must be clear, simple and include the following information: proof of ownership and charges, description of the house, total price, the form of payment, and date of delivery of the house. Before the public deed, there can be two steps, without mandatory reservation:

  • Reserve: the real estate advisor intermediates in the buying and selling process, by delivering an amount of money that can reach 1% of the price of the house. The buyer’s price offer is included in this reservation, that is the previous step to the formal start of the negotiation process. Within a period of time (normally 24-48 hours) the seller will either accept the offer or issue a counter-offer.
  • Arras Contract: this contract is signed by the buyer and the seller and constitutes an obligation on the part of one to buy the house and on the other to sell it. As a reference value, the amount delivered in the deposit is usually less than 10% of the final sale price.  

Payment of taxes on home purchases 

Once you have purchased the property in Spain, you will have the privilege of paying the corresponding taxes. There will be two:

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  • Patrimonial Transmissions or VAT: It will depend on whether you buy a new home or a second-hand one. In the first case, you will have to pay VAT (maximum 10%), while in the second case you will pay the Property Transfer Tax that depends on each Autonomous Community.
  • Documented Legal Acts (AJD): The AJD is also transferred to the Autonomous Communities and constitutes the expenses of the legal documents necessary to close the transmission of the house. It is established as a percentage of the deed value that changes according to the community. For example, if you buy a home in Madrid with a mortgage, this tax will be between 0.4% and 1% of the total amount of the mortgage liability.

Prior to the steps described, in case of buying the home as a foreign citizen, you must make the application for the Foreigner Identification Number (NIE). 

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