Buying property in your own city or state can be a complicated and confusing process. Now try to imagine buying property in a foreign country where you may not speak the language.
Buying property in Spain can be a great investment. This is especially true with the residential real estate market finally bouncing back from the 2008 economic crisis.
With a few simple tools, we'll have you ready to start buying property in Spain. While the overall process works similar, there are a few quirks you need to know about purchasing property in Spain.
The Spanish Real Estate Market
Unfortunately, the financial crisis that we all experienced in 2008 affected Spain's property market. Many regions of Spain have experienced property values decreased by 30%, and some areas are even worse.
There are two sides for property values that have fallen. Sure you can get a good deal on a property, but it also means that your investment may lose value after your purchase.
The majority of people in Spain own their own home outright. This means that owners are going to be reluctant to accept low offers that prevent them from recouping their investment.
Transaction Costs of Buying and Selling
You will find that the transaction costs are around fifteen percent of the property value. This expense is considered moderate as compared to other European countries.
Foreigners Buying Property in Spain
Spain does not impose restrictions on foreigners purchasing land. This includes residential, commercial, and land.
Investment from foreigners interested in property is encouraged. To get started you will need to obtain a financial number.
This financial number can be obtained at a police station. You just need to go in person with your passport.
Processing time for those from Spain or the UE can take a day. It can take up to a few weeks for everyone else.
Golden Visa Program
All you need to do is buy property in Spain and you are eligible for an investor's visa. Just make sure you are investing more than EUR 500,000 in the property you are purchasing.
This is not a work visa. The main purpose of this visa is for those who are retired or looking for a vacation home.
How to Find Available Property
There are many websites that cater to foreigners looking to purchase a property. One thing to keep in mind is what type of home you are looking for.
Most foreign-based sites will have an inventory of homes designed to be used as a vacation home. Look for a site that will offer a wide selection of properties with a large inventory.
Go See the Property
Buying properties in Spain sight unseen comes with risks. Make the time and money investment to go and see the home.
Should You Use an Agent?
In Spain, agents are typically paid by the seller. An agent will be able to give you detailed information about the property and region.
Look for an agent that is bilingual if you cannot speak Spanish. Ask a potential agent what their experience is with foreign buyers.
There is no strong regulation of agents, so be a responsible buyer and do your due diligence when looking for an agent.
Do not trust an agent who insists on payment up front. It is also a red flag if they suggest cutting corners.
Remember that you can choose your own notary and mortgage provider. You do not have to use the person the agent recommends.
Be Aware of Illegal Properties
When looking at a property confirm that planning permission has been acquired before building. You do not want the local government trying to tear down your new home.
Have the property inspected for potential problems. Often unscrupulous sellers will inflate the quality of the property, or downplay potential issues.
Do Your Research
Be a responsible buyer and research the parties you have chosen to work with. Look up the credentials of the lawyers and estate agents.
Check the property in the land registry. Confirm that the appropriate planning permissions were obtained before construction.
Verify that there are no outstanding debts attached to the property including a mortgage. Have a surveyor or architect confirm that the property is structurally sound.
If you are purchasing a home that is new, research the company that is building the home. Confirm that the company actually exists and is registered.
Check that the land registry has the project on file. Confirm that the project has planning permission from the local government.
Finally, do not sign a contract that you don't understand. Have the translation done by an independent third party.
Debt Goes with the Property
A mortgage, tenant's association dues, and outstanding property taxes may be linked to the property. This means that any debt owed will automatically transfer to you the minute you buy the property.
You need to be very clear that there are no debts attached to the property. If there are debts, make sure the purchase contract protects you as much as it can from paying these yourself.
Capital Gains Tax
Sellers will often ask buyers to claim a lower price than what the property actually sold for. This is because Spain requires sellers to be a capital gains tax of 21-27 percent of the sale price.
This is not a smart choice as it will lead to legal problems for you in the future. It will also mean you pay more taxes when you go to sell the property.
The General Purchase Process
Typically a buyer will make an offer through the seller's agent. After the offer is accepted the parties will sign a preliminary contract.
At this point, the buyer usually pays a deposit that is ten percent of the purchase price. The buyer will then make mortgage arrangements.
You will sign the contract for the sale of the property in front of a notary. Once this is completed you will need to pay the sale price, taxes, and any other fees.
Begin Your Search
When looking to buy a home in a foreign country, Spain is a great option. Foreigners are finding that buying property in Spain is a great investment with affordable prices and friendly government regulations.
Just remember that like anywhere else, you need to protect yourself from those with ill intent. Do your research on the parties and the property.
Start browsing available properties in Spain today!