Legal aspects of buying a house in Spain

Legal aspects of buying a house in Spain

Spain is a good place to live. The variety of its geography allows you to enjoy different types of cities or rural areas, beach or mountain areas, islands. Buying a house in Spain is a great investment, especially if we take into account the current market situation that favours the purchase of housing, at least for the moment. Today we explain you all the legal aspects to buy a house in Spain.

Housing in Spain

The housing market in Spain makes it possible to buy a wide range of houses at different prices. This is something you should bear in mind as the price of houses varies a lot from one area to another. The legal aspects also vary a little, but not that much.

The price of housing in Spain has experienced ups and downs. After the phenomenon known as "the bursting of the real estate bubble". In 2010, housing prices plummeted and became cheaper across the board. This drop in prices has been rebounding and rising again until 2020 with the arrival of Covid 19.

We are currently at a time of uncertainty in which the price and sale of housing seems to have suffered a new stagnation due to the pandemic. Experts believe that this crisis will be seasonal and will rebound once the health and economic crisis caused by the coronavirus has been overcome.

Now is the time to take advantage of the situation before the market makes house prices more expensive again.

Before buying a house: be informed

The first step before buying a home in Spain is to be documented conveniently. You must have a valid and unexpired DNI. You would be surprised how common it is not to be able to formalise a home purchase at the desired time because you have an expired DNI.

If you are a foreign citizen, this procedure is also important. If you are a foreigner and you want to buy a house in Spain, you must apply for the NIE (Foreigners' Identification Number). This procedure varies if you are a citizen of the European Community or not.

If you are a citizen of the European Union, you can apply for an Resident NIE or a temporary NIE. The latter will be useful, for example, if you want to spend some time in Spain to look for the home you want. To be able to live continuously in Spain or for longer periods of time, you will need to apply for a resident's NIE.

Search for the house and the reservation contract

Once you have chosen the house and negotiated the price and conditions of purchase with the seller, the next step will be to formalising a pre-sale contract or reservation contract. It is also called earnest money contract. It is the contract that binds both parties to formalise the sale.

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When signing this contract, the details of the buyer and seller are established. It also includes the final purchase price and an approximate deadline for formalising the purchase-sale. During this period the buyer has time to check the legal status of the property and to seek bank financing if necessary.

The seller for his part undertakes not to sell the house to anyone else. If it has not been possible to conclude the contract within the contract period, the owner can sell his house to someone else.

With the signing of the reservation contract the buyer hands over an agreed amount to the seller, usually 1% of the total sale value. This obliges the seller to reserving the property for the buyer. In the event that he decides to sell it to another person, he must return this amount and an equal part of it. In the event that the buyer is unable to complete the purchase after the contract period has expired, the seller will keep the money.

If the sale is finally completed, the amount paid in the reservation contract is deducted from the final price of the property.

Check registration data

When the reservation contract is signed, the seller must provide a copy of the notarial deed. This serves to check that the house belongs to the person who intends to sell it. This can be done by requesting a simple copy from the registry. The details of the owner and of the property will also appear, which will allow you to check its condition.

It is also possible to check whether the property is free of tax and economic burdens. For example, not being mortgaged or having debts with the community of owners.

Formalising the purchase of your home

Once the checks on the dwelling have been carried out, the next step is to seek funding if necessary. Due to the price of houses in Spain and being a high investment, most buyers are forced to resort to bank financing. This is done by means of a mortgage loan that you negotiate with a bank or savings bank.

The last step is to formalise the purchase. The purchase must be made in a Notary. In this act the definitive purchase contract is signed, the seller hands over the keys to the property and the buyer pays the purchase money (generally by bank cheque or similar).

From this moment on you are the owner of a new home. You can now go to the Land Registry to register it in your name.

After the purchase of the house

And finally you will have to pay the corresponding taxes to be able to say that the house is one hundred percent yours. We explain the different taxes you will have to pay:

  • Transfer Tax and Stamp Duty (Impuesto de Transmisión Patrimonial y Actos Jurídicos Documentados). This must be done in the Autonomous Community where the house is located within 30 days from the moment of signing.
  • VAT. The Value Added Tax which will be 10% of the total value if it is a second hand house. In the case of a new house you will also have to pay 1.5% for the first registration.

Discover the monthly costs of owning a house.

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