Key Nuances of Investing in Real Estate in Spain

Investing in real estate is very interesting from the point of view of earning a profit. Developers in Spain begin to actively attract investments at the very beginning of the construction of a residential complex, that is, at the excavation stage. During this period, sales will begin so that everyone who wants to can buy an apartment at an attractive price. The first stage of construction has the lowest cost per square meter. After that, the price just starts to rise. The difference in price between the beginning and the end of construction can be from 20% to 40%.

Investing money at the initial stage, the buyer takes a lot of risk. Because he buys air. The apartment is only in the documents, you cannot see it with your own eyes at the moment. It is important to correctly assess all possible risks and understand that construction can freeze, developers can influence the conditions under which the house can be put into operation will be more difficult, all this must be understood when buying some international real estate. You must choose a reputable developer company and actively use qualified services which are provided by estate agents. You should also check if you need to pay VAT in Spain for that property and the rate that is imposed. The services of a qualified real estate agent can significantly help other people who are looking for a better life on the southern coast of Europe and are interested in the new apartment for sale in Spain.

How to quickly find the right property in Spain?

There are several must-visit portals on the internet where anyone looking to sell their home can advertise their home for sale. Your first choice will probably be Idealista – www.idealista.com. This is the largest portal with ads for the sale of real estate in the Spanish market. You can download the mobile app and customize the search areas. Spain welcomes foreigners who have long been interested in buying real estate in Spain. Private individuals and companies (legal entities) based in other countries can easily purchase real estate in Spain. There are many US citizens who choose to buy properties in Spain for business and some of them even move there from the USA.

The entire process of buying real estate in Spain complies with Spanish and current tax laws. The procedure for buying real estate in Spain is different from the practice of other countries. It is necessary to comply with the official process of buying real estate and the administrative requirements of Spanish, which are in force in Spanish institutions. You can understand the basic requirements that buyers need to consider. Each transfer of ownership when the buy property in Spain process takes place may be slightly different.

To find out the specific conditions for the purchase of a particular property, you should consult with the seller’s representative. The agent you choose will guide you through the entire process of buying real estate in Spain and offer maximum support to ensure the safe transfer and enjoyment of the property. Before signing a notarial deed in connection with the purchase of the real estate, two confidential documents are always signed: a reservation or guarantee agreement and a sales agreement. The law makes a contract of sale strictly a valid form of business if it legally binds both parties to its integrity unless it violates the law.

Booking contract or guarantee contract

You usually sign a so-called “reservation or guarantee agreement” before the purchase contract and enter the amount as confirmation of the reservation. Deposits are generally made in the form of “refundable deposits” (especially for new properties) as the buyer can cancel the purchase, but the amount transferred will be lost if the buyer does so. If the seller cancels the transaction, he must return double the reservation deposit. When signing the contract, it is customary to sign a price offer for the equipment, machinery, and other accessories selected for the property.

Buyers in Spain are also advised to apply for an NIE (Foreigner Identification Number) and validate their passports before returning home. The signing of the contract of sale is a formal legal agreement between both parties. The buyer undertakes to transfer the amount at the agreed time and in the agreed manner, the seller undertakes to build the real estate (in the case of a real estate development company) to the agreed conditions and to hand over the keys to the real estate within the agreed terms.

The contract can be signed by both parties in Spain or sent by registered mail in the recipient’s country; where it can be signed by the buyer and returned to the seller for signature. Properties require buyers to sign a contract before returning home, especially if they live outside the European Union. The documentation signed by the buyer and the seller includes two copies of the sales contract. Also, the payment method chosen by the parties agreed in the purchase agreement between the buyer and the seller, and the date of signing the legal agreement are attached to the documentation.

Experience buying real estate in Spain

Having decided to invest in a new building, it is necessary to carefully study the developer. It is worth checking compliance with the requirements and reading the contract of purchase and sale of housing before signing it. Thanks to the mortgage, the initial costs of buying a cheap apartment are also reduced. Many companies in Spain offer their customers loans with low interest. This is a good option for those who do not have the full amount, but are confident in the stability of their income and know that they will be able to pay the price of the apartment.

Construction companies offer their buyers more than one installment option. The main condition is a deposit of 5-70% of the real estate value. You can buy real estate for new construction cheaper if you refuse expensive repairs. Apartments in Spain without renovation or partially renovated are much cheaper than apartments that are ready for occupancy. Not all buyers are satisfied with the quality of repair or the chosen design. Companies often skimp on materials and buy cheaper windows, doors and plumbing fixtures. Most likely, you will have to change these things to your liking. Of course, this comes with additional costs. You can save money and do all the repair work yourself.

When the buyer of the property is a foreigner, he must first provide the notary with a Spanish Foreign National Identification Number (NIE). This number is mandatory for doing business in Spain and has nothing to do with obtaining a residence permit in Spain. This number can be obtained from Spanish embassies or consulates in other countries. Although it is not necessary to have a bank account in Spain to buy real estate, non-residents are strongly advised to open a bank account in a Spanish bank to complete the transaction and pay all necessary taxes and fees.

Once you have identified the property you wish to purchase, you need to carry out the necessary checks to find out who is the owner and responsible for the property you wish to purchase, according to the Land Registry. In most cases, before the purchase of the real estate, a preliminary agreement called a “deposit agreement” is concluded with a notary.

The contract includes the seller’s willingness to sell the property and the buyer’s willingness to buy the property, the buyer will provide the seller with a certain amount that is part of the final sale price. After signing the deposit agreement, you can sign the real estate purchase agreement at the selected notary. When you have the original notarized document on ownership, you need to pay all the necessary taxes, after which you need to give the protocol to the notary for its registration in the relevant cadastre.

After buying a house, you should be aware of the regular annual taxes that you will have to pay for owning a property in Spain. This whole process can seem very complicated and scary. Therefore, a team of expert, qualified real estate agents in Spain will make it easy for you to purchase real estate in this country and help you enjoy the whole process.

How to start a successful process of buying real estate in Spain?

Of course, you can also rent a house in your chosen area for a few months and search for properties through local agencies. However, not everyone can devote time and resources to this. Most potential buyers are forced to fly mainly for inspection. You can plan your trip yourself and coordinate it with the agency, but using the service offered by real estate agencies will save you a lot of time and money. In Spain, you can buy real estate without leaving home, but in practice, few people do without an inspection. It’s hard to judge a property based on videos and photos alone.

Once you have selected and booked a property, a bank account will be opened in your name from which all payments related to the purchase of the property will be made. Utility, tax, insurance, or mortgage payments can be deducted later. Recently, the procedure for opening a bank account for non-residents of Spain has become somewhat more complicated. If earlier a passport was enough, today banks require documents confirming official sources of income, especially certified tax returns. These key measures were introduced alongside anti-money laundering programs.

The operation itself when opening an account is free, but in the future, the bank will charge a quarterly (or annual) fee for the balance. Your first deposit to your account can even be zero. Later, you will receive a book in which all operations on the account are recorded during the entire period of validity. You will receive your debit card within 3 days. If desired, a Spanish bank can issue you a credit card.

Land acquisition

In Spain, the land is sold like other types of real estate. In other words, any natural or legal person (including foreigners) has the right to purchase land for private ownership. But there are certain important nuances. One of the key problems is the state’s determination of this or that piece of land. Before signing any legal contract, it is necessary to fully understand the land use documents for a specific buyer. In Spain, there are agricultural lands or lands with historical or archaeological value where construction is prohibited.

The Spanish constitution stipulates that coastal areas and beaches belong to the state. In 1988, Spain adopted a national law called “On the Coast” (Ley de Costas). It confirms and expands the state’s rights to the coastal zone. Almost all real estate in Spain is privately owned. The land is for sale and is suitable for future construction. The purchase of land, which is not planned to be built in the next year, is taxed at the rate of 7%, and additional notary fees are paid. Construction of buildings requires permits and approval of projects, taking into account the limits established for a specific area. As a rule, buildings cannot exceed three floors.

Cheryl Hall

Cheryl Hall, a real estate broker with a Bachelor's in Business Administration from the University of Michigan, has guided our readers as a freelancer since 2021. Her 17 years of experience in the real estate market give her a keen insight into property trends and investment strategies. Moreover, her articles also offer a deep understanding of the complexities of real estate transactions and market analysis. Cheryl is an avid gardener in her leisure time and enjoys renovating her century-old home.

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