Foreign investment in property in Spain is increasing at a steady and sustained pace as the property business is booming again. Currently, foreigners are buying 12% of the properties being sold and the number is increasing. This article answers the most common questions of home, holiday home or second home buyers. If you are interested in investing professionally in Spain, you may find useful information in our article “ABC of professional real-estate investments in Spain”
1. What are the general requirements for buying a property in Spain?
Any person or company of any nationality can buy a property in Spain. There are certain bureaucratic requirements though, such as obtaining a NIE (Spanish Tax number for foreigners), opening a bank account, granting a Power of Attorney, and passing the anti-money laundering clearances.
2. How do I find the best property for me?
You may find that not all the agents speak English, and not all the properties announced are exactly how presented on the announcement. Also, many of the properties are sold through local contacts before they even get published. If you do not want to contact the agents one by one, and if you want to have access also to the properties sold among the locals – normally cheaper -, you can hire buyers’ agent (real estate personal shopper). If you want to have more information about this service, please read our article “How Personal Real-estate shoppers in Spain differ from traditional real-estate agencies”
3. What are the steps exactly to be taken once I have decided to buy a property in Spain?
In general, the phases found in any real estate operation would consist of the following:
- Tax planning and deciding on the legal structure
- Administrative tasks (NIE, bank account, anti-money laundering clearances, etc)
- Search for a potential purchase property
- Initial negotiation over the target object(s) identified
- Reservation agreement or letter of Intent
- Conduct of Legal and technical Due Diligence
- Negotiation of the final down payment agreement
- Preparing the final closing
- Execution of the purchase deed before a Spanish Notary
- Consideration and obtaining insurance coverage
- Payment of the Property Transfer Tax or VA,
- Updating the Land Registry
- Arrangement and contract for utilities and establishment of direct debit of the invoices
- Planning for the inheritance of properties
4. What is an NIE and How do I get one?
The NIE is simply an identification number assigned to a foreigner in Spain. Everyone who buys property in Spain and does not have Spanish nationality must obtain an NIE.
For individuals, NIE can be obtained in three different ways:
- Through the Spanish Consulate in your country of origin,
- In-person in Spain at the specific Police Stations,
- Through a Power of Attorney that you can grant to your lawyer.
For foreign companies buying properties in Spain, the NIE has to be obtained through the application with the tax authorities in Spain.
5. Do I have to be present at all the different stages of the purchase?
No. You can authorize a representative to act on your behalf in the process. The easiest way is to sign a Power of Attorney at a Spanish Notary. The only case where you normally have to be present is while the opening of a bank account.
6. Why do I need a bank account in Spain?
When buying a house in Spain, the easiest and most secure way to pay the final purchase price is to bring a bank certified check issued by a Spanish bank to the Notary on the closing date and exchanging the check for the title and possession of the property.
Checks issued abroad cannot be used, and it is not advisable to make a direct bank transfer to the vendor before receiving the title. After completing the purchase, future recurrent costs will be paid by direct debit from your Spanish bank account.
7. How do I choose the best bank for me?
If you are a European national, basically any commercial bank will do. Just make sure that they do not charge high fees for receiving transfers from abroad. If you are not European, you should choose a bank and a branch that has experience in working with clients of your nationality.
8. Can I get financing in Spain?
Yes. Requirements vary depending on the bank and the origin of the clients, but generally, non-residents may obtain funding of between 50% and 65% of the appraised value, for a maximum term of 25 years, as long as the monthly payment does not exceed 30 % of your income after payment of fixed expenses.
9. Is it better to buy a property in Spain under my name or in the name of a company?
It depends on various considerations including:
- Your existing structure
- Your country of origin
- Your age and other personal circumstances
- Type of property
- Intended use of the property
- The number of units and the total amount of investment.
Once your tax advisor has the answers to these questions, he will be able to recommend the right structure for you.
10. What expenses have to be paid at the time of Buying a Property in Spain?
The biggest cost when buying a property in Spain is the taxes, which vary, in part, according to the Autonomous Community. In some Autonomous Communities, the tax is scaled depending on the purchase price. Also, the taxes vary based on the following factors:
- Age of the property
- Identity of the buyer
- Identity of the seller
- Type of the property
- Use of the property
In general, the cost of purchase of a residential property in Spain varies from 8 to 13%, depending on the Autonomous community where the property is located.
11. Do I have to pay the down payment directly to the seller?
Yes, that is usual in Spain. Unlike in most countries, when buying a property in Spain the down payment is indeed paid to the seller instead of an escrow agent. The system works quite well though, and your real estate lawyer will be able to help to minimize any risk they may be regarding the safety of the funds paid to the seller prior to obtaining the title.
12. Can I use the property investment to obtain residency and work permit in Spain?
Yes. If you buy a property in Spain for over 500.000 euros without a mortgage, you may seek and obtain, automatically, a work and residency permit known as the “Golden Visa”. Please find the relevant information and steps related to obtaining such a visa in our article “Complete guide to obtaining the Spanish golden Visa through real-estate investment”.
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