Frequently Asked Questions – Spain
What is the difference between what buying agents in Spain do and what an estate agent does?
An estate agent is engaged by the seller to achieve the highest possible price for their property. They will only be able to offer properties they have listed, usually in a well defined area. Property finders and buying agents are engaged by the buyer to find the right property at the lowest possible price. We are not restricted to one area and can compare and contrast alternatives across regions. An estate agent wants to sell and doesn’t really care whether it suits the buyer or not. They always try to show properties in the most favourable light. A common trick in Spain is trying to disguise the fact that a property does not enjoy afternoon sun by only showing it in the morning. Pushing for weekend viewings if the property is on a busy road during the week is another. A buyer’s agent does the exact opposite and we make sure our clients aware of any negative aspects related to the property or its surroundings.
We often find that people are not really sure exactly where they want to be. We are able to offer balanced and impartial advice about a variety of locations and we use our intimate local knowledge to pinpoint the most likely options for each individual’s requirements. In contrast, real estate agents are only interested in selling in their area and often make disparaging and negative comments about other locations. After listening to our clients, we have often helped them to buy property many miles from where they originally thought they wanted to be.
What is the first step?
If possible we like to arrange a meeting at which we take a very detailed brief. However, our clients come from around the globe and if a face-to-face meeting isn’t an option then we set up a conference call . We consider all the issues. What is the purpose of the purchase; relocation, investment, business opportunity, rental income, holiday property? What is the budget? We help people stay focused and realistic. While that dream farmhouse property down a 5km track seems like perfection, getting the children to school on time in driving rain should take priority! Once potential areas are defined we get to work researching and assessing what is currently available, reporting our findings and short-listing whatever is appropriate. Then, and only then, does our client need to travel. No time is wasted viewing unsuitable properties meaning the trip can be just a couple of days or less.
How do you source property?
In the more established coastal areas we may use estate agents whom we know and trust as well as our extensive network of contacts to see what properties might be available privately, often coming up with properties that are not actually ‘for sale’. In the more rural areas we find out who is the local runner, or ‘corredor’ as they are called in Spanish, in that particular area. We scan international as well as local press and have even done targeted mailings to find potential sellers in specific developments in which our clients are particularly interested.
But why should I pay you to find a property when I don’t have to pay anything to an Estate Agency?
There is no such thing as a free property finding service. If the fee comes from the seller then the ability to give independent and impartial advice is lost. Because we work exclusively for the buyer, there is no conflict of interest between buyer and seller. And estate agencies will not actively search for a property on your behalf regardless of promises. In almost every case, our clients find that we save them money. Add up the cost of a few wasted viewing trips, never mind the time it all takes. Best of all, we know how the system works; we know the right people to use and we are convinced we will always be able to negotiate a better price than our client would have been able to achieve on their own. We regularly save our clients considerably more than the value of our fees in this aspect alone. In Spain, discrepancies in title deeds and the issue of declared values cause most of the problems for buyers and it is not the estate agent’s responsibility to resolve these issues for the buyer; trying to rectify discrepancies after completion is often difficult or impossible and usually expensive. We do not take the place of a lawyer and always recommend one is used – but we do double check everything and if a problem with the title has been identified we make sure that the strategy to correct it is in place before the contract is signed. The disaster stories given such prominence in the media are always the result of failure to do good research and thorough investigation of all the issues.
How does the buying process in Spain go?
In spite of what all the horror stories in the media imply the property buying process in Spain is actually very simple and transparent. Once you have settled on a particular property the normal practice is to pay a small reserve deposit to ensure the property is taken off the market while legal enquiries are made. This can be as little as 1,000 € in the country areas or as much as 5,000 € in the prime coastal areas. Meanwhile, your lawyer will request the Nota Simple, a reduced version of the Title Deed or escritura, and raise a draft contract. Signing private contracts is not legally required in Spain; in fact, many Spaniards dispense with this stage and go straight to the notary to sign the escritura, but as most overseas property buyers will need time to arrange transfer of funds or organize a Spanish mortgage, it has become the norm in transactions involving a purchaser from abroad for a private contract between the seller and buyer to be signed, usually within 21 days, at which time the buyer pays 10% of the agreed price, less the reserve deposit amount. At this stage, the transaction is binding on both sides; should the buyer subsequently default, the 10% is forfeit while if the seller pulls out Spanish law requires that double the 10% deposit is returned and it is very important for this to be specified in the contract.
All property purchase completions in Spain must take place in front of a notary, with both the seller and purchaser present or represented by means of a power of attorney. The escritura will be signed, the keys and monies will be handed over and that’s it. Many property buyers from overseas choose to give their lawyer a power of attorney which covers things like applying for the NIE, the fiscal identity number which must be issued before completion can take place, and transferring utilities after completion, otherwise you are required to do this in person.
If I am non-resident in Spain is rental income liable to tax?
Yes, and the Spanish tax authorities, Hacienda, are determined to stop evasion. The flat rate is 25% of the net rental income.
Are non-residents liable for Capital Gains Tax in Spain when they sell?
Yes, Capital Gains Tax is now applied at 19% for all E.U. non-residents while it is 35% for non-E.U. individuals or entities. And if you decide to become resident in Spain it will still be 19%, irrespective of nationality.
I have been told that money is held back when I sell. What is that for?
This only applies to non-residents, to ensure that Capital Gains Tax is paid even though the seller may no longer have any address in Spain. The retention, set at 3% of the amount declared in the escritura at the time of sale, is deemed to be a down payment of the Capital Gains Tax due. In these cases it is the responsibility of the buyer, via their lawyer, to lodge the retention with the tax authorities, Hacienda, within 30 days of signing the escritura in front of the notary. Hacienda then has 6 months in which to calculate the actual CGT due and to return any overpay. Of course, they can also claim any underpay.
Is it true that money laundering controls have been tightened?
Yes, and the one that will most affect property buyers is the obligation to include the method of payment within the escritura. Previously, buyer and seller simply had to swear to the notary that the full purchase price had been paid and received. Now they have to state in the deeds how it has been paid and failure to do so will mean that the property cannot be registered in the new owner’s name.
If you have a specific question about buying property in Spain that we haven’t covered here please fill in the form below and we’ll get back to you.