Step 1 – Obtaining your NIE
If you plan to buy property in Spain to live, rent or spend your holidays there, you will need a NIE (Foreigners Identification Number) if you are a European, or a TIE, Tarjeta de Identidad the Extranjero (ed.: identity card for foreigners) if you are not a citizen of the European Union.
Why is this document mandatory?
These documents are essential to identify you to the Spanish government.
You will need them for any real estate transaction, opening a bank account, arranging electricity, water, gas, internet, starting a business, buying a car, or even receiving a package.
New: since 2021 it is possible to purchase without NIE, under one condition…
COVID-19 has changed the rules of administration and since the end of 2021, an agreement between the General Council of Notaries and the tax collection agency now allows notaries to apply for a tax identification number (the NIF, Número de Identificación Fiscal) without the mandatory presence of the applicant. This tax identification number allows you to temporarily waive the NIE. This will allow you to continue your purchasing project without being bothered by this formality. This process greatly simplifies things when purchasing property from abroad.
Budget for real estate project in Spain
Step 2 – Determining the budget and financing
One of the first things we quickly try to clarify with potential buyers who contact us is the issue of financing.
The first thing you need to know about financing in Spain is that Spanish banks only lend 60% of the property value without notary fees to non-tax residents.
To be tax resident in the eyes of Spanish law, you must be in one or more of the following situations:
- Living in Spain more than 183 days per calendar year
- Have interests in Spain
- Your official partner and children live in Spain
In general, you can count on a personal contribution of 30% of the purchase price for a mortgage in Spain. We recommend that you make your calculations before you start, as there is no cancellation clause for not obtaining the loan.
You can also choose to be financed in the Netherlands, but note that the bank will probably ask you to provide a guarantee (pledging a life insurance policy or real estate) in exchange for this loan. If you do not have this or do not want your life insurance or real estate to be used as a guarantee, please contact us, we have partners in the Netherlands who can offer you a tailor-made solution.
Step 3 – Taxes and fees upon purchase
Any property you buy in Spain is subject to a range of taxes and fees. These vary depending on each property. Generally, these costs represent approximately 15% of the purchase price. Below you will find the costs associated with the purchase of real estate in Spain to better define your project in Spain.
ITP, Impuesto de Transmisiones Patrimoniales (Transfer Tax)
The most important tax you have to pay if you buy an existing house in Spain is the transfer tax (ITP). The percentage of this tax varies depending on the autonomous community you are purchasing in and may be subject to change. For example, at the time of updating this article in March 2023, the current rate for ITP in Valencia is 10% of the purchase price.
Notary costs
The notary costs are determined on the basis of an official scale. Rates vary depending on the area of the land, the size of the property and its sales price. In Spain the notary has a very limited role. He only confirms the legal conformity of the deeds. The costs are therefore also lower compared to France.
Legally, the notary costs can be shared, but it is often the buyer who pays them. There are additional costs that must be paid to the land registry.
Brokerage fees
If the seller makes a profit on the sale, he must pay the capital gains tax (ganancia patrimonial) and the municipal capital gains tax. Normally the buyer will pay the transfer tax and notary costs mentioned above. Spanish consumer law recommends dividing costs between buyers and sellers, but in some cases the seller insists that the buyer bears all costs. This is again an issue that your lawyer should discuss with you and the sellers.
IBI, Impuesto sobre Bienes Inmuebles (real estate tax)
The IBI is the equivalent of property tax in Spain. It is paid by the owners to the local municipality. Anyone who owns property in Spain must pay this tax every year.
This receipt is very important when purchasing real estate for two reasons:
- It lists the property’s cadastral number, which can give you information about the property you are purchasing.
- It also shows the cadastral value of the property. You often need this reference value to declare your taxes.
When purchasing real estate, your lawyer must ensure that all IBI taxes have been paid in the past 5 years. This ensures that the previous owner and therefore the property you are purchasing is free of debt.
For more information about IBI, see our article: Who pays the IBI?
Step 4 – Property Selection
Your project is evolving and you are now looking for your future property in Spain. You have probably been redirected to articles like this one, or advertisements on real estate portals such as Idealista, Habitaclia, Pisos.com, Kyero.com, Green-acres.com, etc.
But between the sometimes questionable quality of the photos, the language barrier, doubts about the legal status of the property, the location, etc., you may get a little lost!
You can travel back and forth between your country and Spain, but you run the risk of unnecessary travel.
For all these reasons, we (of course) recommend that you engage a Dutch-speaking certified real estate agent . This option saves you time and prevents unpleasant surprises .
Our Dutch-speaking advisors will guide you from A to Z during your purchasing process. They save you time and money by previewing the houses that interest you in video.
During their visits, your agent will check the general condition of the property and the building (heating, insulation, possible works) and inform you of important information such as the costs of the apartment building and property taxes. Our experts know the local market and can accurately assess the price, moderating the sometimes exaggerated demands of some sellers.
Step 5 – Legal Checks
In Spain, the notary has a very different role than in Dutch-speaking countries. He only confirms the legal conformity of the deed of sale.
Therefore, the intervention of a lawyer is necessary and indispensable when purchasing property in Spain. He will carry out all the necessary checks: identity of the owners, absence of debts, encumbrances, conformity with the land registry, absence of construction violations.
To provide the most complete service to our customers, we always recommend the intervention of a lawyer.
This lawyer will provide you with legal advice to help you decide whether or not to proceed with this real estate purchase.
Remember that the land registry can determine the exact boundaries and location of the property. The land registry provides a brief description of the property. Read our article about the land registry for more information. What is the role of the land registry?
Although the differences are generally minor, it is important to ensure that the property you are purchasing is described in the same way in the deed, property register and land registry.
Step 6 – Reservation of the property: la señal
In Spain, to assert your purchase intention, in most autonomous communities you must pay an amount that can vary between €1,000 and 1% of the price offered to the real estate agency or the property owner.
This is known as a “Reserva” or “Señal” and involves the signing of a preliminary contract containing the key information and features of the property. For more information about the reservation contract, you can consult our article on the difference between a reservation contract and a compromise contract.
The owner then has 2 to 5 days to accept or refuse the offer. In theory, viewings should stop. Unfortunately, in practice many owners or brokers continue to try to get a better offer.
If your offer is not accepted, the agency must refund the full reservation amount to you.
If the offer is accepted, the prepaid amount will be deducted from the sales price. This is usually topped up to 10% of the property value at the time of signing the compromise, i.e. during the seventh step of the purchasing process.
Step 7 – Signing the purchase agreement: las arras
The purchase agreement is a private contract concluded between the buyer and the seller. In Spanish it is called “Arras”, it is not signed before the notary but will be requested on the day of the sale. The notary will therefore check the conditions agreed between the parties.
The contract of the “Arras” contains a lot of essential information:
- The identity of the seller and the buyers
- The address of the property
- The sales price of the property
- The deadline for signing at the notary
- The address of the notary where the sale will be signed (optional)
- Any current debts
- Payment methods
- The distribution of the notary costs
- Penalties in case of withdrawal by one of the parties
In most cases, the financial advance paid by the prospective buyer at the time of the “señal” (reservation) is supplemented up to 10% of the sales price.
As for the purchase agreements, in most cases they are signed between private individuals and are called “arras penitenciales”. They are regulated by Article 1454 of the Spanish Civil Code.
If the buyer withdraws, he will lose the amount paid. However, if the seller withdraws, he is obliged to refund double the amount paid to the buyer.
Step 8 – Signing at the notary and handing over the keys: la escritura
The big day has arrived! You will complete the transaction by signing the “Escritura”, the authentic document. At this time you must pay the remaining balance.
Some notaries accept that the amount of the property is deposited into their account and they then issue bank checks to the sellers. However, others refuse to receive a foreign transfer due to money laundering prevention. In that case, you will need to bring bank checks issued by your Spanish bank. To do this, you must have opened a bank account in Spain in advance.
Good to know!
Ask your Spanish bank advisor in advance about the rates for issuing a bank cheque. You might be surprised! Some banks offer attractive promotions where they do not charge certain costs, such as the opening commission. However, they often more than compensate for this by charging high rates for issuing the check, sometimes up to several hundred euros.
And what if the seller of your future Spanish country house is none other than five heirs to a family estate? In that case, you would have to issue five bank checks, and no one else would pay these fees for you.
The keys are always handed over on the day of the signing of the authentic deed. The notary confirms the payment and the new notarial deed is then registered in the Registro de la Propiedad (Register of Properties) through his office or through a collaborating office.
The taxes related to the purchase, in particular the “Impuesto de Transmisiones Patrimoniales” (Transfer Tax), must be paid within 30 days of the signing date.
Now that you know every step of the process of buying property in Spain, you can get started! We guide you in different cities and regions such as Alicante, Valencia, Benalmadena, Denia, Marbella, Jávea, Murcia, Torrevieja, and so on…
Please contact us if you have any questions.
