COSTS OF BUYING A PROPERTY IN SPAIN
Please note that the information provided in this article is of a general interest nature and intended as a basic outline only. Nothing contained in this article should be seen or taken as the writer or publisher providing legal or financial advice.
Here we have been as complete as possible in respect of the “usual” purchase. There will always be the “unusual” purchases where an incoming buyer takes over a debt, a mortgage or other obligation from the seller of a second hand or resale property. As such these transactions are not usual so we haven’t specifically addressed them here.
Let us briefly mention the operation of an “escrow” account. This is a form of bank account, structured between a buyer and seller and works primarily to the buyer’s advantage. The point being that the money lodged in the account cannot be withdrawn without the buyer’s approval. This is essential as many property transactions do fall through and the would be buyer may experience some difficulty in seeking to recover sums that are in a seller’s or the sellers lawyer’s bank account.
An “escrow” account is usually held within the seller’s lawyers “client account”arrangements at his bank and an account is nominated to receive all sums from the purchaser. The difference is that this account is subject to an agreement between buyer and seller as to its operation. A provision of which will be that it the account is only accessible by two or more signatures – or not merely one. This means that the seller and buyer jointly control access to the account.
You should not be surprised if asked by an Estate Agent to provide a holding deposit which is regarded as an act of good faith from you as the would be purchaser. It usually means that they’ll cease to actively market or show the property.
The deposit may be between €3000 to €6000 and you may be offered the chance to swipe a credit card number to make this deposit. Our clients are advised that this sum should be placed under the escrow account arrangements, mentioned above, and may be lodged with their lawyer until the escrow account is set up. Your lawyer will then be able to advise the Estate Agent that they are holding sums to your order which will can be released to the escrow account following its set up.
As a yardstick, in Spain, you should budget for purchase costs of approximately 10 to 12% on top of your agreed property purchase price. This will cover legal fees, plus expenses including notary public fees, land registry, stamp duty and VAT (called in Spain “Impuesto sobre el Valor Añadido” or “IVA”) – which are set out in more detail below.
The buyer is usually responsible for:
A usual breakdown of the above budget for costs and expenses of the buyer are as follows:
If you are planning to complete your purchase using mortgage funding, besides from the costs of servicing the borrowing you’ll need to budget for the following additional costs:
Do not forget about Wealth tax which is payable annually. It is based on the value of the property and income – either notional or actual – derived from the property.
Please also remember when making the above payments from the UK or non € Zone country that the costs – including the monthly mortgage payments, annual taxes or insurance premiums – may be substantially increased by Bank charges incurred in using a High Street bank to bank method of currency transfer. It is sensible to consider the use of a currency exchange specialist to “forward buy” your €s at a predetermined rate to minimise exchange rate risks.