A Guide to Buying a Property on the Costa del Sol

You have found your dream home in the sun and are prepared to make an offer on the property. Before you do, it is prudent to know what will happen next, what funds you will need and when you will need these.

If your offer is accepted by the owner, the purchase process can be neatly broken down into three steps:-

Step 1: Sign Reservation Contract

Signing a Reservation Contract effectively removes a property from the sales market and secures it for a prescribed period of time – usually 30 days. This allows your solicitor time to conduct their due diligence on the property to ensure all permits and licences are in place, the seller is entitled to sell the property, and there are no debts registered against the property.

The Reservation Contract, signed by you (or your representative) and the seller, confirms the agreed sales price. It is essential that, when travelling to Spain to view properties, you have funds available to pay the Reservation Deposit. This is usually €6,000 and can be paid by credit card or bank transfer to your solicitor.

To draw up the Reservation Contract, a copy of the passport of all the buyers and, if obtained, NIE numbers will be required. If you do not have your NIE numbers already, inform your solicitor so they can apply for these immediately.

Step 2: Sign Private Purchase Contract

This is the point at which a sale becomes legally binding and we firmly recommend a local, independent lawyer is used at this stage if you have not instructed one already.

In Spain it is customary that the lawyer representing the seller will draw up the terms and conditions of the contract. Your lawyer will then check these conditions on your behalf.

The contract should include payment terms and an estimated completion date. Your lawyer will also conduct a full conveyance of the property and will outline the total costs of the sale, having calculated fees and taxes.

At the time of signing the Purchase Contract, you also pay the deposit. For resale properties, this is usually 10% minus the reservation fee already paid. For new developments, this is usually 20-30% + VAT (minus the reservation fee previously paid). If you pull out of the sale after signing the purchase contract, you lose this deposit. If the seller pulls out of the sale after this point, they are legally obliged to compensate you 2x the deposit paid.

Step 3: Completion, the Public Notary

The formalities of a purchase are completed before a Public Notary, an independent referee who oversees the sale and ensures the parties have complied with legal requirements including payment of appropriate taxes. This is the day the agreed balances are paid and you take ownership of the new property.

You will be asked to come with several cheques, one for the sellers mortgage company, one for the estate agents and one for the seller. Whilst the seller is responsible for their estate agency and mortgage costs, you clear these and the residual amount is payable to the seller.

For example, for a hypothetical purchase for EUR 100,000 where the seller has a EUR 70,000 mortgage on the property and their estate agency fees were EUR 5,000 you would draft the following bankers cheques:

* EUR 70,000 for the sellers bank to repay the mortgage,
* EUR 5,000 to cover the sellers estate agency fees, and
* EUR 25,000 for the seller as the residual value after all their expenses are cleared.

If you are buying with a mortgage, a representative of your lender will attend and provide the cheques up to the value of the agreed loan.

You will receive the keys to the property this day and become the legal owner. Final registration of the title deeds is likely to take between 2 to 3 months from the time the Land Registry receives all the paperwork.

We walk our customers through each stage of the purchase process and are always on hand to answer any questions or concerns.

Important – Purchase Costs

Buying a property in Spain entails certain costs in addition to the price of the property. As well as taxes, you’ll need to pay fees for professional services bringing the total to between 11% and 13% extra. These will be dependent on whether you are buying a new build or resale property, the value of the property and whether you require finance to complete the purchase.

On the Costa del Sol, real estate agency fees are usually paid by the seller, you don’t need to budget separately for them in your calculations.