THE BUYING PROCESS
At Otium Residences we have an in-depth knowledge and experience in real estate transactions. While we accompany you to find your ideal villa, apartment or plot, we recommend independent legal advice, financial advice and design advice; we highly believe that it is imperative to work with the best professionals in the market.
The Reservation Contract
Once you have found a property you like, and wish to move forward with the purchase, the first step is to draw up a ‘reservation contract’. The reservation contract is a standard procedure when buying a property in Spain – used to reserve the property for a specified period of time (meanwhile your lawyer conducts due diligence). The contract should contain; full name of the buyer and seller, price of the property, property address, date to sign a ‘private purchase contract’, other special conditions (subject to finance), deposit amount placed to reserve the property. If you need a mortgage, you will have the time to take the necessary actions.
The Private Purchase Contract
After a full and complete due diligence, the lawyer will inform you of their findings and will discuss how to proceed with the private purchase contract. This is a contract between you (the buyer) and the vendor (seller). The lawyer will prepare the contract and include: a legal declaration from the vendor, stating they are legally positioned to sell the property, the address of the property, the exact dimensions of the property and the property’s features, as set out in the “referencia catastral” Government registration of the property, the completion day and hand-over date.
That depends on several factors; such as the purchase price, is it a new build or re-sale property, are you a cash buyer or do you need a mortgage. All in all, you can expect to pay 10-13.5% of the purchase price, see below where the costs consist of:
- 10% IVA (Impuesto sobre el Valor Añadido; Spanish VAT) on new properties, 7% ITP (Impuesto sobre Transmisiones Patrimoniales; Spanish Transfer Tax) on re-sale properties
- 1% notary fee – notarization of the property cost
- 1% legal fees – a fee for a lawyer
- 1.5% stamp duty tax – legally effective on the new property
Stamp duty can vary per the region and, when you find a property that you like, it’s worth doing a little research and finding out the specific rates for that area. In Andalusia, if you wish to buy a new build property, stamp duty is currently set at 1.5% of the purchase price. For re-sale properties, you won’t be expected to pay any stamp duty, but you will need to pay transfer tax (i.e. Impuesto Sobre Transmisiones Patrimoniales) instead. This is typically 7% of the purchase price. Other regions could go up as much as 11%.
This is of course something you are eager to know when buying a property in Spain. That is not so easy to answer because it all depends on the complexity of the purchase. If all goes well: paperwork and the finances are alright, the buying process can be completed within 3 or 4 weeks. If a mortgage is required, it can take up to 4 or 8 weeks.
Pay it via credit card or bank transfer and it can be held either in the Otium Residences company client account or with a lawyer of your choice, until due diligence has been completed. If your lawyer finds any legal impediments pertaining to the said property, the deposit is fully refundable. If you decide to continue with the purchase, it will be put towards the purchase price.
As a non-resident, there are several taxes you will need to pay to sell a property in Spain: Plusvalía – this a municipal tax payable to the local council. The amount you’re expected to pay will depend on the cadastral value of the land and the number of years since you bought it. Capital Gains Tax (CGT) – this is approximately 19% of the profit made from your sale. Certain exemptions apply. For example, you won’t be expected to pay CGT if you’re over 65 or have lived in the property for at least 3 years. But, in most cases, the Spanish Tax Authority will withhold 3% from the sale (taken directly from the purchaser) and you will then need to pay the rest.
