Once you have found the right property, the purchase process begins with a reservation agreement, which takes the property off the market and also “freezes” the purchase price. The deposit to be paid at this stage is between 3,000 and 12,000 Euros. Before arriving in Spain, ensure you have funds available. The best way to pay the reservation fee is by credit card or transfer. It is not advisable to pay by cheque, especially if drawn on a foreign bank account, as it can take approximately 14 days to clear at a Spanish bank. Such a delay could cost you your property.
Within approximately 14 days of signing the reservation agreement, the private purchase contract is to be signed between the buyer and the seller (or their authorized representatives). During this time, the lawyer should have completed the investigations and searches in relation to the property and will have arranged with the seller the procedure for cancellation of any outstanding debts. It is customary practice at this point to pay between 10 to 50 % of the purchase price. Funds can be lodged in your own Spanish bank account and your lawyer can arrange for an account to be opened for you Or on your lawyer´s escrow account.
A property sale is formally completed in Spain when the title deed (escritura de compraventa) is signed before a Public Notary in Spain, the agreed final payment is made and possession of the property is passed to the new owner. In the case of new builds, it can take up to 18 months before completion and usually payments are in stages of two to four months, for example by bankers draft, cheques from a Spanish bank account or bank transfer.
Once the title deed is signed, the notary will fax a copy of it to the local land registry. Your lawyer will pay on your behalf all the relevant transfer taxes and will deal with the formalities of registration of your title deed. Final registration of the title deed may take several months. Your lawyer will arrange for the transfer of the utility service accounts, such as water and electricity, to your Spanish bank account.
When purchasing a property on a new development, the developer should provide bank guarantees against each payment made on account of the purchase price. Many developers offer these bank guarantees free of charge whilst others make a percentage charge. A bank guarantee protects your payments. In the unlikely event that the developer fails to complete the property, it will go into liquidation or where they fail to complete on time and you do not wish to wait, all funds will be returned in full. New property is handed over without water and electricity connection. This can however, be arranged by a lawyer. Connection of such services can take up to four weeks following completion. Therefore, we suggest that you do not make any plans to use the property during that period. Under Spanish law, the developer will issue you with a liability construction guarantee.
There are in principle three fees and one tax to pay when purchasing property in Spain. You should budget that the costs involved purchasing a property in Spain are approximately 11-14% of the purchase price. If you have a mortgage there is an additional cost of approximately 2% of the property purchase price.