Buyers Guide

The buying and selling process

 

In general

The economy in southern Spain is seeing positive development. New buildings are being built like never before, consisting of apartments and houses. In such a ‘New Development’ construction project, it typically takes a while from signing the purchase agreement to it being completed and the buyer receiving the keys. During this period, we often see prices rise, and this, of course, already gives the new homeowner added value from day one. The developer is liable for defects in a new house or apartment in Spain and must also be insured for this. It can be problematic if a used property is bought in Spain, as we do not, the same way as in Denmark, have a change of ownership insurance and the Consumer Protection Act when acquiring real estate.

The process of buying a property in Spain

The first meeting with you always takes place in Denmark at our law office in Copenhagen, but other meeting forms and locations can be agreed.

Jackie Phillip & Co. Real Estate stand by your side and help you find the perfect home. We also give an overview of the possibilities with and potential challenges of the specific property that you intend to buy.

Once we have jointly selected the homes that best meet the requirements and wishes you have for your future home in Spain, we agree on a time where we can physically present these to you together with our partners.

Once the property is selected, you will of course need to have your own advisor. You decide who you want as your advisor. We offer to help with contacting a local Spanish lawyer. The fee for the Spanish lawyer is the same, whichever is chosen, namely 1% of the trade price of the property as a fixed lawyer’s fee. Added to this are deed costs to the Spanish state of approx. 10%, so you have to add approx. 11–12% on top of the price the property is traded at. It’s a lot of money, and people often forget that.

The process of purchasing a new building typically entails an initial reservation contract being signed on the house or apartment selected at the project stage. At the same time, a reservation fee of approx. EUR 10,000 is paid. We ensure that this is paid to our Spanish lawyer so that the amount is returned if the deal falls apart. After 1 month, the purchase agreement is signed, and at that time approx. 30% of the purchase price is paid. The balance is due by deed writing to the notary on the day of takeover. Our liability-insured Spanish lawyer ensures that all the Spanish conditions are in place and is guaranteed that the necessary builder’s insurance has been taken out. This insures our clients if the developer unexpectedly goes bankrupt during the construction, which we have never experienced. Your advisor is your Spanish lawyer, who has the task of assisting you as a buyer versus the seller. A property transaction in Spain can only be carried out with the representation of a Spanish lawyer. The Spanish lawyer is responsible for all aspects of your property transaction.

We are happy to inform you about renting out your home in southern Spain. It’s attractive to rent out the home as a short-term rental when you aren’t using it yourself. Typical short-term tenants are extremely wealthy people from all over the world.

Rental prices are very high in southern Spain, almost all year round, and it’s, therefore, a great way to get all or part of the housing dream financed. That way, you can use your home for maybe 4–6 months a year, rent it out the rest of the time, and have more or less of your costs paid. Please note, however, that rental income is not included in a credit rating.

The Spanish lawyer also assists in getting you a Spanish tax number, a so-called NIE number, which you need to have when buying major assets in Spain, such as a property or a car. It will also be an advantage to have a local Spanish bank account so that all expenses on the property can be paid on an ongoing basis from this account. The Spanish lawyer will also help with getting this setup. There are very large legal differences in acquiring a home in Denmark compared to in Spain. You must remember that property value tax is paid in Denmark on the value of your home in Spain. Fortunately, there is a deduction in relation to if your holiday home is located in Denmark, the so-called ‘distance circular’.

From acceptance of purchase offer to takeover day

Once your offer on the property has been accepted by the seller, you must sign a reservation agreement. And at the same time pay between EUR 5,000–10,000, depending on the value of the home. This ensures that the property is taken off the market.

Following this, the Spanish lawyer embarks on a thorough investigation of the property’s legal situation. During this period, it’s also a good idea to have a construction expert review the physical condition of the property, as Spain does not have condition reports and change of ownership insurance as in Denmark. The Spanish lawyer examines the property’s debt situation, pollution, landowners’ association, and owners’ association conditions. If there are no legal problems or outstanding claims, you will receive a so-called ‘nota simple’ from the Spanish lawyer. This is a legal report on the condition of the property.

When everything is as it should be, we go to the next stage, where the Spanish lawyer will draw up the purchase agreement (PPA). We are now approx. 30 days after you signed the reservation agreement. To avoid having to go to Spain all the time and sign papers, you will initially give the Spanish lawyer a so-called power of attorney (POA). The lawyer can then sign on your behalf, with instructions from you. On the day of takeover, the deed must be physically signed by your Spanish lawyer and the seller’s lawyer. It takes place at a notary office in Spain, where the lawyer with your power of attorney can sign on your behalf. At the same time as signing the deed, your Spanish lawyer has arranged for the transfer of the purchase price, so that payment is made at the same time as signing the deed on the day of takeover. It’s important and absolutely crucial that there is concurrency here and that the keys to the property are received at the same time. On this very day you are the owner of your Spanish property.

Finally, the Spanish lawyer takes care of pumigocing your ownership of your new property in the property pumigoc. In Denmark, this quickly takes place online. In Spain it can take up to 3 months. However, it naturally secures you your property right, which is inviolable, so that no-one besides you has the right to sell the property later on.

Once you have obtained the keys to your new property in Spain, the Spanish lawyer will also assist you in taking out all the necessary insurance policies. We also recommend that you take out health insurance. The Spanish hospital system works well, but there is always a long wait and they only speak Spanish at the hospitals. The private hospitals via health insurance are preferable.

Sale of your home in Spain

When you need to sell your home in Spain, we refer you to our partners who will market your property. It’s typically ‘Sold or free’ for the selling broker when you need to sell, and you can have many real estate agents sell your property, unlike in Denmark. Here the fee for a broker is 5–7% of the trading price + VAT. There are therefore many costs associated with both the purchase and sale of your property in Spain. That is why you should always wear ‘the long-sighted glasses’ when buying a property in Spain. You shouldn’t buy to make a quick profit in a short time. There is no tax in Denmark on your sale, but capital gains tax must be paid in Spain on your sale, up to approx. 20%. Upon sale, the notary is obliged to withhold 3% of the difference between your purchase and sale price, i.e. your gain. In Denmark, on the other hand, you get a deduction for the improvements you have paid for during your time as owner, so remember to save all receipts and craftsman bills.

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