Purchasing Property in Spain – 7 Important Tips to Prevent Heartache

The Costa del Sol in recent years has become a Mecca for property investors and although the price of property has reached an all time high in 2008, it is now proving to be the perfect time to buy property on the Costa del Sol and Spain in general with many properties being purchased 25% or more below asking price.

The economic downturn has been the harbinger of property bargains with many owners now desperate to sell their properties in order to realize some kind of profit on their initial purchase. Supply now outweighs demand, meaning that it is most certainly a buyers market, especially for those who do not require a mortgage and are able to move quickly.

But this does not mean that you act fast and forget some of the major rules of buying in Spain. Due diligence is still very much an important requirement and you need to make sure that you do not go into any sale blind and end up making a purchase that you live to regret. So what do you need to think about before purchasing?

Decide What Kind of Property You Want To Buy

Different people have different requirements when purchasing. Some buy for investment purposes and some buy in order to enjoy the property as a holiday home. Then you have those who are buying a property as a permanent residence. Knowing exactly why you want to purchase, will help you to realize the kind of property you will need to buy in order to meet your expectations.

For example, if you are buying for investment, you will need to purchase on the coast or in an area that is experiencing a lot of growth in terms of investment and infrastructure.

Research Your Locations Thoroughly

Yes, it’s an old cliche but it is very true. The area that you buy in is sometimes more important than the property you buy.

Make sure that before you purchase a property, that you have decided on the area you want to buy in. You also want to make sure that you have sufficient local facilities and will be in close proximity to banks, airports, buses and good traffic routes.

If you purchase a property in a bad area, you will not only be reluctant to live there, you will also have problems when it comes to selling or renting the property. So take your time and make sure the area is just right.

Why Not Rent First?

Many people make the mistake of not doing enough homework before purchasing property on the Costa del Sol. Sometimes it’s worth renting long term in order to establish whether the area you are renting in, is an area you would also like to buy a property in and move to permanently.

There is also an opportunity in today’s market that you can come to an agreement with the seller of the property, whereby you will rent the property for an agreed amount of time and then at the end of this period, have the right to buy the property at an agreed set price.

Your Trip to Spain

If you are not currently living in Spain then you will no doubt need to make regular trips in order to come to view properties. Make sure that you find a good local agent who you can trust and stay away from pushy agents who tempt you with offers of free flights and accommodation. You will spend 3 days being pressured into purchasing something you do not want!

Check out property forums online, ask friends and get some recommendations of reliable agents in the area that you are looking to buy in.

Hire a Good Spanish Lawyer

This one is one of the most important tips of all. An English speaking Spanish lawyer can save you lots of heartache. The best way to find one is to speak to friends or someone who has purchased on the Costa del Sol and find out which one they would recommend.

A good property lawyer should be able to speak to you in your native tongue clearly and explain the buying process in detail. They also need to demonstrate experience and expertise to you in their field and be able to walk you through each step of the way, keeping you informed at each point.

You can also grant power of attorney to your lawyer so that they may act on your behalf. This can be especially important if you are not permanently based in Spain and will prevent you from having to travel to the country every time something needs to be signed.

Have Deposits Available

Once you have found the property that you wish to purchase, you will need to pay your reservation deposit which means that the property will be taken off of the market.

The deposit for a new build off plan property is generally between €3,000 and €10,000. With a resale property the reservation deposit is normally around 10% of the purchase price. Most deposits unless otherwise agreed in writing, are generally non-refundable, so make sure that you are 100% sure that the property is right in every way before committing yourself with the reservation payment.

Be Aware Of the Total Costs

Property Taxes for a new development property are 7% IVA and 1% Stamp Duty (IAJD). Both are determined by the purchase price of the property.

For a resale property you will be paying a transfer tax of 7% which is commonly known as ITP. This is also based on the purchase price.

You will also have to pay notary fees which are generally paid by the buyer of the property. The notary fees should be no more than 1% of the stated sale price in the deed of sale.

Of course, your lawyer will also want to be paid and you will need to budget for around 1-1.5% plus IVA (16%) of the purchase price.

If you require a Spanish mortgage, the banks will generally charge a fee of around 1% of the required loan.

As a total figure you need to expect fees totaling around 10-11% of the purchase price and this can go up to around 13-14% if you are taking out a mortgage on the property.

So make sure that you have your finances in place before purchasing of even looking for a property as this will prevent you from experiencing any "financial shocks".

PGM Property World Spain are an established family run real estate agent based on the Costa del Sol and provide a wide range of property for sale on the Costa del Sol including resale and off plan investments.