Purchase Process in Spain

The purchase process explained

Once you have found your property, the purchase process begins with a reservation agreement. This is a contract that freezes the purchase price and takes property off the market for, usually, 30 days on payment of a fee between €3,000 and €12,000. The deposit is usually held by your lawyer or your agent in a client or escrow account.

Within 10 days of signing the reservation agreement, the full private purchase contract (contrato de arras) is signed between the buyer and the seller. This is similar to exchanging contracts in the UK buying process. Within this time your lawyer should complete all the searches on the property – confirming that the seller owns the property being sold, there are no mortgages or charges and the purchase process explained that planning consents are in order.

Once both parties sign the main contract, it is binding. The arras contract or full private contract will usually require a 10 to 20 per cent deposit to be paid. The buyer is then committed to pay the balance of the price, and the seller (once the money has been paid) must transfer ownership to the buyer.

If the seller pulls out of the transaction he must return double the amount of the deposit received by way of compensation. If the buyer pulls out he will lose the deposit paid.

The property sale is formally completed when the title deed (“Escritura de Compraventa”) is signed before a public official called a Public Notary, or Notario. This will happen at their office and be accompanied by the agreed final payment and all the relevant purchase taxes. The Escritura is then presented by the Notary to the Land Registry for registration and the property is passed to the new owner. Final registration of the title deed can take several months.

With a new-build property, obviously completion can take a lot longer, and the payments are split over stages of the build process, and the developer should provide bank guarantees against each payment. This protects your payments in the event the developer fails to complete the property or goes bust.

Finally, make sure that you have insurance for your property, ensure all service contracts are in your name (telephone, water, electrics etc.) and register your ownership of the property with your local Town Hall (Ayuntamiento) – all of which your lawyer or agent can help you do.

Who does what in the purchase process?

You can purchase Spanish property very quickly, if you are a cash buyer and you have an NIE number. Certainly, it is not unknown for the Spanish (in particular) to see a property and be the owner (with full access) later on the following day.

However, this is not the way to proceed for any foreign buyer and you should never rush to buy – or be rushed. Rather, you must always allow your lawyer and building surveyor ample time to do their proper investigations.

Indeed, never lose sight of the fact that it is far better to miss out on an amazing bargain than buy a defective property you’ll always live to regret.

Estate Agents

A good estate agent will help you in your search for a property but it is important to remember that just like in the UK, they represent the seller. You need your own representation in the form of an independent lawyer that you choose.

Needless to say there are many estate agents operating in Spain, of all nationalities, with British agents or agents with English language ability common in most coastal areas. So, finding an agent with whom you can communicate is rarely a problem. But finding a good one is key to your success.

Throughout many areas of Spain registration of an agent is not compulsory and, even in the areas in which it is obligatory, the industry is considered unreliable. Does the agent belong to a professional association such as the AIPP (aipp.org)? Don’t take anything that agents tell you at face value. Equally, under no circumstances should you ever sign any document from an agent without your lawyer present.

So what should you expect of your agent? They should be proactive, know the local market thoroughly and be prepared to spend extra time with you offering all sorts of general advice and assistance. Anyone who takes ages to get back to you on your first inquiry does not bode well for the search ahead.

Estate agency commissions vary widely across Spain but tend to be high as the agent does do a lot more for the overseas buyer than a typical UK agent. In some areas it is common for sellers to pay an agent 3% commission, whilst in others the sales commission can be as high as 7% or even 10%. Sometimes (normally on new-build developments) agents may earn as much as 18% on a sale.

Occasionally, you, as the buyer, may be asked to pay a fee to the agent who shows you a property and this is normally a percentage of the sale price (for example 3%) and is sometimes called a ‘buyer’s premium’. As such ‘premiums’ can be a lot of money, you should always carefully look at any contract between yourself and an estate agent (and get it specifically approved by your lawyer before signing it).