How to buy a property on the Costa del Sol, Spain – a buyer’s guide
Questions and Answers on ‘How to Buy a Property in Spain?
You have the QUESTIONS and we have the ANSWERS. Let Start Group help you!
When you are thinking of buying a property on the Costa del Sol there are a few things to take into consideration, for example closing costs such as taxes and the general sales procedure. As for the procedure, each case can be negotiated a bit differently but Start Group has outlined the general way things are done in Andalusia, Spain. Please have a read through our guide which will advise which property to buy on the Costa Del Sol and the process involved.
Finding the right property for you. Why StartGroup?
To have a great start you need good help! At Start Group we have over a decade of experience and over 1000 properties on our books. Let us talk about your needs and expectations, together we will work hard to find the best property for you. We will not only show you properties, but you will also be able to take advantage of our local knowledge. Where is the best school? Where are the best restaurants? Sports Clubs and Gyms? Golf? Bridge clubs? Local transport? We have all the important answers for you! StartGroup has been around since 2003 and knows the area of Calahonda, La Cala de Mijas, Cabopino and Riviera del Sol as the back of our hand. All out staff gets external training on a yearly basis and are all certified in the Andalusian property law Decreto 218/2005, LOPD and PBC. Our CEO Christofer Fogelberg is a registered Spanish real estate agent with G.I.P.E. License 3726.
How will you make an offer on a Property For Sale in Mijas Costa?
When you have found the right property it is time to make an offer. On the Costa del Sol the buyer normally makes an offer that is lower than the asking price. Whether you are looking to buy a cheap property for sale in Mijas Costa or a luxury penthouse in Cabopino, your property specialist at Start Group will help you to negotiate the purchase and achieve you the best possible price. As all the StartGroup staff is multilingual we have great communication skills with vendors from all over Europe. With over a decade of satisfied customers you are in good hands! When a price and terms are agreed it is time for the next step, which is the reservation contract.
Reservation contract and paying a deposit
When the price and conditions are agreed Start Group will draw up a reservation contract that will be signed by both parties and close the deal. The buyer will pay a deposit of, normally, 6000 Euros which will guarantee that the vendor withdraws the property from the market and stop offering it to other potential buyers. In the reservation contract it will state the time for completion. If the completion is within 30 days the next step is normally to sign the deed in front of a public notary. If the agreed completion will be later than 30 days the praxis is to sign a private purchase contract and pay 10% of the price (minus the deposit already paid).
Exchange of private contracts
If the completion of the sale is more than 30 days after the reservation, a further payment of 10% (minus the deposit already paid) is done at the signing of a private purchase contract.
Completion of the sale
The final payment and exchange of keys is done before a public notary who signs the new title deed, “Escritura”. The notary has previously asked the land registry for a “nota simple continuada” which means that the Property registry is informed that a change of owners will take place on this particular property in this notary. This means that for a period of a few days this property can only be sold at this notary and it is a measure of protection for the buyer.
The buyer will pay the vendor the final balance with bankers drafts (cheque bancario) and the vendor will give the keys to the buyer.
Registration of the change of owners is made in the property registry.
The same day of the signing the Notary informs the land registry that a completion has taken place. The deed now has to be taken physically to the registry in order to be properly registered, this process can take up to three months.
What are the Cost and Fees Involved in the Purchase?
Notary. The notary fee can vary in different notaries and depends on the amount of documents to incorporate into the new deed etc. Generally a property sold for 200,000 Euros will pay between 600 to 900 Euros. There can be differences but here is a link to the fees approved by the Spanish state: https://www.boe.es/buscar/act.php?id=BOE-A-1989-28111
Property Registry. The fee depends on the price of the property. The fees ranges from 0,175% on cheaper property to 0,02% for properties over 600 000 Euros. For most properties it cost 0,03%. You can find the list of the fees approved by the Spanish state here: https://www.boe.es/buscar/act.php?id=BOE-A-1989-28112
Lawyer. You can chose to have a lawyer representing you in the sale, this is optional but a very efficient way to get things done without having to worry about it. The lawyer will get you the obligatory fiscal identification number (NIE), arrange the inscription of the new deed in the land registry, open a bank account for you as well as arrange payments of all the relevant transfer taxes associated with the purchase. They can also set up contracts for water, electricity, internet providers, town hall taxes etc. It is very practical to have these payments set up on a direct debit from a Spanish bank account. A property lawyer normally charge 1% plus VAT of the price.
Taxes payable by the buyer on the Costa del Sol
The taxes depends if you are buying a brand new property or a used property (resale). New property pay VAT (IVA) and Stamp duty (AJD), while resale property pay another tax called ITP. The ITP is a sliding scale depending on price while the VAT and AJD are always fixed percentages.
If you are buying a resale property ITP scale in Andalusia is:
8% for amounts under 400 000 Euros
9% for amounts between 400 001 Euros – 700 000 Euros
10% for amounts over 700 001 Euros.
For new properties (new developments) there is no ITP but VAT (IVA) of 10% payable regardless of the price and there is also 1,5% Stamp duty (AJD).
Other costs are the Notary fees and Land Registry fees (see above), and the lawyers fee which normally is 1% plus VAT. If you are taking out a mortgage count on approximately 1-1,5% opening fee of the mortgage amount and 1,8% of taxes and notary fees for the mortgage deed, as well.
These cost and taxes are not reflected on the advertised price for the property and has to be added on top. For a resale property you have to calculate around 9-11% on top of the asking price and for a new property is will cost between 12-14%.
Taxes payable by the vendor in Andalusia
There are generally two taxes to pay when you sell a property on the Costa del Sol. Municipal Plusvalia and Capital gains tax. Up until recently the Plusvalia was paid even if a property was sold at a loss, but a Supreme Court ruling in May 2017 declared that unconstitutional and the plusvalia is now only paid if there is a economic gain, the same as the Capital gain tax. However each Town Hall applies this in a different way so please inquire depending on Municipally.
Municipal Plusvalia. This tax is a municipal tax based on the increase of the taxable value of the land during the time between the purchase and sale of the property. The tax has to be calculated individually. The longer the property has been owned the more you pay. StartGroup will be glad to calculate the plusvalia for you when putting your property for sale, so that you have all information from the start.
Capital Gains tax. At present the tax for tax residents is 19% for the first 6000 Euros gain, 21% for the amount between 6000 and 50 000 gain, and 23% for amounts over 50 000 Euros. For non-residents the capital gains tax is 19%. The capital gain is calculated on the actual gain which means that you are allowed to deduct the closing cost you had when you bought; ITP/IVA/AJD, notary fees, land registry fees, lawyer fees. And the cost when you sell i.e. real estate agent and lawyer fees.
Fiscal retention for non-residents. For non-resident vendors the buyer is required by law to withhold 3% of the purchase price and pay that directly to the tax office on the vendors behalf. This is a measure to prevent tax evasion by the vendor who resides in another country. The vendor has 90 days after the payment has been done to submit a tax return for capital gains tax which will show how much has to be paid. If there is no gain in the sale the 3% will be paid back to the vendor by the tax authorities. This can be paid into a Spanish bank account or an account held by the vendor in another EU country.
For more information please contact us at +34 952 90 48 90, email:firstname.lastname@example.org or visit our offices in Calahonda, Mijas Costa.
We are happy to answer all your questions of buying a property on the Costa del Sol!
All information is correct at the publishing of this article in September 2017 and is meant as a Buyers Guide for property on the Costa del Sol. The text has no contractual value and can be subject to change without prior notice.