Buying a house in Spain as a non-resident

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The real estate sector plays an important role in Spain's economy. After the pandemic, the real estate market was significantly boosted, and today it remains a very attractive market for investors, who also see it as a good way to hedge against inflation.

The foreign buyer has returned strongly to the Spanish residential market, with coastal areas and large cities generating the most interest, and where the largest number of transactions are accumulating.

Those who make a significant investment in Spain (more than €500,000) have the possibility of obtaining the Golden Visa, which undoubtedly makes investments in our country very attractive.

In some countries the purchase of property by foreigners is quite complicated, however, in Spain there are not too many limitations, which makes it an interesting market for foreign investors.

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How to buy a property in Spain as a foreigner

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If you are not a resident in Spain, but you are considering buying a property, these are the steps you should follow:‍

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- Obtain the NIE (Foreigners' Identification Number): If you do not already have one, it is essential that you apply for it. It is a personal and unique number, essential for any type of transaction in Spain. You can apply for it at the Spanish Embassy in your country of origin, or apply for it directly in Spain (https://extranjeros.inclusion.gob.es/es/informacioninteres/informacionprocedimientos/Ciudadanosnocomunitarios/hoja091/index.html).

- Open a bank account in a Spanish bank: It is not compulsory, but it is highly recommended to open a bank account in a Spanish bank, as you will have to face several expenses derived from the purchase process, and the fact of having funds in a national entity will speed up the whole process.

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- Find the property and negotiate with the seller: If you are still not sure which property you want to buy, now is the time to do an exhaustive search to find your ideal home. It is not necessary to have a real estate professional, but it is advisable, as they will know how to navigate the market and advise you throughout the whole process of finding the property, negotiating and closing the sale.

- Taking out a mortgage: If you need a mortgage to buy a property in Spain, now is the time to start comparing mortgage conditions in different banks, find out about the different interest rates and choose the one that best suits you

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- Reservation contract: This is not always the case, but it is common when you use an intermediary. This contract serves to confirm that a purchase price has been agreed, and that the property will be withdrawn from the market.

- Earnest money contract: The signing of the earnest money contract will allow you to reserve the property before formalising the purchase contract. For this contract to be valid, an amount of money must be paid to confirm the intention to buy to the seller, normally 10% of the sale price, which will be deducted from the final sale price.

- Official valuation for the mortgage: The bank usually offers its specialists to carry out an official valuation of the property, although the buyer can contract this service on his own.
The total amount that the bank will lend you will depend on the amount of the valuation. It is therefore very important that the amount of the valuation is as close as possible to the agreed purchase price, or even higher.

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- Documentation: At this point, the buyer must request the following documentation from the seller:
o Identity documents
o Nota simple
o ITE (technical inspection of buildings): This is not obligatory, but it is advisable.
o The IBI (Property Tax) receipts paid for the last 4 years.
o The certificate of being up to date with the debts with the community of neighbours
o The Energy Efficiency Certificate

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In this phase of the sale and purchase it is advisable to have the services of a lawyer to guide you and advise you on the steps to be taken.

- Notary and public deed: The notary will be in charge of drawing up the property deed and the purchase and sale agreement, which will be signed by the buyer and seller. At this appointment it is necessary to come with the identity documents of both parties, and the means of payment prepared (e.g. bank cheques).

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- Registration of the property: Here it is also advisable to entrust the management of the property to a specialised agency. This last step consists of registering the property in your name, in order to identify yourself as the new owner of the property.

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Taxes you will have to pay

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Apart from the purchase price of the property in Spain, there are various expenses derived from the buying and selling process.

- Taxes:
o  New housing: 10% VAT (Value Added Tax).
o  Second-hand property: ITP (Impuesto de Transmisiones Patrimoniales), depending on the Autonomous Community (between 6% and 11%).

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- Notary fees‍‍

- Land registry fees‍ ‍

- Appraisal of the property‍

- Legal advisor's fees (if you have hired one), the amount of which is usually 1% of the total purchase price.

- AJD (Impuesto sobre Actos Jurídicos Documentados): this tax is levied on notarial, mercantile and administrative documents. With regard to the purchase of a home, what is relevant is the modality of Notarial Documents (DN) where two quotas are distinguished:

o Fixed: this refers to the stamped paper on which the notarial documents must be drawn up and amounts to €0.30 per sheet and €0.15 per portfolio.
o Variable: the amount to be paid will depend on the percentage approved by each Autonomous Community, and ranges between 0.5% and 2%.
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At Ivory Homes we are specialists in the sale and purchase of real estate. Thanks to our experience and knowledge of the market, we can help you find the best investment opportunities in Madrid, as well as guide and assist you through the whole buying and selling process.

If you are considering investing in the Spanish real estate market, do not hesitate to contact us.

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‍IVORY HOMES
The Art of Homing

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