The process of a real estate purchase and sale in Spain is strictly controlled by law, which is why all procedures and contracts are standardized and don´t differ significantly. That’s why most of the deals are prepared and conducted by a real estate agent without involving a lawyer. Real estate agent´s duties include studying of all the documentation, including checking all the encumbrances and controlling coordination between buyer, seller, notary and if necessary the bank in case of a previous mortgage cancellation or new mortgage application.
Legality of the deal is controlled by notary public whose duty is to check both buyer`s and seller’s documentation. Moreover, during notarization he is entitled to get in contact with Property Register which is done to protect buyer’s interests.
Involving a lawyer in the purchase and sale deal process is advisable in case of adding significant amendments in the standard reservation contract (Contrato de arras). However, in this case legislation gives little space for nonstandard deals, confining severely deal’s regulations. Final purchase and sale deal contract is prepared completely by the notary public and consists of standardized clauses and regulations with no possible variations.
If you see it necessary to contract a lawyer, Albert Good Team will provide you with information about qualified English speaking lawyers for you to choose from.
After choosing the real estate you want to buy you have to pay the owner a deposit which will confirm the seriousness of your intention to purchase. This sum is usually around 3.000 Euros and is not dependent on the property price, but on the decision of the owner. However, lately due to the limitations in the cash transaction policy most buyers prefer to skip this step and sign reservation contact directly instead.
In case the seller insists on deposit payment it is necessary to remember the following:
• Be sure to make the seller to write out a receipt which confirms the deposit.
• This sum is included in the total price of the property and is mentioned in all contracts.
• Deposit is a sign of mutual agreement between the buyer and seller and does not put any juridical obligations on a seller. It means that the seller can give you back the deposit and sell the property to someone else. However, generally sellers respect the agreement and do not break it.
After paying the deposit it is necessary to request a copy of the property registry to ensure that the Developer is the registered owner. Usually the requesting of the property registry and showing of the document to the seller are the duties of a real estate agent. The property registry provides information in digital format (PDF) which is why the copy won't have any original stamps on it. Waiting time for obtaining the registry is around 24 hours during working days, but in some cases it can take longer.
The property registry contains information about all previous owners and all charges related to the property. Typical charges can be mortgage responsibilities or costs related to infrastructure improvements which have taken place next to the property or are being planned for the future. If the property is subject to asset forfeiture or involved in an ownership argument, these facts are stated in the registry.
It is the job of the real estate agent to explain all of the information stated in the registry. In complicated cases it is recommended to ask for a notary consultation or lawyer’s assistance, but for all standard situations, only a qualified real estate agent is needed.
In the event that there are any complications, or unsolved issues in a registry that cause you to not want to close the purchase and sale agreement, you have the right to cancel the deal and ask for your money back.
After clarification of all ownership rights and determining the possibility of a purchase and sale deal, it is necessary to sign a property reservation contract (Contrato de arras). A reservation contract typically consists of standard real estate laws about reserving the property, but can also contain additional information about furniture, repairs and installations. In order to make the reservation contract effective, the buyer has to pay the owner 10% of the property value (after deduction of previously paid deposit); however, this sum can be higher when mutually agreed upon. In the case of buying a newly constructed property, the sum for reservation is fixed in advance by the building company. Sometimes reservation amount can be paid in stages.
After signing the contract the buyer has a couple of days to pay the necessary sum to reserve the property through bank transfer to the seller’s bank account. The contract period of a property reservation normally lasts from 2 to 3 months, but can be extended to 6 months when mutually agreed upon between the parties. During this period, the seller and buyer should take care of necessary procedures and sign a sale and purchase contract.
Out of all typical aspects of an agreement it is important to pay special attention to the financial obligations of both sides. According to law, if the buyer opts out of the purchase and sale agreement, they lose their reservation deposit. If a seller refuses to sell the property to the buyer, he must return the deposit in double.
The property reservation contract is sealed by the signatures of the buyer and seller or their authorized representatives, but is not sealed by a notary public. The contract has juridical power according to law but those aspects which do not correspond to the law do not have any juridical power.
In the event that a real estate agent gets a commission from the buyer, together with reservation contract the buyer also signs agent commission contract. According to standard agreements, the agent gets half of his commission after the reservation agreement is signed.
If the buyer wishes to guarantee their right to the purchasing of a property, and revoke the owners right to claim back the sale of the property, then a sale contract must be signed rather than a reservation agreement. In this case the seller cannot refuse to sell the property. This type of contract is assured by a notary and is taxed 11% from the reservation sum. This means extra expenses for the buyer.
Here are necessary actions a buyer needs to perfom before final purchase and sale deal signing.
1. Obtain an NIE (Número de Identificación de Extranjeros ) –Foreigner Identification Number. The process of obtaining an NIE is not complicated, but requires preparing the proper documents and
complying with all bureaucratic formalities. The procedure can take from acouple of hours up to a few months (if papers are handed in to an embassy outside Spain). The standard time of obtaining an NIE in Spain is 15 days.You must turn in all documents in person, however, an authorized person can pick up your NIE when it is ready (authorization should be done during the
initial turning in of documents). A real estate agent or a lawyer can take over the responsibility for this process.
2. If the buyer wants to obtain a mortgage it is necessary to find a bank that can issue a loan, organize all necessary documents, prepare an estimate of the property and issue a loan confirmation. Usually the process of obtaining a loan can take from three weeks up to two months. A real estate agent or a financial consultant can assist you with this process.
3. Choose in advance a notary who will notarize the deal. All necessary papers for a notary authorization of a purchase and sale deal must be prepared in advance. A real estate agent is responsible for the
coordination between buyer and seller and a notary assistant is responsible for the deal preparation. The right choice of notary can save a lot of time and energy.
4. Confirmation of adequate funds on buyer´s account. When signing a purchase and sale agreement, it is necessary to write out a bank check for the deal, same day. The sum and writing of the check are controlled by a real estate agent or a financial consultant.
The check for the sum of purchase (the price minus all earlier paid amounts) and the taxes have to be ready by the day of signing the contract. In the event that the seller has a mortgage, he is obliged to close it. To do so, the buyer writes the check with the amount needed to close the mortgage to the name of the bank which provided the mortgage. If the buyer requires the mortgage loan, then the check for the amount of loan has to be carried in by the representative of the bank which issued the loan. A buyer overtaking the mortgage from the seller used to be very common; however, nowadays banks prefer the seller to close the mortgage and to issue a new one to the buyer in order to get double commission.
In the event that the seller used to have mortgage and the buyer is requiring a new one, then the price of the real estate «X» consists of the following parts:
a. amount of deposit is given in cash to the seller
b. reservation amount is transferred to the bank account of the seller
c. outstanding mortgage fees of the seller are paid by a check written by the buyer to the bank that issued the mortgage to the seller. All additional costs relating to the closing of the mortgage are paid by the seller separately.
d. a check for the new mortgage written on behalf of the buyer to the seller, that is brought in by a representative of the bank who is issuing a new mortgage to the buyer.
e. Check written by the buyer, made out to the seller, for the outstanding amount «X – (a + b + c + d)»..
The buyer is also obliged to prepare a check in advance for the amount of taxes and fees. The service of calculating this amount is usually provided by notaries or a by the bank which issued loan to the buyer.
It is important to take into account that the amount of loan payment of the buyer and the amount of taxes and fees are calculated the day before signing the contract. In case of rescheduling the date, amount change and checks have to be written again. It is also very important to consider that checks for Spain residents are different for non residents. It has to be checked in advance that the bank has enough of necessary blanks.
Since the sales contract is signed in Spanish, buyers who do not understand the language will need a translator. A notary is obligated to assure that the buyer understands every sentence of the contract. A translator can be any person who speaks Spanish as well as the language of the buyer. However, it is recommended to use the services of a legal translator (traductor jurado). Please note that since there are limited legal translators available, it is necessary to arrange and agree on the price of the translators’ services in advance.
Usually the seller and the buyer meet at a notary office in order to revise the contract and find all possible mistakes that have to be fixed. Three quarters of the contract is a standardized legal text which does not have big value for the buyer. While reading the contract, notaries will highlight all important sections and make sure that the buyer understands them well. However, a lot of buyers prefer to read the whole contract. Reading and translating of the whole text usually takes about an hour.
As soon as everyone is ready to sign the contract, the notary starts the process. In the event that the buyer is taking out a mortgage, the first paper to sign is the mortgage contract. It is a short and pretty simple contract, which does not take much time to review. After signing the mortgage contract, the bank authority hands the buyer the check for the sum of the mortgage.
Afterwards, the notary starts reading the contract for the real estate purchase. In the event that the contract has already been previously reviewed by the buyer with the help of a translator, the process of reading goes faster. While reading, the notary identifies the buyer, the seller and the translator. He also assures that all necessary documents are up to date, informs both sides about all contract details and explains legislation sections. If both sides are in agreement with the contract and no mistakes are found, then the notary sends an inquiry to the real estate registrar in order to confirm the rights of the owner of the apartment, and that he has the right to sell it. This inquiry blocks all other possible actions related to the real estate and excludes tricks during the buying and selling process. As soon as the registrar sends a positive answer to the buyer, the seller, the notary and the translator sign the contract, and the buyer gives the seller the check. The notary prepares a document listing all sums and means of payment which will be attached to the sales contract.
Upon completion the seller turns over to the buyer: all keys, real estate plans, instructions for use of any home installations and a receipt confirming that all necessary taxes were paid. All receipts are reviewed by the notary and are attached to the contract of sale.
The buyer then hands over the bank check to the notary for the sum calculated in advance for the tax payment. The exact amount is known after the new owner is written into the real estate registry. Normally the final calculated amount ends up being within a few euros of the previously calculated sum. This difference is either returned or charged to the buyer.
It is also at this time that the real estate agent gets the second half of their compensation.
After the signing of the sales contract is completed, the buyer will get his copy within the next couple of days. (copia simple). It is possible to get the original contract back after the record of buying the real estate has been entered into the registry. This process lasts from two to six months. As soon as the details of the new owner are entered into the registry, the deal is considered to be finished.
Immediately following the signing of the sales contract, it is necessary to reissue the contracts for water, light, electricity and gas under the name of the new owner. It is possible to agree with the seller in advance to have the contract details changed, without interrupting services. In this case, the buyer avoids additional expenses. Obligations for taking care of the changing of the contract details are usually assigned to the real estate agent or to a special service company.
Payments for water, gas and electricity are charged automatically from the account, which is why it is necessary to make sure you have enough funds available on your account.