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Welcome to our guide explaining the standard buying process in Costa del Sol and all thepoints to consider..
1. Finding the right property
Costa del Sol represents a vast geographical region stretching over 180 km; encompassing Sotogrande and the coastline of Málaga province. As a result, there is an ample variety of neighbourhoods, cities and areas, each with a unique character.
For this reason, it is important to have a clear idea of your wish list and priorities. Most importantly, your real estate agent should be an experienced advisor, instead of a sales agent. That is, a professional who knows the market like the back of his hand and is willing to go the extra mile until finding your dream home.
Unlike most real estate agencies in Costa del Sol which employ telemarketers to handle initial enquiries and sales agents simply to visit properties, we have a unique “boutique” approach because our property advisors will assist you from the outset, including preparing a bespoke selection, visiting properties and assisting with negotiations.
The search criteria should be tailored to your specific objects, but should at a minimum contain items such:
Online: Nowadays there are numerous portals and websites that can give you a general idea of the market. However, it should be noted that a considerable percentage of online advertisements are either out-of-date (showing properties that sold a long time ago) or have incorrect information (for example, developers will generally publish the cheapest unit or omit specific issues). For this reason it is important to have a trusted advisor who give you the exact information.
2. How to approach negotiations
When you finally find the right property, it is best to speak with your agent and agree together on the next steps to secure the best price and conditions.
Your agent will be able to guide you during the negotiation process. This usually involves an initial offer, to be followed by acceptance or a counteroffer until both parties reach a verbal agreement.
A verbal agreement is generally non-binding and does not give any certainty to either party. As a result, in order for the property to be taken off the market and to fix the price and terms, it is necessary to sign a reservation document or a private purchase contract (or PCC).
3. What is the right price for a property?
For resale properties purchased from individual owners, the listing price generally allows a margin for negotiation. This logic does not apply to new developments because prices are set by the developer, who most likely has financing obligations from a bank and must respect some parameters. In addition, developers will not generally grant substantial discounts because this upsets earlier buyers. In this sense, buying a new-built property is like buying a new car, with a narrower scope for negotiation, but with all the applicable guarantees and protections, such as a bank guarantee for deposits and a 10-year warranty for structural defects.
The scope for negotiation depends on the specific circumstances. For example, if a property has been on the market for some time, the owner may be willing to grant a discount (this could be 5% in most cases or
even 10% in very extreme conditions or if the listing price is already high). This is especially the case of a cash buyer (i.e. with no mortgage financing) who can complete quickly and without any conditions.
On the one other hand, if the property is an excellent deal, it is unlikely that the seller will accept a major discount. In fact, if one is dealing with an excellent opportunity, it is advisable to pay a reservation promptly to avoid losing the deal.
The bottom line is not how big the discount is, but if the price is fair based on neighbouring properties, location and the market as a whole.
4. What documents and contracts need to be signed?
(I) Reservation Document
The first document to be signed in most cases is the reservation contract. The reservation amount would depend on the value of the property, but it could be about €5,000-€6,000 for most apartments. More expensive properties such as a luxury villa will likely require reservations of €20,000 or more.
The reservation contract is likely to be very brief (1-2 pages). It will fix the price and the property will be taken off the market for some days.
(II) PPC – Private Purchase Contract
The PPC (or private purchase contract) is signed some weeks after the initial reservation. It is normally negotiated by the parties’’ lawyers. The PPC will generally set out all details of the transaction, such as the timeline, description of the property, payment terms, legal obligations and so on.
In most PPCs the buyer pays a 10% deposit, which forms part of the price. This deposit is not generally refundable, so the buyer will lose the deposit if he changes his mind or otherwise cannot complete the purchase within the longstop date. On the other hand, the seller must return twice the value of the deposit to the buyer, if the seller cannot complete the transaction because he changed his mind or otherwise cannot fulfil the contract (for example, if the charges could not be cancelled).
For new-built properties purchased from developers, the PPC may require a larger deposit, but one should be aware that in this case, pre-completion payments are protected by a bank guarantee (which protects buyers if there is a substantial delay or if the developer goes bankrupt).
(III) Escritura de compraventa – Purchase Deeds
Under the Spanish legal system, it is necessary for the transfer of ownership to occur by way of purchase deeds, in Spanish known as “escritura de compraventa”, which must be signed before a Spanish notary.
Completion (signature of the deeds and transfer of legal title) could be done in person or by your lawyer if he has power of attorney. This process involves signing the purchase deeds at the notary. The keys (possession) and a banker’s cheque from the buyer (cheque bancario) are exchanged simultaneously. Your lawyer would have completed the legal due diligence on the property beforehand, but the notary will also check that the seller is the legal owner and undertake some last-minute searches at the land registry.
5. Special considerations for international buyers
(i) Obtaining an NIE (Numero de Identificación de Extranjero) or ID Number for Foreign Nationals in Spain. The NIE can be requested in person at a Spanish Consulate or at the National Police Station, but it is advisable that this is sorted by your lawyer or representative as soon as possible. An NIE does not result in Spanish tax residency, but it is needed for most bureaucratic steps, such as paying taxes, registering land ownership title or buying a car.
(ii) Opening a bank account. In Spain it is possible for international buyers to have a “non-resident” account. The latter applies to buyers who are not tax-resident in Spain. Opening a bank account is straightforward because local banks in Costa del Sol are experienced at dealing with international clients. In accordance with EU regulations, it is necessary to show photo ID, proof of address and source of funds.
(iii) Financing. Local banks in Costa del Sol are experienced with financing purchases by international buyers. They will generally require standard documents like proof of income, tax declarations and credit reports. International buyers are also advised to consult a specialised mortgage broker, who may be able to circumvent many of the complications and secure a better rate.
6. What are the standard post-completion steps?
As soon as the deeds are signed at the notary, the buyer becomes the new legal owner. This will be followed by post-completion tasks which are normally completed by the buyer´s lawyer. These include:
(i) Paying the relevant taxes. If the property is a resale property, the buyer will have to pay the land transfer of Andalusia known as ITP “impuesto sobre transmisiones patrimoniales”. New-built properties will be subject to VAT and a stamp duty tax known as “acto juridico documentado”.
For further details on taxes and the applicable rates, please see Golden Properties’ Tax Guide.
(ii) Registering title. The registration of title in Spain is not obligatory. However, it is done all the time to safeguard ownership and avoid any liabilities from the previous owner.
(iii) Council tax (IBI). Spanish properties are subject to a local tax called IBI (Impuesto sobre Bienes Inmuebles). The amount does not tend to be considerable but depends on the municipality and indexes published by the tax office.
(iv) Connecting water and electricity. This is done by your representative or lawyer.
(v) Registering with the padron. Local authorities have a list of residents called the “padron”. Registration does not result in Spanish tax residency, but it is advisable for accessing some local services or to secure a discount with the local IBI tax bill.
Most of the above can be completed by your lawyer or property managers.
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