Natalie House buyers should know the common pitfalls of buying a property in Spain because this is a considerable investment. Of course, you want everything to go smoothly for your dream purchase and that sun and sea lifestyle. Buyers of homes in Spain look forward to dining Mediterranean style and enjoying the Spanish culture while making a wise real estate investment.
However, as with any house sale worldwide, there is red tape, stress during the property search, and strict legalities to follow during the purchase process. While property sales going wrong is rare, forearmed is forewarned. Buyers who are knowledgeable about the pitfalls, confidently steer their property purchase in Spain. So, let’s look at what information to know.
Common Pitfalls of Buying a Property in Spain
1: Property Tax
There are two prices when declaring the tax value in Spain of properties. First, the valuation estimation and then the market purchase price. If the valuation is higher than the market price, that is what buyers pay property tax on. Secondly, Spanish authorities will claim the difference later if property buyers pay under the tax rate, with property tax fines incurred.
2: Currency Fluctuations When Buying Property
One crucial aspect all buyers of property in Spain need to be aware of is the currency fluctuations if your income is in a different currency to the market Euro. Source an exchange company, to lock in rates and secure better currency exchange and transfer fees and rates, rather than using banks. Home buyers can save hundreds this way.
3: Illegal Properties and Registration
Lawyers perform necessary checks, including whether the home in Spain is legal and registered with the land registry. If they do come back with disappointing news, make a choice. Instruct the seller to sort out the legalities; in this case, the purchase becomes long and drawn out. Or lose your deposit.
4: Not Using a Good Lawyer in Spain
Not employing a lawyer may sound tempting to save money on fees, but we strongly advise all buyers of property in Spain to use one. First, many foreign buyers in Spain don’t speak Spanish, so finding out all the information to safeguard your investment is a headache. Secondly, you will require assistance without good knowledge of Spanish customs and culture. Lawyers are there to help with legal conveyancing like urban planning records, help and legal advice, and purchase contracts. Generally, they ensure your purchase goes through as required by law.
5: Residency to Live in Spain
When buying property in Spain, foreigners can only stay for three months. Any time after this goes into the residency factor. For those who dream of living in Spain or even moving to Spain for the winter, factor extra residency costs into your yearly budget. Residency visas are simple to complete, as seen in thousands of foreigners who live in Spain already.
6: Complex Maintenance and Ongoing Costs Involved
When buying a villa or an apartment in a complex in Spain, you will pay yearly maintenance fees for communal upkeep areas like the swimming pool. Factor this into your annual budget because failure to pay can result in court action and loss of property. Additionally, your Spanish law firm can check to ensure no maintenance debts during the purchasing process. Remember to pay all complex maintenance via a Spanish bank account.
7: Extensions and Renovations
When buying an older home in Spain, chances are there has been extensive renovation work or extensions like swimming pools added. However, in some cases, the property owners in Spain did not declare these changes to the land registry. The thought never occurred that an extra room would need permission. Your Spanish law firm will check for common mistakes like these when buying.
8: Not Understanding the Legal Contract
In most cases, international buyers assume the Spanish property buying process is the same as in their home country. Hence, they don’t take the time to understand the contract, Spanish bureaucracy and what they are liable to pay. Therefore, read it very carefully, and double-check that you are not paying costs or property tax that the seller should. This is important to ensure your dream Spanish property doesn’t become a nightmare.
9: Buying Resale Properties
Furniture, appliances, and other household items are included in many resale properties. Therefore, have an inventory when drawing up the contract in Spain to avoid misunderstandings or the seller changing their minds. Remember, the house should be sold as seen. When you do enough property research, all these details should come up.
10: Rental Incomes in Spain
Real estate investors who plan to generate tourism rent income from their Spanish property should do as much research about regions before buying since many places in Spain are saturated with them. Additionally, find out if there are any local, regional, and country-wide restrictions on tourism lets.
11: Buying Off-Plan Properties and Spanish Law
The Spanish government introduced laws to protect purchasers of off-plan properties because developers previously went bankrupt, and people were left to pay a mortgage for a non-existent property. Therefore, if buying an off-plan property, only use developers in Spain who has bank guarantees. This will protect your deposit and staged payments if construction does not finish.
12: NIE number and Bank Account
Many people think finding a property is the first step in Spain’s buying process. However, it isn’t. For a smoother and quicker purchase, get your NIE number first. This is a foreign identification tax number. Also, open a Spanish bank account to ensure a paper trail of all payments and costs involved and to pay future bills.
13: Local Research
Some foreigners buy property where they have holidayed for years. However, vacationing and being a property owner are two different things. Do local research on property values, urban planning records and amenities and pre-empt any situations, such as paying the electric bill and property taxes.
14: Be Financially Prepared for Your Property Investment
One of the biggest pitfalls is additional costs before searching for your first Spanish property. Remember to factor in extra costs, associated taxes, related estate agent fees, and mortgage and legal fees alongside the property purchase price—also, factor in future fees like the yearly running and maintenance costs.
Good financial preparation is vital during the purchasing process. The costs vary depending on whether you buy new or resale property. New properties include VAT and stamp duty called IVA & Actos Jurídicos Documentados. Anyone purchasing a resale home will pay Impuesto Sobre Transmisiones Patrimoniales. Additionally, an income tax is required if buying from a non-resident.
Is It Wise to Buy Property in Spain Now?
The Spanish real estate market is always good. But it is not about the market in general but regional markets. Some perform better than others, and some have no potential future for capital appreciation. There are also other factors and necessary fees that will go towards ensuring your property purchase is a success rather than a dud.
- To buy with a mortgage, do as much research as you do the property search. Low-interest rates, reasonable legal and mortgage fees, and checking the small print are essential.
- If you buy a holiday home, consider who will look after the property when you are not there. Imagine an unexpected flood sitting there for months until you arrive. Some people entrust friends, while others employ a key management company.
- Forget about flipping houses in Spain. Buyers need expert local knowledge to grab the best deals and ensure a smooth buying process, and the hassle involved in renovation works is a nightmare to navigate. The unexpected costs can also turn your bargain into a cash drain.
- Look for a regional market with high liquidity. These tend to be the big cities and coastal resorts in southern Spain that attract both Spanish and international buyers.
- For capital appreciation, investigate future community investments. These can be public facilities like shopping malls by private corporations, or council plans to modernise and upgrade infrastructure. In most cases, check for these at the local town hall.
- Lastly, have a positive mental attitude because there are many opportunities, and we are on hand to offer professional help.
Also, About Property in Spain
Property Buying Process: If you want to know more about the purchasing process in Spain, rest assured of a straightforward procedure. Experts say buying a property is highly stressful, so property purchasing overseas naturally makes buyers nervous. However, research, the best knowledge, and taking your time go a long way in making the buying process easier. This guide and article explain everything.
How Much is Spanish Property? Occasionally, we get inquiries about how much property is in Spain, the extra purchasing costs, and any other financial aspects to consider. While we can answer the latter two questions directly, potential homebuyers should narrow down to specific regions for property values. Therefore, this article talks more about detailed local research.
Contact Us: We are Spot Blue International real estate agents, and we have helped hundreds of buyers conduct satisfactory property research in Spain. Contact us today and talk with our locally based property experts about the many pitfalls of buying property in Spain. Otherwise, do your property research on our portfolio of apartments and villas in many different areas of Spain. Each listing contains everything, including price, location, home features and how to arrange property viewings in Spain.
