“10 steps to buy Costa Blanca Property ”

There are too many horror stories of people losing their money or property because they bought without knowing what they were doing. This is the major reason we set up this Consultancy – to help people through all stages of the buying process and to ensure that it is less of a burden and more of a pleasure.
Here is a step-by-step guide to buying property in Spain.

Step 1 – Do your research!

Before you embark on a property-buying trip you need to decide which area of Spain you would like, but also one that you can afford. Look at several web sites or advertisements in the press to get an idea of realistic prices (NOT TV programmes as they give a false impression) – so many people are disappointed because they arrive expecting a 3 bedroomed villa with pool, but only have the price of a 2 bedroomed apartment! Generally, inland prices are the cheapest and coastal areas more expensive, but bear in mind that inland there is very little English spoken and frequently only the local dialect used.

Step 2 – Type of property

Your choice of property is also dependent on whether you are looking for a holiday home or a permanent residence and whether you wish to live among the Spanish or in an ex-pat community.

Holiday homes need to be secure as they are left empty, so usually apartments or small urbanisations with communal facilities are the best choice and a good first step on the Spanish property ladder. Detached villas with pools have to be maintained when you are not there, which is an additional cost, and are more vulnerable.

The Spanish people are very friendly and if you wish to live among them they tend to live in towns or villages, in townhouses or apartments. Villas and coastal fincas (farmhouses) are usually owned by ex-pats of several different nationalities.

Some Spanish property terms:

Bungalow – an apartment with a garden, normally in a block with another above or below
Duplex – a two storey terraced house
Chalet – what you and I would call a villa…
Villa – a very large, expensive detached house
Finca – a farmhouse usually with a minimum 5 to 10,000 sq metre plot of land
Hacienda – the main house of an estate owner (also the name of the Spanish tax office!)

Step 3 – Costs

You need to allow around 10% of your purchase price for extra costs, such as legal representation, Property Purchase tax, Land Registry fees and Notary fees. You may need more than this if applying for a mortgage (see Mortgages).

Step 4 – Mortgages

Spanish mortgages are easy to obtain and are usually at a cheaper rate of interest than the UK. You do not need to be resident in Spain. As a foreigner you are entitled to a mortgage of up to 70% of the value of the property (not including costs).

All you need to bring is your last 3 months wage slips or last tax year accounts or any similar proof of income. The amount you can borrow is determined by the monthly repayments being calculated as being no more than a third of your monthly income. At the moment Spanish banks have no way of checking if you already have a mortgage in the UK and cannot contact your employers for verification of your income.

The bank fees for arranging the mortgage are quite high, but include all the costs mentioned above, a valuation survey, searches and legal representation for the bank at the Notary. You therefore do not necessarily need your own legal representation and can save money in this respect. You should allow up to 15% extra for costs on top of the 30% deposit and this will not be allowed to be included in the mortgage. Therefore you will be expected to find up to 45% of the value of the property.

UK mortgages can also be obtained for buying property abroad and although at a higher interest rate you may be able to borrow a higher percentage and/or cover your costs.

Step 5 – Legal Representation

The amount of people who buy property in a foreign country without legal representation is very high and than when they neither speak the language nor have any knowledge of the legal system! Some estate agents will assure you that they will do all the legal business for you (similar to a conveyencor in the UK). Firstly check that they are API trained, but also ask yourself that in case of a problem exactly who are they representing – you or their client? Therefore it is always safest to employ your own legal representative who will ensure your interests are paramount.

Legal representatives in Spain fall into two categories – Gestors (pronounced Hestor) and Abogados. Either are licensed to carry out property purchases. The main difference is that Abogados are more qualified and able to represent clients in court (similar to a Barrister) where Gestors are more like an ordinary Solicitor. This is also reflected in their fees. Gestors charge between €500 to €1,000 whereas Abogados charge between €1,500 to 1.5% of the purchase price.

Step 6 – N.I.E.

In order to purchase anything in Spain, even a car, you need a National Identity number. This involves going to a central Police Station with your passport and two passport-sized photographs.

Step 7 – Opening a Spanish Bank account

You will also need to open a Spanish bank account.

Step 8 – Deposits

Once you have found your dream home and negotiated an agreed purchase price you will want it taken off the market. In order to do this you need to make a small deposit (normally between £1,000 or €1,500 to 1% of the purchase price). This could be a returnable deposit and is only for a short period of around 14 to 21 days to give you time to either arrange a mortgage or to have your money transferred from the UK.

At the end of this period the balance of the full 10% deposit is required. This is a non-returnable deposit but gives you the security of not being “gazumped”. A contract is entered into whereby the agreed price is noted and the Notary date is agreed. This is usually within a month, but can be longer if both parties agree. If either party defaults on the contract they have to repay the other party the 10%. This means not only do you get your 10% deposit back, but also 10% from the vendor to help cover your lost expenses. Equally if you default, you lose your 10% deposit. Therefore if your purchase in Spain is reliant on you selling your house in UK it is advisable to do this before you come here to look for property, as a common reason for purchases falling through here is because it takes so long for sales to go through in the UK.

Step 9 – Transferring Money

There are many different ways to transfer money from the UK to Spain and we can advise on the most cost-effective way depending on your circumstances. The most expensive way is through your own bank, so take advice from us before you act!

Step 10 – The Notario’s office

All legal transactions in Spain are carried out in front of a Notario. These are highly qualified completely impartial professionals from a legal background (higher than a judge) and are responsible for ensuring the legality of all contracts and that all parties understand and agree the contracts they sign. All parties must be present at the signing unless they have awarded Power of Attorney to their legal representative, but this is a costly procedure and it is usually cheaper to be present yourself (we will be there with you to ensure you understand all the procedures). All monies are handed over at this time and the keys, as the premises are usually vacated prior to this unless agreed otherwise.