You are thinking of buying an apartment in Madrid, or you might even already have your head set on the right apartment for your goals.
However, you have no clear picture of all the things you need to complete this purchase. Some ideas, and some significant experience possibly in purchasing property. But part uncertainty is not the kind of feeling you like to associate to maybe the largest purchase of your life.
I will sum up simply the 5 steps you have to go through when you know the property you want to buy: preparation, property check, pre-agreement, closing and taxes.
The objective is to give you an overview of the buying process, so you know from the start where you are heading.
1. Preparation
The most important here is the financial part.
You need to have a signed official pre-agreement contract for your mortgage.
Do check that you took into account all the costs in a property purchase: you need to add 10 to 15 % on top of the price as a minimum. Then add to this financial, moving, furniture and renovation costs.
Another check you should do before even searching: the legal check.
Your country of origin might apply limitations and taxes for sending money abroad.
Now you are ready to go forward and confidently make an offer.
2. Property Check
I recommend that even before starting the negotiation, you make the minimum background checks.
The first step is to request “a nota simple” which will tell you:
- the owner: check you are talking to the right person,
- the debts linked to the property: a great weapon to know how far you can negotiate,
- the characteristics of the property: double-check the square meters and characteristics.
If everything is in line with what the seller says and you expectations, you can confidently confirm the final offer on which you and the seller agreed.
I strongly recommend a certified Spanish lawyer not linked to the seller or agency, recommended by a friend of yours, checks the legal background for you and issues a final statement.
Keep him involved in all the next steps of the sale.
3. The pre-agreement
We call this official pre-agreement a “contrato de arras” in Spanish.
It is a private contract which commits both buyer and sellers into finalising the sale.
The buyer has to put down an amount, from 3000 € to 10% of the value of the property.
The seller has to give you back the double of this down-payment if he backs off the offer.
Therefore, the more down-payment you put, the more likely you commit the buyer into selling, even if he gets a better offer.
For instance, if you only put 3000 € down, and another buyer makes an offer superior by more than 3000 € than yours, than the seller is likely to change idea.
When you have a pre-agreement contract signed with a down-payment ensuring no counter-offer will rob you this dream property, you can proceed to the final purchase agreement.
4. The closing
The closing is financial and legal.
On the financial side, you need to go to your bank to confirm the final details of your mortgage.
With your “contrato de arras” (pre-agreement), the bank will then issue the final papers and make the routine checks on their side.
Once the bank has given you the final signed agreement for the mortgage, you can then proceed to sign the final sale contract, or “contrato de compra venta”.
Again, get the lawyer you have from the start to check the contract and all legal aspects linked to the property.
This final sale agreement will be signed in front of a certified Spanish notary (“notario”).
This will be the moment the transfer of property and money will be completed. So prepare before with your bank well in advance that they will be able to issue a bank-backed check 48 hours before. Take this very seriously since banks are not always well managed, and this can postpone the sale.
After this contract is signed in front of the notary, you should go directly to register officially the sales agreement at the Spanish Registry. Your bank will be behind you anyway to make sure you do this step, since legally the contract is not valid in court until registered.
The apartment is now yours !
5. Taxes & Fees
As you now have the pleasure to have a Madrid apartment, you now gain the priviledge of paying taxes and fees linked to the property purchase.
The two main ones you must make sure to pay within 30 days are:
- The Tax linked to the sale:
- for second hand properties, “Property Transfer Tax” (ITP or “Impuestos de Traspasos Patrimoniales”): 7% in Madrid (it’s more in Andalucia for instance)
- for new build apartments, VAT (“IVA”): 10%.
- The Stamp Tax (IAJD or “Impuestos de Actos Juridicos Documentados”) to cover the legal work to be done by the local government for the apartment and the credit: between 0,4 and 1%.
And of course, along the 5 steps I explained, other administrative would have been paid to the lawyer, surveyor, bank, notary, buyer’s and even maybe seller’s agent.
Do read “Buying an Apartment in Madrid – The Real Cost” to understand what are the 10-15% of cost linked to the purchase on top of the price.
Do you have now a clear picture of the path leading to the purchase ?
If so, great and keep on reading the blog to learn more.
If you need help to ensure you buy the perfect property, just send us an email !
Yours Madridly,
+Pierre-Alban Waters