STEP 4: The real estate buying process
After you have decided which home you want to buy, we recommend that you consult with your tax specialist/accountant/bookkeeper. It is also advisable to employ a competent local lawyer in Spain who specializes in real estate. We have experience with capable Dutch-speaking lawyers / economists / tax specialists from Marbella who we can warmly recommend to you if you don’t know anyone yourself. The use of a lawyer is common in Spain. He can advise you extensively and does the ‘due diligence’ research work (comparable to what the notary does in Belgium). The lawyer is indispensable. He guides you step by step.
Only after consulting your local real estate lawyer should you conclude the agreement with the seller regarding the price and other conditions. You will also need to sign a reservation agreement and pay a deposit (normally between 6,000 and 15,000 euros (Can be higher if we’re talking +€1M. Varies per property). This effectively takes the property off the market and the price frozen. The deposit is non-refundable if you decide not to proceed with the purchase (unless there is a written agreement stating otherwise, for example if a mortgage is required but not granted or the legal due diligence of your lawyer advises against the purchase).
The lawyer can help you set up a Spanish bank account and obtain a N.I.E. (Número de Identidad de Extranjero – the required Spanish tax identification number, assigned to a foreigner acquiring a property in Spain). More importantly, your lawyer will conduct full due diligence on the property you intend to purchase, as well as the seller. This process will include basic verifications of whether the land and building are properly registered with the local real estate registries, whether first occupancy licenses and building permits are valid, whether the title is valid, whether there are any debts, liens, claims or other restrictions affecting the property or the seller, whether the property meets the requirements of the municipality and general urban planning, etc.
When the due diligence indicates that there are no insurmountable risks to the transaction, the lawyer will prepare a Private Purchase Agreement (PPA). This is a contract between buyer and seller, which is legally binding to proceed with the transaction. Currently, a deposit of 10 to 20% of the total price is required in case of resale of property and 25% to 40% in case of new build or off-plan purchase. The PPA is generally signed between 2 to 4 weeks after the reservation agreement / deposit.
Within 2 to 3 weeks after signing the PPA, the transaction is completed by signing the permanent public title deed (Escritura) before a notary. For new construction this can be much later, namely upon completion. At this point, all debts and other obstacles to the sale are cleared by the seller and the buyer must pay the remaining balance of the purchase price. The notary registers the new ownership in the public property registers and you now receive the keys to your new property.
Now your law firm still has some follow-up to do: transfer water and electricity to your name, register you as the new owner with the municipality and pay fees, take out insurance, arrange telephone and internet connections, register and pay the annual tax return for real estate, etc.
Ask your lawyer about capital gains tax if you want to sell your Spanish real estate again after a few years. Finally, know that you must declare your second residence abroad and any income therefrom to the Belgian tax authorities (you may deduct the property taxes paid abroad).