Define what does your family need ?

Generally speaking, if you have young or teenage kids, your life will be a lot easier if you a buy property that allows them to have fun without you having to drive them everywhere. Residential estates that attract families are ideal, as both parents and kids are happy.

What sort of maintenance budget do you have ?

You need to be clear about the maintenance costs that different properties involve, and budget for them before you purchase. Otherwise you may find yourself owning a property that is too expensive for you to maintain. A good agent will give you a guide to the maintenance costs of different properties. For more detail on the sorts of costs you will face see the ‘Owning a property’ section of this guide.

How much effort do you want to put into maintaining the property ?

Essentially it is just the end of the beginning when you complete the purchase. Property in Spain, as anywhere, doesn’t look after itself, and maintaining property in a foreign country can be more of a challenge than at home. Depending upon what you buy, you may find yourself having to deal with local government, local builders, cleaners, plumbers, gardeners, and what have you, and all in Spanish.

Is investment a primary or secondary concern ?

Many people have bought Spanish property in recent years primarily as an investment, both in terms of rental income and capital gains. If you are buying as an investment then you have to focus on the type of property with the greatest potential in these terms. A good property agent will be able to advise you on the factors that drive property investment returns, along with the tools to help you analyse them. If you are buying primarily as property for living in and enjoying, then you will find you have a wider choice of properties.

Will this be a holiday home for a few weeks a year, or will it be a main residence for spending all or part of the year ?

A holiday home means you probably will not be there for large parts of the year. Therefore you will need a property that doesn’t require a great deal of attention on a regular basis. The last thing you want is for your holiday home to become a burden that interferes with your life. Apartments or villas on urbanisations (urbanizaciones in Spanish) are the best option in this respect as security and maintenance tend to be easier for these types of properties. Perhaps look for something with good rental potential to earn income and avoid leaving the property empty most of the year.

A more permanent home requires greater thought. You plan to spend large parts of the year living there, so you need to be somewhere that offers you the best quality of life. This means considering the local infrastructure and facilities, community, security, accessibility, and so on.

Are you paying the right amount of money for your property or are you being overcharged? Some sellers will give an unrealistically high property value because they hope someone will “bite” or at least to give them more room to negotiate in case someone tries to lower it down. Some especially individual resellers just don’t know how much their property is worth. Sometimes agents and / or developers jack the price up because they believe that foreign buyers won’t know the market values since they’re not from the region. This can happen if the real estate agent dictates the itinerary of your entire visit so you don’t have time to shop around and compare the prices of properties.

Here are some ways to avoid this situation.

Find a trustworthy agent

It is important to find a good estate agent with unquestionable professional and ethical standards if you are to avoid overpaying or even more serious problems.

Spanish real estate agents know how much the real estate values really are since it is part of their job to go around and check the different houses and lots for sale. If they are competent an trustworthy they should have a better idea than anyone else as to the fair market price for a property. If they are professional and ethical they should assist both you and the person selling the home to be able to come to a fair market price (even if they will normally be paid a commission from the total value earned by seller from the sale).

Gain market insight

Do your research and study the Spain property markert. Try to get a feel for how much houses and lots in the area you are interested in really cost. The web is an easy and effective tool for basic research but there is nothing like seeing the properties or even directly asking people who have a personal and professional understanding of the Spanish property market.

Don’t be afraid of robust negotiations

In the Spanish real estate business it pays to get involved in the details. For example you should always ask for very good construction and examine the finishings to see if it matches the highest standards. And play the negotiation game! Bring down the price, be firm on what you want and how much you expect to pay for the property. Say what you don’t like about the property and be very honest about what you can afford and why you would never pay over a particular price.

If you are buying a brand new property or ‘off plan’, the developer will generally have the most attractive financing options to offer to purchasers. The paperwork will be standardised but you’ll want to check the terms and conditions carefully.

Check that the contract stipulates the initial payment, the number of the subsequent payments and when these payments will end. From the sum of these payments you’ll be able to see the true cost of the developer’s financing compared to other options. Make sure you know what happens if you should miss a payment. Usually there will be provision for you to make a certain number of late payments and incur only a small penalty. Make sure that you are allowed to pay off the remainder of the contract at any time without incurring the total remaining interest.

Developers generally offer excellent terms to purchasers who begin payment before the building is finished. This can work in your favour but you must be sure that the developer is reliable and solvent, and that he is able to bring the project to completion. The developer must offer a bank guarantee that assures the return of your total investment if the project stalls or fails. It is important that this guarantee does not cost you anything and details of the guarantee must be documented in the contract or a separate document.

Aside from purchase costs (the actual cost of the property) there are other fees involved before the sale is completed.

Taxes

Before a title deed can be registered into a new owner´s name, or a deed issued for a newly constructed building, transfer tax has to be paid by the buyer. It can come in two variants: Transfer Tax (ITP) at 6% , or Value Added Tax (IVA) at 7% plus Stamp duty (AJD) at 0.5% when buying from a developer or promoter. These two taxes are calculated on the declared purchase price on the title deeds.

Also, the local municipalities charge a tax on the increase of the value of the land since the previous sale. It is not based on the seller´s capital gains tax but on a number of caculations and values set by the Town Halls. This tax is called `Plusvalia´, and according to the law it is the seller´s responsibility, although it is commonly stipulated in the contract that the buyer pays it. It is a point which will be negotiated between buyer and seller. On a property worth 25 million pesetas bought ten years ago, a plusvalía amount of 150.000 Ptas. can be expected.

Fees

• Notary Fees: The scale is fixed by law and may range from 30.000 Ptas. for lower priced properties to 140.000 ptas. for higher priced properties.

• Land Registry Fees: The scale is also fixed by law and are between 30% lower than the Notary fees.

• Legal Fees: Normally charged at 1% of the purchase value increased by VAT currently charged for legal services at 16%.

Saving on Costs

Financing from the developer