Discover how to buy a home in Spain as a foreigner step-by-step in this complete guide! You are about to go over the complete list of requirements to buy a home both as a resident and as a non-resident, how the legal process works step by step, how long the process exactly takes, and much more. We will analyze the main risks and mistakes that you should avoid committing, as well as tips that will be very useful to create an easy and safe procedure.
About the Spanish property market
The property market in Spain presents great opportunities. And that is true both for foreign investors and for expats willing to settle in the country with their families.
After the 2008 crisis that completely devastated the real estate sector in Spain, the overall market situation has improved since then.
Nevertheless, we are talking about a very special market. As the whole country in general, each region operates differently. And being aware of the nuances and differences that arise between regions is a must.
For example, if you want to rent an apartment, knowing where to find the greatest deals is crucial; as in cities like Madrid or Barcelona rents are just too high.
In order to give you an overall idea, you can find in this article our predictions and characteristics for the Spanish property market during 2020.
Can foreigners buy a house in the Spanish territory?
Yes, any foreigner can purchase a house in Spain. Nevertheless, there is one difference. In case you are not a Spanish national, you will need to take one extra step prior to the purchase.
Don’t worry, it is really simple (if not, we can help you out).
What are we talking about?
The first thing you should do is to get your NIE number. It is the basic identification number that all foreigners must obtain once entering the country.
Furthermore, we must make a distinction here. Because depending on your country of origin, things change:
If you are from a European Union country
If you are from a European Union country, there are two types of NIEs:
- The temporary NIE number, for those individuals who do not want to live in Spain. For instance, if you are planning to visit the country and realize the purchase, but then leave, this will be the type of ID you will need to request.
- Conversely, a resident NIE (a permanent one) for those who actually want to.
If you are a non-EU citizen
On the other hand, let’s say that you are a non-EU citizen. In that case:
- You can apply for the Resident NIE number if you are a Spanish resident (if you live in the country more than 183 days per year).
- Non-resident NIE, if you are not living in Spain but would like to buy a property either way.
Can I buy a home if I am not a resident?
Yes, it is totally possible to buy a home in Spain even if you are not a resident.
As we have already mentioned, the foreign non-resident buyer will be required to obtain the NIE in advance, which must be requested at the General Immigration Office.
This request must be accompanied by a photocopy and original of the complete passport or identity document, as well as the communication of the economic, professional, or social causes that justify the request in question.
In addition, we recommend that the person who intends to acquire a property open a bank current account in Spanish territory (even if he is not going to reside in the country), since this way he will be able to prove the economic means of payment of the price of the sale and of the corresponding taxes.
This step is not required, but it will certainly make the process easier.
Do you have any doubts so far? Ask anything to our lawyers here or keep reading for more information:
How to buy a property in Spain as an expat
The process of purchasing a property in the Spanish territory can be divided into three different steps:
- Down payment: procedures or diligence that arise prior to the purchasing of the property
- Public deed: formalizing the purchasing contract
- Formalities and procedures that come after the purchasing moment
How long does it take to buy a house?
It depends. There are cases in which you can complete all the steps in just one or two weeks, provided that everything works smoothly between buyer, seller, and agency. But it can be much longer if any contingency arise.
Let’s analyze the property purchasing process in a more detailed way.
1. Legal procedures prior to the purchase
In this section, a series of diligence prior to the signing of the binding contract between both parties is born: the so-called diligence of the property.
What does this process consist of? Basically, it consists of a review and verification of all the documentation of the property in the registry, as well as the validity of those papers.
We will first analyze the documents you will need here. And afterwards explain, step by step, how should you manage this first part of the purchasing process.
Documents you will need before buying a house or flat
Already with your NIE number and the house you are willing to acquire, there are now 3 documents you will need to sign:
- The reservation contract. It normally is 1% of the property price. This percentage represents a tiny amount that you should pay in order to officially make the offer to the seller of the house.
- If the seller accepts the offer, you need to pay the pre-sales agreement, which is 10% of the amount of the price.
- Deposit contract
Once you have a copy of the notarial deed containing information regarding the registration of the property (for example, who is the owner of the property), you can go to the register and request a simple note, a document by which we can see that the property is free of duties and charges (such as mortgages).
Pre-sales agreement (“contrato de arras”)
In addition, on a large number of occasions, before signing the public deed on the notary, a prior contract is signed, pre-sales agreement or “contrato de arras”, which is not mandatory.
This pre-contract between buyer and seller has the purpose of formalizing the transaction between both parties: the buyer shows his clear intention to acquire the property, and the seller her intention to sell.
As we have said, it represents 10% of the total price. Once paid, the seller is obliged to sell the property. But what happens if she doesn’t? Good news. She then has to give you back double the amount you paid (20% of the total price).
But be careful. If you, as a buyer, don’t want to finally purchase, then you will lose that money.
Finding financing and preparing for the notary
After the pre-sales agreement is made and paid, there is usually a 3-month period in which you can find financing from a bank, or just wait. Once that period is over, you will go to the notary to pay the remaining 90%.
The payment conditions will be defined in the deposit contract. In it, the purchase price will be established, the payment method defined (whether it will be fully paid in advance or it will be paid in installments), and the deposit (for practical purposes, a common down payment).
However, this document, unlike the public deed (as we will see right now), can not be used for registration to the property registry in Spain.
2. Public deed
Once you sit down with the notary, you will proceed to draw up and sign the sales contract.
That is the time in which you do the due diligence of the property. The seller is requested several documents in order to verify that she is the real owner, that there is an actual agreement to sell, no inheritance or tax problems with the property, no debt with neighbors…
A full check regarding any legal issue that could affect the house or flat that is being sold will be done.
Important advice: hire an architect and a lawyer
This is crucial and will avoid many problems.
Our advice here is to hire an architect to do an architect report about the flat situation, in order to determine that no damage to the building is present.
This part of the process is undoubtedly one of the most important, since a meticulous analysis of the contract will be needed, so as to neither party gets harmed. Buying a property that has problems with the city hall for town-planning reasons, and that is something you discover after the final payment… is for sure detrimental.
That is why we recommend you to receive help from our specialized property lawyers in Spain. Why? Because we will accompany you during the whole process of buying and/or selling the property from the beginning, and we will make sure that there is no clause that could go to your detriment.
Furthermore, we developed a checklist that will guide you during the procedure. The checklist contains all the issues you should consider before buying a property, and you can have access to it here.
Signing the contract with the seller
Once the transaction is completed and contracts signed, the house can be registered in the Property Registry under the ownership of the buyer (now the new owner).
Of course, each of these legal steps will have additional costs. How much, exactly, will those be? You can learn here about all the total costs when buying a property.
3. Legal procedures after the purchase is complete
Once the purchasing contract on the notary has been signed, the process hasn’t yet finished. There are 3 remaining steps that you must follow in order to deal with all the diligence that may arise:
- First of all, you must register the property in the Property Registry, identifying the new owner (you).
- Then, you must fill in the corresponding forms referred to the payment of property transfer taxes: the property transfer tax and the stamp duty, to the Autonomous Community in which the property is registered. You have 30 days to realize that payment.
- Finally, you must transfer the ownership of public services; such as gas, water, and electricity.
How long does it take to buy a house in Spain?
Being aware of the duration of the entire process is important to plan everything perfectly.
As we have seen, the process is made up of several phases.
First of all, what you should do is find the house that is ideal for you and the one that suits you best. That is, the one you really want to buy and feel comfortable with.
This search usually lasts from about 3 months to up to a year, depending on the buyer’s requirements and how picky she is.
When carrying out this search, you must take into account several aspects, such as the city or town in which the house is located, the surroundings and how close you will be to places such as public transport, shopping centers, hospitals, etc.
Once you have located your ideal home, the actual buying and selling process will begin. This can last from 2 to 3 months until you finally receive the keys (see the previous section).
But keep in mind that this process will take longer if you decide to apply for a mortgage. If this is the case, you will have to add a few more weeks, since the bank requires time to verify and prepare the necessary management.
Our recommendation is simple: plan the entire process well in advance to avoid setbacks.
Taxes when buying or selling a property as a foreigner
There is no denying the fact that taxes will be next to you in any legal process. In that sense, not only will you pay taxes when buying a house, but also if you plan to sell it.
And knowing which are the specific taxes beforehand is crucial so you can plan accordingly.
Taxes when buying a property: Property transfer tax
As we have mentioned before, you will need to pay the property transfer tax. And the exact amount will depend on whether the flat or house is new or not.
If you are buying a second-hand house, the tax amount to be paid will be equal to 10%.
On the other hand, if we are talking about a new promotion, the VAT is 10%, and then you have an additional 1,5% that needs to be paid as a new registration. Therefore, buying a brand new flat in a brand new building implies paying a total amount of 11,5% in terms of taxes.
But if you are a young individual we have some good news for you. Because if you are under 32 and you declare that the house or flat which you are buying will be the place in which you are going to live, then that 10% turns into a 5%.
Capital gains tax when selling a house
If you are the one selling the property, you will need to pay mainly between 19-24% (provided that you are a tax resident), depending on the case, on capital gains tax (there is a scale). That tax percentage will be applied to the benefit obtained from the property. This means, the difference between the selling price and the price you paid when acquiring the property.
And what happens if you rent the property? As that will be considered an income, capital gains tax will be also applied, at the same tax rate.
Can you deduct any expenses? As a non-resident, you will just be allowed to deduct the expenses from the real estate agency, from the lawyer, and from the notary. Anything else. Nevertheless, the list of things you can deduct is larger in the case of being a resident in Spain (more on how to determine if you are a resident or a non-resident in Spain in our tax post).
Buying a property with cash, deposit and how to finance the purchase
In the event that you consider paying for the property in cash, you should bear in mind that Law, 7/2012 of October 29 limits the amounts that can be paid in cash when making transactions in Spain.
For anyone who is not a tax resident, the amount is set at € 15,000.
So you will have to pay for the house by making an international bank transfer if your money comes from abroad. Likewise, you should be aware that this type of transfer has a high cost due to the commissions set by the entity for the currency exchange.
On the other hand, financing.
Non-resident home buyers in Spain can enjoy the same mortgage conditions as Spaniards, that is, up to 80% coverage in the case of a first home, and between 60% and 70% in the case of a second one.
This means that you only need to have a minimum of 20% of the available house price, in addition to approximately 15% extra on the cost of the house to pay taxes, lawyer, notary, property registration, etc.
Also, your debt cannot exceed 30-35% of your income.
You must also bear in mind that in Spain mortgages are contracted for a minimum of five years and a maximum of thirty, with 75 years as the maximum age to finalize the mortgage.
It should also be said that each bank or entity has its own risk criteria, in which the country of residence can be included, and that properties abroad are not usually accepted as collateral, since it is difficult to reach them.
Best places in Spain to buy a house
The average price of housing in Spain is about € 1,886 per square meter.
Therefore, if you do not want to invest a lot of money and find really good deals, you will have to move away from the big cities (such as Madrid and Barcelona, some of the most touristy, populated and therefore expensive areas).
The cheapest cities in Spain to obtain a home are usually located in inland areas; although the metropolitan areas of the big capitals also offer good market conditions.
On the other hand, if you are looking to invest in homes to generate profits, the best cities in Spain are Madrid, Barcelona, Valencia, Malaga, and Bilbao.
All of them are large provincial capitals that, either because of the job or study offer, or because of their high tourist and leisure interest, concentrate the largest number of housing developments under construction, and because it is also where there is the greatest demand for housing and land available where to build.
How to buy a home and get Spanish citizenship
As of 2013, the law to support entrepreneurs and their internalization came into force in Spain. This new Law allows foreign citizens who intend to invest (either in companies, talent or real estate) to obtain their visa in Spain in an easier, in a more agile, and faster way.
This visa, known as the golden visa or investor visa, brings the foreigner closer to Spanish nationality. That is because each year in Spain with that residency accounts for the total number of years required to obtain nationality (the general rule establishes that it is 10 years, but for Ibero-Americans the amount is reduced to 2).
This residence visa for investors in the event of the purchase of a property in the Spanish territory is granted as long as they meet the following requirements:
- The acquisition of real estate in Spain is carried out with an investment of a value equal to or greater than € 500.00 for each applicant in a period not exceeding 50 days prior to the submission of the application.
- The visa must be requested in person or through a duly accredited representative.
- The request must be submitted a maximum of 90 days in advance of the planned date of travel.
- The residence permit allows you to reside and work throughout the national territory.
Thus, the validity period of the visa will be:
a) 365 days, if the purchase has already been formalized
b) 6 months if the purchase has not yet been formalized but there is a pre-contract with a guarantee of its fulfillment by means of a deposit or other means formalized in a public deed
Once the visa is obtained, the residency card must be requested. This is something that can be done from the moment the visa is obtained and up to 90 days after its expiration; and with that we can now legally reside in Spain.
Subsequently, in order to renew the residence authorization after 2 years in the country, the only requirement is to have traveled to Spain at least once in the period authorized to reside and maintain at least the investment that gave rise to the residence visa.
Accreditation of the sale
At the time of processing the golden visa, the authorities will require us to prove the sale of the property.
In this case there are two possibilities:
If the purchase has been formalized
You must provide:
- Certification with continuous information of domain and charges from the Property Registry that corresponds to the property or properties.
- If at the time of the visa application the acquisition of the real estate is in the process of registration in the Property Registry, the presentation of the aforementioned certification in which the entry for the presentation of the acquisition document is valid and will be sufficient, accompanied by supporting documentation of the payment of the corresponding taxes.
- The applicant must prove that they have an investment in real estate of 500,000 euros free of any charge
If the purchase has not yet been formalized
In this case, the pre-guarantee contract must be presented together with a certificate from a financial institution established in Spain in which it is verified that the applicant has an unavailable bank deposit with the amount necessary for the acquisition, complying with the committed contract, of the property or properties indicated therein, including charges and taxes.
Rely on a real estate lawyer for an easy and safe process
We have just covered the 3 main legal steps to buy a property in Spain as a foreigner. The purchasing process can be long and complex, basically due to the fact that there is an urgent need to take into account many aspects related to the operation (many times small nuances), especially if we do not want to be harmed.
If you still have doubts, good news. We have gathered in an article the 9 most frequent questions that our clients do to us when trying to buy a new house in Spain. Would you like to go over them? You can have access to the real estate questions and answers here.
Nevertheless, you may want to get the help of a specialized real estate lawyer. Getting the right legal advice as an expat is key. He will draft all the contracts and look after you during the whole transaction, making sure you are fully protected and you avoid losing money.
At our office, we have dealt with many foreigners who wanted to purchase a property. And now we want to help YOU out.