General

Thinking of buying a property but don’t know where to start?

Like most transactions that involve a sizeable sum of money, buying a property of any kind can be either amazingly simple or agonisingly complicated. Although a lot of that depends upon variable factors that are beyond your control, there is no reason why you should add to the confusion by not being well informed. Understanding the process, as well as the roles played by the many people who might potentially be involved in a property transaction, will not only make things run smoother, but it will also help you to make the right decisions. The whole process starts with looking for a property. There are so many options out there that it might be a mistake to see too much, you might end up more confused than when you started looking. To avoid this problem, choose a professional and reputable estate agent, or a trustworthy consultant with sound local insight, who will have the expertise to successfully assess your requirements and who will only show you properties that are of real interest to you.

As part of their total service, Extraspain Consultants brings you into contact with a reputable professional lawyer and gestor.

Buying a property

As in all countries, the buying or selling of a property in Spain follows rules, regulations and procedures that are highly specific to this country, engrained not only in its legal and commercial practice but also in the local culture. Things have come a long way since the early days of the holiday home boom, when red tape, delays and confusion reigned supreme, yet for foreigners buying here for the first time, coming to grips with a new language while dealing with the unfamiliar processes can still be a bit confusing. This page provides a concise overview of the main elements, offering buyer and seller alike a handy and useful guide to property transactions in Spain.

1. The first step to buying a property is orientating yourself. Becoming familiar with the prospective area and what you can get for your money is very important. Naturally there is no substitute for visiting it yourself, but to save yourself many days and miles of driving around unnecessarily it is wise to make use of the handy magazines and websites that can allow you to zoom in on the areas, price categories, property types and service providers that fit your requirements.
2. In most cases, the most important of all the service providers you will need in the course of a property transaction is a locally knowledgeable consultant, since foreign real estate agents have until very recently not worked in Extremadura. Analysing magazines and websites, along with word of mouth, will help you pick a professional and reputable property consultant, who will not only have the right kind of properties on his books, but also be reliable and provide a full range of support services.
3. In addition to showing you the kind of homes that suit your budget and lifestyle, a good property consultant will also provide invaluable information about the respective characteristics and investment value of different areas and property developments. When you have found the right property, your consultant will make an offer on your behalf (in the case of re-sale properties only). Negotiations might follow, but once a price has been agreed it is important to appoint a lawyer.
4. The lawyer will formalise the agreement, which will set price, deposit and completion dates. In Extremadura, you the purchaser generally have a say in these completion dates, which can be anywhere from 30 – 180 days. The lawyer will also check that the home’s documentation is in order and that there are no outstanding fees, taxes and debts up to the official date of purchase.
5. Once the above has been cleared, you will have to pay the holding deposit (usually 10% of the purchase price), which will ensure that the property is taken off the market and reserved for you. This usually includes the signing of an Option to Buy.

   Having worked throughout Extremadura since 1998, Extraspain Consultants often suggests a suitable, locally operating bank for providing you with a mortgage, generally up to 60% of the purchase price. Part of the local bank’s procedure is to perform a title search and to appraise the property. Because of their local knowledge, such procedure takes the bank chosen but little time.

6. On the set date for final completion, buyer and seller (or their authorised representatives) come together to sign the title deed and pay the balance of the purchase price. The notary witnesses all the documentation related to the transfer of ownership, so it is important that they mention the property to be free of outstanding charges or tenants. Once signed over and paid for the property is yours.
7. Both the lawyer/gestor and consultant can continue to provide invaluable services, from importing your car, taking out insurance and getting your local residence papers sorted out, to removals, interior decoration and landscaping.

Selling a property

1. Again it is important to find a serious, reputable estate agent to represent you. Although exclusivity is seldom granted to one agent, this might be a good option in the case of more expensive properties, as it enables the agent in question to invest in the suitable forms of marketing. In addition to window cards, postings on websites and joint listings with collaborating agents locally and abroad, this also takes the form of advertising in the local media, representation at international property fairs, house features in appropriate magazines and personalised brochures.
2. From the point where an interested buyer makes an offer it is important to appoint a lawyer to represent you in the process mentioned above.

Investing in a property

1. What to buy if you’re looking to invest in a property depends firstly on your priorities. If you are buying a home to live in but want it to be a good investment, follow your own preferences but stay wise to the longer-term potential of both the property itself and the area you are buying in. In this case it is good to look out for up-and-coming areas that will outpace other areas in value over the longer term.
2. If you are, however, buying with investment foremost in your mind, chances are you will want to sell on in the short to middle term. The investment potential of a property is then not only represented by the immediate desirability of the property (type) and area, but also by the actual urbanisation and its rental potential. A specialised estate agent or financial advisor will be able to tell you which developments are most in favour and offering the best returns. Newly constructed properties offer the most upward potential over the shorter term and if you can find a good off-plan development to invest in, so much the better.
3. It is hard to predict actual rates of return, but even below the peak performances of 20-25% it is clear that property currently offers a better investment outlet than the capital markets. Your financial advisor will be able to advise you on the most effective way in which to structure the purchase and/or financing.

Property rentals

1. If you’re looking to rent a property short-term you will have a world of choice, except at the height of the summer season, when rental rates soar and you may even have trouble finding anything unless you have booked well in advance. Finding a long-term let, however, is another story altogether. Most property owners prefer the lucrative holiday rental market, which allows them several months’ usage themselves, to lower-yielding long-term lets. Some people, however, like the security of income this provides, so if you look hard enough there are still places to be found. In Extremadura, the holiday rental market is at a premium, and it pays to buy your own property as soon as you can.
2. Those who have a property to let, regardless of whether it is an apartment, villa, townhouse or country cottage, will have a very good chance of making money out of it. The main point is not to be too ‘greedy’ and your expectations will be realised. Some sales people convince prospective buyers that they will be earning fortunes through rentals. The rental market, however, has its seasonal fluctuations, and whereas you will be able to name your price in summer, you may struggle to fill the home the whole year round. Moreover, there is competition, so set your targets realistically and make sure the rental price is attractive to all parties involved. Charging a competitive rate should ensure a high rate of occupancy and thus provide for stable annual income.

Real Estate Terminology

The world of real estate has a terminology all of its own. This can be confusing enough in your own language, let alone when you are trying to buy a property in a foreign country, so the following chart attempts to shed light on the terms you are most likely to come across.

• Agencia Inmobiliaria - Real Estate Agency
• Gestor - Professional who arranges paperwork
• Abogado – Lawyer
• Notario – Notary
• Asesor Fiscal - Financial Adviser
• Tasador – Valuer
• Tasación – Valuation
• Director de Banco - Bank Manager
• Hipoteca – Mortgage
• Aval - Person who underwrites a loan
• Arquitecto – Architect
• Contrato de Compraventa Privado - Sales Agreement
• Depósito – Deposit
• Opción de Compra – Option to Buy
• Registro - Land Registry
• Nota Simple - Land Registry Report
• Escritura de Compraventa - Purchase Deed
• Escritura de Hipoteca - Mortgage Deed
• Plan General - Urban Plan
• Impuestos – Taxes
• Gastos – Costs
• Comunidad Proprietario - Community of Owners
• Administrador – Administrator
• ITP - Transfer Tax (7% in Spain)
• Plus Valía - Capital Gains Tax
• IVA - VAT (7–7,5% on houses, 16,5% on land)
• IBI - Local Rates
• Valor Catastral - Rateable Value