Buying a Home in Andalucia...The process.

The following information is offered as a guide and is by no means exhaustive:

Reservation Deposit
Once you have identified a property which you wish to buy, you may be asked to leave a small deposit typically an amount between 3,000 € and 6,000 € to reserve the property. At the same time you may be asked to sign a Reservation Agreement. This fee is to secure your purchase.

Purchase Contract
This contract is usually drawn up within 21days of receipt of the Reservation Fee and will set out in detail the agreed purchase including price, payment terms etc. and you are required at this stage to pay a more substantial deposit typically around 10% of the total value of the property.

It is important that this contract is checked by your lawyer to make sure that all your rights and the vendor's obligations are incorporated into it. Often what is missing from a contract is more important than what is included.

Your lawyer will check that the vendor is the true owner of the property, carry out a Land Registry search, ensure that the property has no debts or encumbrances (such as an un-paid mortgage) and that the building is legally registered.

If you do not comply with all the terms of this contract you may stand to lose all monies paid.

Staged Payments
If the property is under construction you may be required to pay instalments which should reflect the stages of the building process. Bank guarantees should cover these interim payments.

Completion
The final payment is made at the time of taking possession of the property and this transaction is recorded in the Title Deed (Escritura de Compraventa) signed before a Notary Public.

Beware!!!
Many charges and debts incurred by the previous owner can be registered against the property if left un-paid and it is your lawyer's job to ensure that you buy the property free of any encumbrance.

Insurance
You should arrange insurance cover for the building and contents from completion but it is a mandatory requirement if you are obtaining a mortgage.

If you are buying in joint names you should consider whether you would have sufficient funds to complete the purchase if either of you died between exchange of contracts and completion. It is advisable to have sufficient life insurance cover in place therefore following your commitment to purchase the property.

Payment of Taxes
The relevant taxes (stamp duty, either VAT if a new property or Transfer Tax if a re-sale property) must now be paid within a fixed period of time to avoid fines. It is your lawyers job to ensure that the appropriate completed forms are sent to the Tax Authorities on your behalf.

Inscription
After signing the Title Deed the taxes which are generated by the transaction must be paid, and only then can the Deeds be delivered to the Land Registry for inscription.

This is probably the most important stage of the purchase and it is vital that the property be inscribed in your name at the earliest date to protect your interests.

Expenses involved
As a rule of thumb you should budget a total of between 10% and 12% of the purchase price to cover all expenses and legal fees.

The fees:
Notary fees vary depending on the circumstances.

Land Registry Fees (Gastos de Inscripción)
These vary according to the locality, type and value of the property. They are not strictly taxes but fees charged by the Land Registry to inscribe your title.

The taxes:
Impuesto sobre Transmisiones Patrimoniales (ITP)
Transfer tax payable when you purchase land, house, apartment or a building plot from a private owner. It is calculated at the rate of 7% of the declared value of the property as expressed in the "Escritura de Compraventa" (Title Deed). Severe penalties are payable in respect of under declarations which, in addition, can lead to Capital Gains Tax headaches at a later date, as the declared value on your purchase is the base line used by Authorities when assessing the Capital Gain you make on the disposal of the property.

Impuesto sobre el Valor Anadido (I.V.A)
This is the Spanish equivalent of VAT. It is charged at the rate of 7% on the purchase price of all property with the exception of commercial property and plots.

AJD (Stamp Duty)
Stamp duty is payable by the purchaser at 1% of the purchase price on new property..

Municipal Plusvalia
A local tax paid on the increase in the value of the property from the last transaction. Normally payable by the vendor but it may be stipulated that the buyer pays. Who pays this will be discussed in the negotiations and in consultation with your Lawyer.

Disbursements
In addition to the above costs, there will be other payments made on your behalf by your lawyer such as the Land Registry search fee, bank charges etc.