There is no denying there is something magical about Spain. Whether it be the vibrant culture, stunning architecture, long sandy beaches, gastronomical delights or welcoming locals, Spain has something for everyone. In fact, Spain has become such a popular haven for expats that in 2022, 20% of property sold was snapped up by foreign nationals.
While it is easy to get caught up in the allure of living a life in Spain, the act of buying a property in the country is not for the faint hearted. The Spanish property system is nuanced and complex and can easily result in unexpected expenses and unnecessary stress.
Here are five common pitfalls that expats should watch out for when buying property in Spain.
1. Insufficient due diligence
Failing to conduct thorough due diligence can leave you open to unforeseen risks and detrimental financial consequences. The Spanish real estate market is unregulated and vendors are not obliged to give you all of the information about the property. In this context, keep an eye out for any outstanding debts owed to the owners’ association, as these will pass on to you on the sale of the property. There are a number of other legal issues that can trip you up and it is recommended that you have a reputable lawyer who specializes in Spanish property law to conduct a comprehensive title search, review contracts, and ensure all legal requirements are met.
2. Not understanding all the costs involved
Buying property in Spain involves various costs beyond the purchase price. Additional expenses include taxes (which, depending on the autonomous community, can be up to 10%), notary fees, registration fees, buyer advisory fees and legal fees. To avoid financial strain, make sure you have a clear understanding of all the expenses associated with the property purchase and factor them into your budget.
3. Paying too much
If you don’t have anyone advocating for you, chances are you will end up paying more than you need to. Always be mindful that the selling estate agent is working for the vendor and not for you. In Spain it is difficult, as an individual, to obtain the selling price of comparable properties. This makes it hard to know if the price you have been quoted is the true market value. This is when it is handy to have an experienced buyers advocate or property finder on the ground who knows the market intricately and can negotiate on your behalf.
4. Not getting your finances in order
While Spanish banks will lend to foreign nationals, it is partially dependant on the currency in which you receive your income. For instance, US$, GBP and Euros are widely accepted but other currencies are more difficult to get over the line and will limit your choice of bank. If you do secure a mortgage through a Spanish financial institution, you will need to contribute a 30% deposit from your own funds and pay all of the associated taxes and fees to acquire the property. Unlike other countries, Spanish banks generally don’t provide ‘pre-approvals’ and will only start the mortgage documentation process once you have put in an offer on a property.
5. Not understanding the rental landscape
If you buy a property with tenants in it, they potentially have the right to remain for up to 5 years if it is a long term let. The reason being is that long term rentals are subject to the Spanish national laws which give tenants the right to lease property for up to 5 years with the option of a 3-year extension. If you are intending to rent a property on the short-term rental market, on the other hand, you will need a touristic licence (unless the property already has one). Touristic licences are governed by each autonomous community and they all have different regulations, in fact, in some areas, you are unable to get touristic licences at all. In some regions, owners’ associations can also limit the number of apartments used for holiday rentals within a complex.
So, there you have it, the top 5 pitfalls to avoid. With careful planning, thorough research and professional advice, you can minimize your risks and make informed decisions when purchasing property in Spain.