When investing in property in Spain, bear in mind that you will be asked for two deposits depending on how you come across the property.
Negotiating the Purchase Price
When you are buying a property in Spain you must bear in mind that you will be asked for two deposits:
- An initial deposit of between 1,000 and 3,000 euros as a “reservation fee”.
- A second deposit of 10% of the property price.
Once this first deposit has been made, you can make your offer, which can be simply by accepting the price offered, or by offering a lower price (for more information see: how much to offer on Spanish property).
When negotiating a price you must take into account that the cultural factor plays a very important role. In some cultures the price variation between the offer and the final price can be up to 50%, while in other cultures it will be only 1-2%. In Spain, as everywhere else, it depends on many variables, but in general terms we can say that in a big city like Madrid or Barcelona, that margin is usually 5%, that means that if the property you want to buy is worth 200,000€, you can make an offer of 180,000€ and reach an agreement of 190,000€, and to be honest, you will have bargained very well, don’t keep pushing because there is a risk of losing the property.
Of course, the more demand there is for a product, the less likely it is to be traded, and vice versa. If you want a house in the mountains, that margin can perhaps be as high as 20%.
Negotiating the other Terms of the Purchase
Once you have reached a final agreement on the price, another negotiation starts, on a lot of details not less important, such as the time you need to pay the rest of the price, what happens if you do not get the expected financing, the inventory of what the owner leaves in the property, the state of the water, gas and electricity services, the state of the building where the property is located, if there are encumbrances, when will the keys be delivered, possibility of visits before the final signing to take measurements… and a long etc.
Our recommendation is that you hire a lawyer from the first minute to carry out all this negotiation, think that you are doing a business of quite a lot of money, so any mistake can be very expensive, in addition to that it is in a country that is not yours, being an operation that involves many difficulties, much bureaucracy and the risk of committing errors is very high, so we recommend that to avoid regrets tomorrow you hire a lawyer today.
And it is very important that you choose a lawyer specialised in dealing with Real Estate, because only they can carry-out a full and proper legal due diligence on the property; do not trust real estate agents, and above all do not trust the agency that intermediates on the purchase – its interests are very much aligned with you going ahead with the purchase, while for a lawyer, their interest lies in ensuring that you do not make a mistake and that the whole process is carried-out according to the law.
Everyone who is going to buy a property is usually optimistic and thinks that they will find a perfect property, without further legal or constructive complications and that the negotiation will be easy… and unfortunately this is seldom the case. From experience we can say that it is highly unlikely that this will be the case – there are many pitfalls when buying a property in Spain and in practically 100% of conveyances, some problem arises. There is always something that can represent some danger to the buyer, and the work of the lawyer is to discover that hazard and resolve it effectively.
It is very important at this point to keep cool and not rush, as this is the most delicate moment of the whole negotiation process and what is decided now will have long-term consequences, so you have to resist the pressures of the seller and the agency and deal with all the issues in detail. Rely on your lawyer.
An important detail to bear in mind is not to accept the template contract offered by the agency. Firstly because it is usually only in Spanish, and also because it is a generic model to which only the names of the buyer and seller and the property change. It is best to have your lawyer draw up a personalised contract for your specific situation and for the specific property you are buying. And one recommendation is that this contract is translated into English, it’s your money, your business, and you have the right to know everything it says, not only what your lawyer translates for you or what you can understand over Google Translate, but you must understand everything, absolutely everything, even if you trust your lawyer. An additional pair of eyes is to be recommended, and you should definitely ask about anything you do not understand.
Payment of the Deposit
Once an agreement has been reached on all matters, you will have to pay 10% of the price of the property, discounting the “reservation” price that we have mentioned already. It is not written anywhere that it must necessarily be 10%, but it is a long tradition that everyone knows, so if you are asked for more than that amount, ask why. Paying more than 10% is not necessarily wrong, but there should be some compensation for that, like they give you more time for the final signature, or they give you a discount on the final price, or they will carry-out some repair that you have requested… etc.
From this point you have between 2 and 3 months to make the final payment, that is, unless you have all the money waiting in a bank account in Spain, which is unusual. You will be able to use this time to find the necessary financing or to transfer your money from your account in your country, which is another tricky moment that your lawyer can advise you in order of not having your money blocked by the anti money laundering protocols of the banks.
It is important at this point that your lawyer has good contacts to help you find a decent mortgage, or if you have to send money from a country outside the Eurozone to get a good exchange rate and the fees are as small as possible.