The 5 minutes guide to selling property in Spain 2019: complete and extended, learn about all you need and what professionals can help you.
Practical issues When Selling Property
If you are planning on selling your property in Spain during 2019, this guide will cover the main points that you need to consider – from estate agents to Property Law expert lawyers and from taxes to utility bills. The aim is to aid anyone starting from scratch who perhaps isn’t sure where to start and isn’t aware of the pitfalls to avoid.
Advertising the Property
Anyone who has spent any time in Spain will have seen the Se Vende signs protruding at various angles from houses and apartment windows. These ‘For Sale’ signs signify a property that is for sale privately by the owner.
Many local Spanish people tend to at least try this method in effort to avoid estate agency fees. That is the main benefit from going down this route but on the negative side only those that would pass the property will be aware that it is for sale.
Another possibility that has proved popular in more recent times has been to advertise the property over the internet.
Of course this has the potential to reach a much larger audience though you are depending upon the effectiveness of the website chosen to market the property.
Some of these companies offer their services for free while others charge.
Of course another, more traditional method would be to contract a local estate agent to market the property.
As previously mentioned the biggest downside of this is probably the fact that the agent will charge a fee though it is worth pointing-out that this will normally be a portion of the sales price and therefore they have to be successful in order to benefit.
During the boom-time it was possible for estate agent to charge as much as 18% of the sales price!
As a result of the current slowdown and competition from internet based marketing models mentioned previously, margins selling Property in Spain have come back down to earth and it is quite normal to be quoted a fee of anywhere between 3% and 5%.
One thing to be careful about when dealing with an estate agent is the possibility that they will request that you sign an exclusivity contract i.e. that you will not contract any other estate agent or company to market your property.
While you can, without doubt, negotiate a lower commission rate if they are given exclusive rights to market the property this has to be balanced against the benefit to be gained by being able to market the property across a number of agencies and internet sites.
Any contract, be it exclusive or otherwise, should clearly state the commission fee the agent will charge for successfully marketing the property.
One of the main benefits of contracting a local estate agent is the possibility of them being available to show the property when you may be out of the country.
They will also know the best forms of local marketing such as which papers to place adverts in.
But you would be advised to ask them what forms of marketing they will be using to market your property to get a better idea.
The Closing and Payment
Once an offer has been made and accepted on the property then typically the buyer’s lawyer will carry-out due diligence checks on the property. Assuming no issues arise, the next advisable step is to prepare and sign what is known as a ‘deposit contract’.
This involves a deposit being paid by the property purchaser which effectively grants an exclusive right to purchase with a date being fixed for the purchase to be finalized.
Should the sale not go through due to a change of heart on the part of the purchaser then their deposit, often 10% of the purchase price, is lost.
Should the failure of the property transfer be caused by the vendor then they are obliged to pay the purchaser 20% i.e. double the amount of the deposit.
Once again assuming that everything happens smoothly the next important date is ‘the closing’.
This is a meeting that will include any or all of the following: the purchaser, the vendor, their legal representatives, the bank representatives and the notary.
The notary is required as the purchase deed is a public document and requires a notary to formally witness it.
At the closing stage it will be necessary to sign the public deeds of ownership though it is sufficient for your lawyer to be present if they have full power of attorney.
Payment is made typically with a bank guaranteed cheque though it may be possible to use the notary’s escrow account.
The public deeds will contain a detailed description of the property as well as contain the details of the purchaser, vendor, the price, form of payment and any other relevant conditions.
It is worth highlighting the point that it is advisable to contract the services of a lawyer for the sale of such an important and costly asset as property.
There can be many terms in a typical deed of sale-purchase of property and such terms can assign responsibility for the payment of taxes such as the sales tax on one or other of the parties, regardless of who is typically responsible for their payment.
Therefore to avoid the possibility of unwittingly accepting responsibility for taxes that you are not liable for or indeed agreeing to any other disadvantageous terms, make sure to have a qualified lawyer assist you with the sale.
Taxes, Mortgages & Other Charges
A transfer of property in Spain can function differently from other jurisdictions and so it is important to be aware of the assumptions that the law makes with regards to responsibilities and liabilities for payments of taxes and charges when selling property in Spain.
The main taxes and charges connected with property ownership include the following: IVA or ITP (VAT on new or second-hand homes) Plusvalía (Capital Gains Tax), IBI (Council Tax), Comunidad Charge (If in a shared building or urbanisation), utility bills and, of course, any mortgage on the property.
Where the property being sold is second-hand then the tax payable is ITP and the rate is typically between 7% and 8% depending in which region the property is located as ITP is set by the regional government rather than at a state level and so varies a little as between each region.
When buying a new property IVA is paid on the purchase price to the developer or promoter when buying the property. It is then the responsibility of the developer or promoter to make their IVA returns to Hacienda (Spanish Tax System) in the usual way.
If a second-hand property is being purchased then it is the responsibility of the purchaser to pay this tax directly (using form 600) in the local tax offices within one month of signing the deeds.
This tax, equivalent to Capital Gains Tax with regard to property, is ordinarily the responsibility of the vendor as they have benefited from the increase in the value of the property since they previously bought it. This is not written in stone however and should the two parties come to an agreement it can become the responsibility of the purchaser to discharge this liability. In fact, where the vendor is a non-resident this liability actually shifts to the purchaser.
Of course if the vendor is resident and reinvests the funds in another primary residence then there is no liability for plusvalía.
If however, the vendor is a non-resident then the purchaser is obliged to retain 3% of the purchase price and pay this to the tax office. Evidence of payment is demonstrated with a stamped copy of form 211 and the vendor can then deduct the same amount from the purchase price.
It may be the case that the vendor has already paid the local Council Tax or IBI (Impuesto de Bienes Inmuebles) for the full year, yet will only be in the property for a portion of that time. If that is the case then upon facilitation of receipts for payment of the tax, a vendor will be entitled to add the extra amount paid to the price of the property. In any case the purchaser will be anxious to see receipts for the previous and current years IBI as they are otherwise liable.
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