A Guide for Selling a Property in Spain

A Guide for Selling a Property in Spain

If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or WhatsApp (+44-7393-450-837).

Introduction

Property in Spain is in high demand, particularly among purchasers from the UK. How complicated is selling a property in Spain, though?

Even if the processes of buying and selling are conceptually quite similar, it is a good idea to pause and re-evaluate the procedure from the perspective of the seller.

Selling a Property in Spain: Is Now a Good Time?

The COVID-induced pandemic has had a significant impact on the world’s real estate markets.

Real estate prices in Spain have mostly remained stable despite the epidemic and, in some areas, have even increased, notably Madrid, Navarre, the Basque Country, and the Valencian Community.

The cost of real estate has gone up in several of Spain’s more rural and coastal areas as well as in smaller municipalities. This could be attributed to the fact that more Spaniards are attempting to move from urban regions to rural areas as a result of the pandemic.

While rural farmhouses and villas are more in demand, there is a decline in the market for apartments nationwide.

Amid the uncertainties in the real estate markets, the growth in property prices is anticipated to pick up within the latter part of the year.

So how exactly does the Spanish real estate sales process operate? Let’s check below.

Selling a Property in Spain market
Spanish housing market. Image by kavalenkava/Shutterstock.com

Selling a Property in Spain: Electing an Estate Agent

It is not necessary to use an estate agent’s services, but unless you are pretty knowledgeable about the local demand for real estate, are familiar with sales tactics, and have access to prospective buyers, it is in your best interest to work with a company that can market your property effectively and professionally.

As a rule of thumb, the client must carefully examine the terms of the contract and understand the significance of specific articles, such as the exclusivity clause, which requires the owner to sell directly to the buyer without using another agency.

The customer should seek legal counsel since the estate agent lacks expertise in legal and tax problems. A lawyer will be able to effectively supervise the sales process, ensuring that it is carried out in accordance with current law, and guarantee that all applicable taxes are paid in a timely manner.

Selling a Property in Spain: Marketing the Property

It’s now time to list your home for sale and promote it to prospective purchasers. It’s crucial to take excellent images and do some preliminary work to tidy up the house. After that, your estate agent will be instrumental in marketing the property, but you can also advertise it on well-known property websites.

Selling a Property in Spain: Looking for a Solicitor

Although it is not required, it would be a beneficial decision to hire a solicitor to guide you through the legal process and manage the administrative and financial aspects of the sale. The best recommendation would be from a trusted personal source, but the UK Government website also has a list of English-speaking property solicitors.

Selling a Property in Spain: Selecting a Notary

In Spain, a notary is essential for handling the paperwork, paying the taxes, and registering the sale with the land registry. They are there to ensure that everything is done within the bounds of the law and play an impartial role in the deal.

After accepting an offer, you and the buyer must decide on a notary. In Spain, there are about 3,000 notaries, and their fees are all set at the same level.

Selling a Property in Spain: Providing the Paperwork

Both your attorney and your estate agent must have the following paperwork before the sale of your property may move forward:

  • Title deed or another kind of ownership documentation, such as a purchase or inheritance deed
  • Identification document, like a passport or NIE (personal, unique and exclusive number that is assigned to foreigners)
  • Proof of tax residency (if applicable)
  • Certificate of Habitability or First Occupancy License
  • Receipt for the most updated local council rates
  • Property owners’ certificate of community
  • If there is a mortgage on the property, the bank will issue a certificate of outstanding obligation
  • Latest utility bills

Selling a Property in Spain:  Calculating Taxes and Gain

For sellers to avoid disappointment later, it is essential that they are well briefed about what their net income will be after deducting taxes and expenses prior to accepting a purchase offer.

Selling a Property in Spain: Signing the Power of Attorney

It is strongly advised to give a power of attorney for sale and tax representation irrespective of whether the owner will be able to visit the notary’s office to sign the deed.

With the help of this document, your legal representatives will be granted the authority to handle a wide range of tasks on your behalf, such as terminating and transferring utility contracts, canceling direct debits, canceling insurance policies, and notifying the Town Hall and the neighborhood of property owners of the transfer.

Additional tasks include processing the cancellation of your mortgage at the Register, submitting your tax returns, as well as requesting any returns you might be entitled to.

Selling a Property in Spain: Preparing the Sale-Purchase Agreement

Your representatives should give the buyer’s lawyers all the necessary information once you accept an offer on your property and give them the go-ahead. This will allow the buyer’s lawyers to perform all necessary and customary legal checks.

Likewise, your own legal counsel will draft a contract including the terms of the agreement, which will then be sent to the prospective buyer for approval.  A copy of the agreement will also be handed over to you for your reference.

Selling a Property in Spain: Signing the Deposit Contract

It’s time to sign the deposit contract when all relevant due diligence checks have been performed by the buyer’s solicitor. The lawyer for the buyer will draft this initial contract, and it will be signed by both sides. The closing of the acquisition has a date assigned to it.

Selling a Property in Spain: Settling the Deposit

The buyer will pay the deposit at the same time as signing the preliminary contract. The deposit is deemed, like in other regions of the world, as a definite declaration of commitment to the deal.

Well, how much deposit should you expect?

Ten percent is the standard deposit in Spain, as it is in many other nations, including the UK. But what becomes of the deposit if one or both parties decide to back out?

  • You (as the seller) can be required to reimburse twice the amount that the buyer gave as their deposit if you decide to back out of the contract. This is considered as a type of compensation for the untoward cancellation.
  • Meanwhile, the buyer will forfeit the deposit if they decide not to complete the transaction.
Selling a Property in Spain deposit
Expect to receive a deposit from the buyer prior to completing the property sale. Image from banking exchange

Selling a Property in Spain: Signing the Deed of Sale

The public deed of sale must be signed by both the buyer and the seller in order for the deal to be finalized. The seller gives the buyer the title deed to the property at the time of signing, and the buyer gives the seller the remaining balance of the agreed-upon amount.

The deed of sale is signed in front of a notary. Given their status as public servants, notaries are considered independent. The parties’ agreement to the transaction and their compliance with the law are publicly attested to by notaries. 

Before the signing, the notary requests the most recent registry data on the property to ensure that there are no last-minute liabilities or foreclosure entries. An electronic copy of the title deed is sent to the Property Register as soon as the deed is signed, ensuring that the Register has a record of the new owners as soon as possible. 

You should be accompanied by your legal counsel during the signing procedure at the notary’s office to supervise the paperwork, ensure that everything is in order, and serve as an interpreter.

Your legal representatives should sign the deed on your behalf should any business or personal obligations prevent you from appearing at the notary’s office on the scheduled day. For such a situation, you must give your legal representatives a power of attorney in advance.

The simplest and least expensive option is to sign the power of attorney in front of a notary in Spain. Other options include signing it at any Spanish Embassy or Consulate abroad, or in front of a notary public in the client’s home country. In the latter case, the document will need to be translated into Spanish and legalized with the apostille provided by the Hague Convention.

As was previously indicated, general authorizations included in powers of attorney allow for further actions to be taken on the client’s behalf in addition to being present before the notary.

The sellers will provide the buyers with the remaining balance of the purchase price, which is often paid by check, at the signing along with the property’s keys. The seller will have access to the money in about two to three days from the time the check is deposited in the bank.

Selling a Property in Spain: Cancelling Contracts and Paying Taxes

Your legal representatives should be in charge of transferring or terminating the utilities agreements, cancelling direct debits, settling any taxes that was necessary for the sale, as well as requesting any reimbursements (if applicable).

Taxes and Costs When Selling a Property in Spain

The fact that the buyer will cover the majority of the transactional costs in Spain is good news for sellers. Still, there are some fees that you will need to cover. The following is an example of these:

  • Real Estate agent fee – If you hire a real estate agent to sell your house, you should budget for a commission of between 3% and 6% of the sale price.
  • The price for an energy performance certificate could range from 150 euros to 300 euros.

You can incur charges too when sending the sale money back to the UK if you don’t live in Spain but have a Spanish bank account.

3% of the price must be withheld

Gains are taxable income when they are realized through property transfers. The difference between the purchase price and the conveyance price is what determines the gain. 

When the seller is a natural or legal person who is not a resident of Spain, the buyer is required to set aside a percentage of the purchase price, which is currently set at 3% by law. The buyer shall then pay this amount within a month to the Spanish Treasury in the form of a down payment for any potential rise in the seller’s equity.

You can ask for a refund by submitting a special form made for this purpose to the Spanish Tax Office when a loss of equity results or when the amount of the withholding is larger than the amount of capital gain tax the seller must pay.

The withheld sums or those paid in excess will be repaid in a period of about 10 months as of the date of sale, assuming the Spanish Tax Authorities do not contest the values listed in the statement or initiate a probe.

However, in order for the Tax Authorities to approve a refund, the tax payers had to have filed their annual income returns as non-residents and be current on all payments.

Selling a Property in Spain: Plusvalía Property Tax

This is a local tax that is determined by the rise in the value of the land the property is situated on. According to the law, the seller is responsible for paying the plusvalía property tax.

The variables determining its amount will differ from Town Hall to Town Hall, but they largely revolve around the plot of land’s location and surface area, the mutual share percentage, and the number of years since the last conveyance.

Selling a Property in Spain: Lawyers’ Fees

Generally speaking, the lawyers’ fees total 1% of the sale price plus the current value-added tax (VAT). Except in cases where the preliminary assignment undergoes significant alterations at the client’s express request, these fees must be agreed upon at the beginning of the contractual arrangement and cannot increase during such arrangement.

When determining the capital gain tax related to the sale, one item that can be subtracted is the lawyer’s professional fees.

Selling a Property in Spain: Estate Agents’ Fees

In most cases, the estate agents’ fees represent 4% to 7% of the sale price plus VAT, which is charged at the current rate of 21%. Once the whole sale price has been obtained, the estate agent’s commission is paid at the time the deed is executed. This expense can be taken into account when determining the taxable capital gain.

Selling a Property in Spain: Capital Gain Tax

As we already indicated, the profit from the sale of real estate is regarded as taxable income. Residents of any of the member states of the European Union (EU) are currently subject to a 19% tax rate, which is the same charge for residents of Iceland and Norway.  For taxpaying citizens of the other nations, the rate climbs to 24%.

Essentially, the net profit is determined by calculating the difference between the purchase and sale prices, to which the deductible expenses will already have been added to and deducted from, respectively. The process of indexation—applying a corrective index to the resulting purchase value—was eliminated.

There is a specific transitional arrangement that allows some discounts to be applied when computing the Capital Gain Tax for residences purchased prior to the 31st of December 1994.

Selling a Property in Spain: Energy Performance Certificate

Existing home owners are required to offer prospective buyers with the property’s energy performance certificate, which must be provided by a certified technician, in accordance with European rules on energy and environmental issues.

This legislation does not apply to, among other things, the following:

  1. Properties with less than 50 square meters of usable surface area
  2. Properties that are utilized for fewer than four months each year or those that are used for a longer period of time but whose energy usage is less than 25% of what it typically would be for an entire year.

Selling a Property in Spain: How Long it Takes

Selling a Property in Spain takes time
Selling a property takes time. Image from Amazon.sg

In Spain, there could be a variation in the amount of time it takes from listing your home to actually turning over the keys. Your property’s location and the market’s demand for properties of that sort will determine how much it will cost.

Due to the COVID pandemic, the typical time it took to sell a home in Spain in 2020 climbed to about a half year from the usual five months average. However, be ready because according to some studies it can take up to 10 months for you to offload your property in Spain.

Can you accelerate the course of selling a property in Spain?      

There are a few things you can do to boost your odds for a swift sale in Spain, such as:

  • Take pictures using a good camera and lighting and upload as many good photos as possible, depending on the site recommendation
  • Utilize online real estate listing sites, advertising on social media and other digital marketing strategies effectively.
  • Add a floor plan to internet advertisements.
  • Take into account posting a video or virtual tour of the home
  • Conduct market research and consult industry professionals to determine a fair sale price.
  • Deep clean the property and declutter it; it’s advised to take personal stuff out and decorate each room for open houses.
  • Spend time creating a captivating property description that showcases and sells its best qualities.

Selling a Property in Spain: Final Thoughts

Learning how to sell a house is crucial. If you can’t find a buyer in time, you may end up trying to pay two mortgages, having to rent your home out until you can find a buyer, or, in dire situations, in foreclosure. It’s important to think like a salesperson, not like a homeowner when selling your property.

Make sure you prepare mentally and financially for less-than-ideal scenarios. The house may sit on the market for far longer than you expect, especially in a declining market.

Disposing your property in Spain or elsewhere involves work, patience (a lot of it), and correct timing. Keep your emotions in check and stay focused on the business aspect.

Pained by financial indecision? Want to invest with Adam?

Adam is an internationally recognised author on financial matters, with over 548.6 million answers views on Quora.com and a widely sold book on Amazon and a contributor on Forbes.

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