THE

NAKED AGENT
Your Quick-step Guide
to Buying a Property
in Spain

By Shaman Chellaram

Sponsored by

www.hamilton-homes.com
www.nakedagentspain.com
Copyright@2008 Shaman Chellaram 1
 The Naked Agent
Your Quick-step Guide to Buying a Property in Spain
Buying a property in Spain, be it as a main home, holiday home, or as an
investment should be an exciting time in all our lives. Many of us have
dreamed of owning a beautiful home in the sunny, warm climate of Spain. All
too often, many buyers get caught up in the dream and fail to fully understand
the buying basics and the complete Spanish purchase process. As a result,
buyers are often confused, wishing they had the right knowledge and
guidance from the start.

The Naked Agentʼs quick-step guide is designed to give you a clear overview
of the entire process, ensuring that buying your property becomes a simple
and efficient task. This guide highlights the details from doing your initial
budget and property research, right through to completing on your property
and getting settled in!

THE KEY LESSONS

1) UNDERSTAND THE TOTAL PURCHASE COSTS AND MORTGAGE
COSTS
2) KNOW WHAT YOU CAN AFFORD, HOW MUCH YOU CAN GET ON A
MORTGAGE AND BUY WITHIN YOUR MEANS
3) USE A SPANISH-QUALIFIED PROPERTY LAWYER TO CARRY OUT
THE CORRECT PROPERTY CHECKS BEFORE PAYING A NON-
REFUNDABLE DEPOSIT
4) ALWAYS VISIT THE SITE OR PROPERTY PERSONALLY
5) DO NOT HAND OVER ANY MONEY UNLESS YOU ARE
ABSOLUTELY SURE

Before we delve into the process, letʼs cover a few of the buying basics first:
Copyright@2008 Shaman Chellaram 2
 The Buying Basics
1) Purchase and Mortgage Costs
When buying a property in Spain, over and above the purchase price, you
need to allow for for the following purchase and mortgage costs:
• Approximately 10% purchase costs (if buying without a mortgage)*
• Approximately 13% purchase costs (if buying with a mortgage)*
*If you are buying a brand new property where you will be the first registered
owner, you also need to add 1% stamp duty.
EXAMPLE
The approximate breakdown of this is as follows: If you are
• 7% Transfer Tax (or VAT for a brand new property)** planning to buy a
property for
• 1% to 1.5% Notary and Registry Fees €200,000, it will
• 1% plus VAT/IVA for the legal fees probably cost you
about €220,000 in
• 3% mortgage fees, taxes, notary and registration total (without a
**Please note when buying a plot of land, commercial mortgage, add
10%), and about
premises or garage spaces you may be charged 16% €226,000 in total
Transfer tax or VAT (as opposed to 7%), so always (with a mortgage,
add 13%).
check with your lawyer / the seller first.

2) Documentation Required
NON-RESIDENT: As a non-resident in Spain, you will need the following
documents to buy a property:
1) NIE NUMBER (Numero de Identificación Extranjera). This is effectively
a foreignerʼs tax identity number in Spain for legal and fiscal matters.
To find out how to apply for your NIE and to download your application
form please follow the link www.nakedagentspain.com and click on the
page: NIE SPAIN.
Copyright@2008 Shaman Chellaram 3
 2) VALID PASSPORT
3) CERTIFICATE OF FOREIGN INVESTMENT to prove that your funds
have come from abroad. This can be issued by your bank in Spain to
which you transferred your funds from abroad. If you have transferred
funds to your lawyersʼ account then the lawyer will be responsible for
getting this.
RESIDENT: If you are resident, then you will have to present either of the
following:
1) SPANISH ID CARD (DNI - Documento Nacional de Identidad)
2) A VALID PASSPORT & THE NEW EU CERTIFICATE OF SPANISH
RESIDENCE. (EU Residents only). You can find out how to apply for
this new EU residency certificate and download the form at
www.nakedagentspain.com and follow the link to: RESIDENCE FORM
IMPORTANT: if you are unable to be present in person to sign the formal
contracts and/or completion at the public notary, then you must grant a Power
of Attorney to your lawyer (or trusted friend) to do so on your behalf.

3) Getting a Mortgage
In general, as a non-resident the Spanish banks will lend up to 70% of the
purchase price. As a resident, you can obtain up to 80%, but in some cases
the banks will go up to 100%. Banks in Spain tend to base what they lend
on a combination of the purchase price, the formal bank valuation of the
property, and your ability to afford the mortgage repayments. They assess
your mortgage affordability on about 1/3 of your net monthly income. If you
find a bank which bases its lending on the valuation (and the valuation is
higher than the purchase price), you may obtain a higher
mortgage as a percentage of the purchase price. Check the
bankʼs policy to ensure you get the right mortgage for you.

Copyright@2008 Shaman Chellaram 4

4) Taxes & Fees as a Property Owner in Spain
As a property owner in Spain, you should pay the following taxes and fees on
an annual basis:
1) IBI: An annual council tax/rates on your property (normally from about
€200 per year upwards, depending on the size of your property)

2) Notional Income Tax: Providing the property is not your main

residence, the Spanish taxman assumes your derive a notional rental
income of 2% on the value of your property. Non-residents will be
required to pay 25% tax on this ʻ2% notional incomeʼ as an annual tax.
Residents will be taxed at their income tax rate.

3) Wealth Tax: You are required to pay annual wealth tax equivalent to
0.2% to 2.5% of the rateable or purchase value of your property. This
tax may be abolished from 2008, following new Spanish Legislation.

4)Community Fees (if applicable to your property): These are

fees payable to keep the amenities running on your urbanisation

When it comes to selling your property, Capital Gains Tax

(CGT) on your profits is set at 18% (non-residents previously had to pay
35%). On completion of your sale, if you are a non-resident, the Spanish
authorities will insist on retaining 3% of the sales price as a partial retention
for your CGT liability. It is the buyerʼs responsibility to retain this 3% and pay it
to the authorities on your behalf. If your profit is lower than this amount you
can claim back the difference. If it is higher, you should pay the balance to
the Spanish taxman within 2-3 months after the sale. In addition, you will
have to pay the Plus Valia, which is a tax based on the
incremental value of the land which your property occupies
over the amount of time you have owned it. In general, the
larger the property, the higher the tax.
Copyright@2008 Shaman Chellaram 5
 The Purchase Process

Step 1: Do your initial research

• Read the Naked Agent Spain guide
• Do some basic online searches
• Understand the buying basics and costs
• Decide which area you want to buy in

Step 2: Decide on your main criteria

• Is the property for investment or personal use?
• Do you want a ready-built property or something
off-plan?
• Calculate your approximate budget (to include the
purchase and mortgage costs highlighted above)

Step 3: Understand your budget and affordability

• How much of your own money do you have
or do you want to put in to buying a property?
• Calculate your net real monthly income
• Understand how much mortgage you can
afford and obtain
• Calculate your real budget and plan within
your means

USE THE NAKED AGENT MORTGAGE CALCULATOR

TO WORK OUT WHAT MORTGAGE PAYMENTS
YOU CAN AFFORD
www.nakedagentspain.com
Copyright@2008 Shaman Chellaram 6
Step 4: Do your detailed research

• Conduct detailed online property search

• Speak to or email real estate agents
• Possibly attend property exhibitions
• Call banks/broker for specific mortgage
advice

Step 5: Organise to view your properties

• Select specific properties for viewing

• Plan your viewing trips accordingly
• Make a shortlist and view again if necessary
• Apply for your NIE certificate
• Open bank account

Step 6: Find the right property

• Ask the real estate agent detailed questions

• Understand initial payment terms & total costs
• View property again and, if happy, engage lawyer

Step 7: Engage a lawyer to do your initial property

checks and consult a mortgage broker/bank to
ensure you can obtain the mortgage you require
• Lawyer to run important property checks
• Speak to banks and/or mortgage brokers with
regards to obtaining a mortgage
• Get initial mortgage approval in writing

Copyright@2008 Shaman Chellaram 7

Step 8: Negotiate the price and make an offer
• Ensure all property checks are in order
• Make an initial offer on the property and negotiate the price
(you may be asked to pay an initial holding deposit)
• Confirm final price & deposit amount, agree terms and
conditions (negotiable between buyer and seller) & set
completion date

Step 9: Pay a non-refundable deposit and sign the

reservation and/or private contract
• Typical deposit is 10% of sale price, payable in two stages:
1. Pay initial holding deposit (eg €6000) and sign initial
reservation contract
2. 15 to 30 days later, sign private contract (if necessary) and
pay balance of deposit
Stages 1 and 2 can combined. Deposits are normally
considered non-refundable. In some cases you can pay a
deposit earlier subject to all the property checks being in order.

Step 10: Formalise mortgage finance (if needed)

• Ensure bank conducts property valuation
• Await banks formal mortgage approval and ask for the
binding offer letter (oferta vinculante). Get it in writing

IF YOU HAVE ANY DOUBT OVER GETTING THE

MORTGAGE AMOUNT YOU REQUIRE, ENSURE YOU
GET FORMAL MORTGAGE APPROVAL
BEFORE PAYING A NON-REFUNDABLE DEPOSIT

Copyright@2008 Shaman Chellaram 8

Step 11: Prepare for completion
• Get complete breakdown of funds for completion from lawyer
• Ensure mortgage funds from your lending bank are in place
• Transfer own funds to Spain either to your own bank account
or lawyerʼs client/escrow account
• Ensure you have correct documentation in place
• Set completion date at Spanish Public Notary
• Send all documents for completion to the Notary at least three
days before the completion date

Step 12: Completion

• Organise bankers drafts for balance owed to seller
in accordance with lawyers breakdown of funds
• Buyer and seller to be present for completion at
notary or leave Power of Attorney with lawyer
• Sign Title Deeds (Escritura) and hand over cheques
• Keys handed to you -- congratulations!

Step 13: Get settled in

• Connect the utilities (water, electricity, gas, telephone line, etc.)
in your name, and sort out your furniture
• Register the rates/council tax (IBI) in your name
• Get Home & Contents Insurance www.hamilton-insure.com
• Move in!

To understand the whole purchase process in more detail and to find out how
to get the right mortgage in Spain for you, please read:
THE NAKED AGENT:
YOUR ʻSTRIPPED-DOWNʼ GUIDE TO BUYING
A PROPERTY & GETTING A MORTGAGE IN SPAIN
ACT NOW & GET OUR SPECIAL LIMITED OFFER
www.nakedagentspain.com
Happy house hunting & enjoy your new home.
www.hamilton-homes.com

Copyright@2008 Shaman Chellaram 9