One of the most interesting and frustrating things you’ll ever do in your life? That would be buying a home in Spain as a foreigner. The good news is that you will have the battle scars and stories to tell to others. As Americans, we are not used to the way things are done here. This post will help you avoid the pitfalls.
- Buying a Home In Spain: What you need to know
- How to buy a house in Spain:
- Can Americans buy property in Spain?
- Buying property in Spain: What you need:
- House buying in Spain: The decision
- Some things to look out for when searching for property in Spain:
- Is now a good time to buy property in Valencia?
- Financing a property purchase in Spain:
- Selling U.S. property from abroad:
- Things to know before buying property in Spain (Valencia):
- Houses In Spain To Buy: Where to find them
- The final day of escrow:
- House buying in Spain: Wrapup
Buying a Home In Spain: What you need to know
Ultimately, it will be a rewarding transaction assuming you had done your due diligence and adjusted your way of thinking as opposed to assuming that it would be the same as your home country. This is pretty much everything to help you to buy a house in Spain.
How to buy a house in Spain:
After having gone through this experience, I can say that I’m glad l did it. I’m glad it worked out, and hopefully, this was our one and only time buying property in Spain as foreigners. Here are some tips and things to look out for if this is a path you would like to follow.
Can Americans buy property in Spain?
Yes, they can. Americans and other foreigners can definitely buy property in Spain. We bought ours in Valencia, and know others who have purchased in different parts of the country.
Buying property in Spain: What you need:
- NIE number
House buying in Spain: The decision
Our first foray into purchasing property in Valencia was after renting for two years. This is something l always recommend that people do when they first move, to a different country or even a different state. There are so many things that can affect your decision and so many things to consider, especially when it’s a big city where noise for instance can be a big issue. Spain in general is noisy.
Renting gives you a chance to try things out before you buy. The neighborhood that seems great when you first move in can quickly become a jail or an unpleasant place to be. Things that can annoy you in addition to noise can be smells.
Spain’s cities and flats are a combination of businesses (usually on the bottom floor) with apartments on top (usually six more floors). Be unlucky enough to be right above a fish market for instance, and not like the smell of fish, well… you can just imagine life with windows closed all the time. The list of annoyances goes on. It is important to make your list and see what you can live with, and even more importantly what you can not live with.
Some things to look out for when searching for property in Spain:
– The neighborhood in general. Is it convenient to places you go often for instance? Sometimes l find people skipping this bit of research in favor of outlying areas for instance, and then complaining afterward because so much time is spent driving/taking public transport back into the city.
-Your potential neighbors. One of the most common complaints from ex-pats is the noise factor, usually from barking dogs or screaming kids 24/7. It is not unusual for dogs to be left out in the yards or on the balconies for hours on end.
You can’t blame the dogs for barking non-stop when they are neglected. You, on the other hand, just want your peace and quiet and choose a place based on this illusion, and then get frustrated when there is no peace or quiet. Complaining to the authorities rarely does any good. This is just the way it is here.
-Where, and what the businesses are. I’ve already mentioned that the bottom floors are usually businesses (sometimes flats which are very handy for people with disabilities). It is also common for offices to be on the first or even the second floor. Dental offices, dermatologists, accountants, and gestors are often on these floors.
This means people traipsing in and out during office hours which can be jarring to you. We had an accounting office next to our first-floor apartment and boy… doors were slamming all the time, people yelling when they got bad news. It was never-ending, and not fun for us.
-Is it an Interior or Exterior flat?
If it’s an interior flat, chances are there will not be as much sunlight as some people might welcome. I am not a big fan of them for instance because you are basically surrounded by neighbors’ windows. A lot of trapped smells l find, from laundry to sewer.
Exterior… and you will have sunlight, but you will be more exposed to street noise too. That suits my personality more, so know thyself.
-The amenities that are available to you. For us, for instance, it was imperative that we be within a 5-minute walk of a grocery store. That was non-negotiable because we spend a lot of time at home and my husband loves cooking, and shopping (thank god because we would starve if it was up to me. I hate both!).
For you, it might be a post office, a gym, etc., etc. These things are also important to check out before you made that big decision. Once you’re locked in, it will take the shine off and become irritating, to say the least. Who needs a workout before they get to work out?
-How many flats are on each floor?
The more neighbors, the more noise. There are usually two at a minimum, but sometimes four or six. This was another deal-breaker for me. It had to be two. One would be amazing, but almost impossible.
-How much are the community fees? (HOA)
In the city of Valencia, most are usually under 50 euros a month, but of course, the fancier the place, the more you pay. Some buildings have concierges, pools, and more. You would expect the fees to be higher in these places. It’s a good thing to check and not be in for a big surprise.
- Access via elevator or stairs?
When you’re young and fit, you don’t mind sprinting up some stairs to get to your flat. These flats are usually a bit cheaper because they are not as wanted. I would think that one quickly gets tired of having to go up and down 6 floors of stairs (remember the buildings usually go up to 5 or 7 floors) on a daily basis. Lugging groceries and such becomes a real pain.
Don’t forget the fact that most properties take a long time to sell, so you might be stuck with it for a while. Eventually, maybe, the building might opt to install an elevator, and the cost is divided between all the owners, so your “cheaper” buy might not be cheap all things considered. If you’re retired, well… I don’t have to tell you about arthritis and all the ailments that make you not so spry anymore.
Once you have sorted all these things out, then you can focus on places that meet your criteria. Documenting this before you start the search will narrow down your frustrations. Say you need a balcony or terrace when then you can filter your search and focus your energy on flats that have that.
Tip: Carry a notebook when you view the places to jot everything down and compare it to what you were looking for. Sometimes you are so enchanted with a place, you forget what was on your “needed” side.
Also, don’t be shy about taking photos or videos (ask first) when you view. Things can get confusing after seeing a lot of places. All these precautions will lessen your chance of making a costly mistake.
Is now a good time to buy property in Valencia?
At some point, when you’re ready to put roots down, you need to remember something.
Spain property is mostly a buy-to-live scenario, not buy to flip.
In my years in Spain, I have met a few people who forgot this and got stuck in situations that made them desperate. You can not bring that American thinking of I’m gonna buy it, make a few adjustments and flip for a big bargain two years later.
Buying property in Spain is not set up like that, and they have a good way of discouraging this in the form of taxes to pay when you buy a property. It is not unusual for flats and houses to sit on the market for a year and more before it sells, and usually after a few reductions, so chances are you would end up losing money. Sure there are some people who do make a living flipping, (at least they say they do). The odds are against you though.
I don’t think it’s smart trying to time the market. The fact that you’re going to be living in it should be the deciding factor since it’s not a flip. If you’re happy with the place, then you will be happy with it. It’s about your quality of life in the space.
Overall, prices in Valencia have been on the uptick as more and more people discover what a great city it is and made the decision to set down roots here. To me, it’s as good as any time to buy.
***Don’t be afraid to ask for a discount off the asking price if you feel it’s warranted.***
Financing a property purchase in Spain:
As a normal occurrence, most banks in Spain who offer to finance a foreigner’s property will do so with a 30-40% downpayment and financing 60-70%. Sometimes, this can be upped to 80% financing if you can show that you’ve been living and paying taxes in Spain. A lot of the realtors work with banks and can point you to ones that do.
I urge you to check out the terms of the loans properly before you sign the papers.
- What is expected of you with regards to downpayment?
- Is it tied to an appraised value?
- Do you need to purchase policies such as home insurance, car insurance, and health insurance with them in order to get the loan? (happens frequently).
- Any early payment penalties and what the late payment penalties are?
- What happens if you default. You may not only lose the house but also need to repay the loan. From what l understand, Spain offers more non-recourse loans (go after other things you won) as opposed to recourse loans we see mostly in the states where they take the house and nothing else. Buyer beware!
Selling U.S. property from abroad:
If you need to sell your property in order to purchase your Spanish property, make sure to make it as painless as possible. After having done that a few times from abroad following these steps, it can definitely be so.
We always use Wise to move the proceeds over. It’s an online banking company where you can open accounts in different currencies. We have our money wired by the U.S escrow company into our USD TransferWise account. Once that was done, we simply convert that into euros inside of the app within seconds when ready.
This post explains why we really, really like this. It has simplified banking across continents for us and has saved us a crapload of money. Much better rates than what the traditional banks offer. Game changer for sure.
Things to know before buying property in Spain (Valencia):
- You might need a lawyer at a cost of approximately 1% of the property cost. They function to research the potential property and basically act like an escrow company would in the states. I put “might” because if you have a good realtor, you might not need one.
- Notario, Gestoria, and other fees will run you just about 1% of the total cost. The notary is like a lawyer here, with big credentials and knowledge (another reason you might not need a lawyer is if you have a good notary).
- In Valencia, it is customary for the buyer to pay the real estate commission. Most realtors won’t even show you the place unless you sign a form agreeing to it. That really takes the piss to be honest. Their fee is usually €3,000 flat fee if the house is under €100,000 and then a certain percentage if above that amount (usually 4%). It adds up quickly. You can try and negotiate with them.
- 10% of the property cost is a transfer tax to the city, and non-negotiable. If you are disabled or purchase in a historic area, this drops a few points. This amount needs to be paid within 30 days of purchase, and often will be done through the notary. This number is the one for the Valencia region, other regions of Spain differ and tend to be lower.
- All in all, you need approximately 16% of the cost of the property to cover everything, so definitely factor that in, and put that cushion in. I am always amazed watching programs like “A place in the sun” where there is no mention of this 16% on top and wonder how people react when they find out :-).
- Your closing is done at a notary office and it’s just one or two signatures and you get like a five-page document or something close to that, and l think it was because our notary had everything in both English and Spanish. In the U.S, you can count on about 20 signatures and 70 pages (at least it seems like that).
- If your Spanish skills are not strong, be sure to have someone who can translate for you. The documents are in Spanish of course, you shouldn’t be signing things willy-nilly, and don’t blindly believe what the realtors and everybody else tell you! Once those papers are signed, and they are paid, you are on your own.
Houses In Spain To Buy: Where to find them
By far, the biggest and most popular place to find property for sale in Spain is online, on the idealista website. This is where we found ours and is my favorite portal for finding a property, either for sale or for rent.
The site is great for filtering. You can narrow it down by minimum size, minimum and/or maximum price, private seller listings, the neighborhood and so many other matches. Since there are often thousands of properties for sale, you can save yourself some time.
Another way to find properties is to check out the windows of real estate agencies, and if you see something you like, get in there and talk to them. What to remember is that they will only show you what they have on their books which can be frustrating.
Expect them to show you a two-bedroom with one bathroom when you said you specifically told them you would only consider three bedrooms with two bathrooms. It’s like they don’t bother listening… comical, but frustrating.
The good news is that most respond to you quickly when it’s for a sale as opposed to a rental. Still slow in our way of thinking, but faster nonetheless.
Once you find your property:
There is no specific time frame for an escrow in Spain. Once you find the property, you put down a deposit to hold the property and prevent it from being shown to others. This is now a binding contract assuming all obligations are met on both sides. Usually, the contracts are written like this:
If you back out, you lose your deposit. If the seller backs out, he gives you double the deposit as compensation. It is therefore important that you understand everything before signing so you don’t lose your money. Make sure to find out what kind of contract you have. Put any requirements you need such as:
- getting a mortgage.
- survey or inspection to be carried out.
- If the land it’s on is the one you’re getting.
- If you need zoning permission.
- If any unpermitted changes had been done to the property. You may need to have them permitted (have them do it before the changeover is my advice).
- The furnishings in the house. Are they sold with it, or they will clear it all out?
To buy property in Spain, you need to have patience and be resilient. It’s important to remember that this too shall pass. All obstacles, both big and small can be overcome when you have a good team working on your behalf.
It is therefore important to choose carefully. Word of mouth is good to pick a good team, so make sure to ask others who have gone through the process of buying Spanish property.
The final day of escrow:
Once all the conditions have been met, you go to the notary’s office for completion. Usually, there is the buyer, and seller, and the transfer of ownership takes place with both sides signing the papers. Once again, make sure your notary explains it all to you (we had a bilingual one) which makes things easier.
At this point, you also pay the balance of the purchase price based on prior arrangements. Some will do wire transfers (preferable), or the old-fashioned cashier’s checks to the seller. This is another annoying thing about the banks, they charge an arm and a leg for cashiers’ checks (sometimes hundreds, I’ve heard of up to €770 euros charge.
It is imperative that you check with your bank BEFORE the closing date as you might be stuck with whatever they charge. We negotiated ours with the bank from €300 each (brother and sister sellers) to €60 each, and it took two days to prepare it. Ridiculous l know!
We opted to have the notary pay the taxes on our behalf and send us the receipt. This saved us the headache of having to go to city hall and do it ourselves. Most do it as part of their fee anyway, so you might as well do that.
You are handed the keys to your new home, and voila… your new adventure begins.
House buying in Spain: Wrapup
House buying in Spain can be quite a headache, but it is quite satisfying in the end. The sense of accomplishment at the joy it brings is immeasurable. The fact that the prices are still so much lower than comparable parts of the world is amazing. Buying in Spain has been good for us, and l say at the three-year point post buying a Spanish property :-).
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Have you taken the plunge into the property market in Spain? Was it smooth sailing or a big headache? If not, are you thinking about it?