The Steps to Selling Property in Spain
1. Appoint a Professional Real Estate Agency
Why Lucas Fox?
Lucas Fox is Spain’s leader in home sales to international buyers, specialising in the sale of exclusive properties in the country’s major cities and most desirable second home destinations. We are recognised for our professionalism, market knowledge and experience. Our dedicated team of multilingual Sales and Listings Agents are motivated to sell your property fast and at the right price.
Lucas Fox has an association with international real estate advisor Savills, providing sellers with full access to Savills’ global business network. Savills boasts an international network of more than 600 offices and over 30,000 employees. Savills recently acquired Aguirre Newman, making it one of the leading commercial real estate businesses in Spain.
At Lucas Fox we offer you the following services:
- Market valuation of your property based on credible current sales data
- High quality professional property photos
- Creation of property floor plans
- Revision of all documentation relating to the sale of the property (Occupancy Certificate (Cédula de Habitabilidad), Land Registry Certificate (Nota Simple) etc)
- Listing on our 11 language websites (135,000+ monthly visits)
- Listing on Savills website
- Possible inclusion in Savills newsletters
- Possible inclusion in Savills brochures
- Benefit from Savills’ experienced PR service
- Listing on leading national and international portals
- Property alert email sent to potential clients
- Inclusion in monthly newsletters to targeted subscriber database
- Inclusion in targeted national and international PR and media campaigns
- Exposure on social media platforms
- Regular feedback from your personal Sales Agent in your own language
EXCLUSIVE SALES MANDATE
Exclusivity is the most effective way to sell your property and we strongly advise sellers against instructing multiple agencies to market their property. The perceived value and exclusivity of a property can be damaged if marketed by several different agencies. Furthermore, contact with just one real estate agency saves time and simplifies the selling process for owners. Our experience has also proved that with exclusivity properties sell faster.
At Lucas Fox we offer you the following additional services at no extra cost in the case of exclusive instructions:
- Featured property on all Lucas Fox websites
- Featured property on leading national portals
- Inclusion in our biannual property brochures
- Inclusion in Lucas Fox Property Lounge window displays
- Professional video of your property, displayed on our Property Lounge screens and published on social media platforms
- Simulation using renders of a renovation project
- Personalised national and international PR and media campaigns
- Sign on the property
- Processing the following documents (subject to Lucas Fox office):
- Occupancy Certificate (Cédula de Habitabilidad)
- Energy Performance Certificate (EPC) (Certificado de la Eficiencia Energética (CEE))
2. The Formal Offer and Letter of Intent to Reserve
An offer on your property from a potential buyer will be presented to you either verbally or in writing by your real estate agency. At Lucas Fox we encourage our buyers to make a Good Faith Deposit to the company escrow account and sign a formal Letter of Intent, outlining in writing the terms of their offer. This way we are able to demonstrate that the Buyer is serious in their intention to acquire the property and it helps us to filter out speculative offers. This is not an industry standard practice but we find that it helps to formalise the offer process and increase the chance of reaching a successful conclusion to negotiations.
Upon acceptance of the offer the document automatically converts into a private Reserve Agreement and the Good Faith Deposit becomes the Reserve Fee, removing the property from the market. The amount transferred as a Good Faith Deposit / Reserve Fee can vary depending on the value of the transaction – though it is usually between €5,000 and €10,000. If the offer is rejected and negotiations do not reach a successful conclusion, the Good Faith Deposit payment is returned to the Buyer. The Reserve Agreement is normally valid for around 7 to 10 days and will outline the basic conditions and timelines for the next stages of the transaction.
3. The Private Arras Contract (Contrato Privado de Arras)
This is a private agreement between the Seller and the Buyer in which the Seller agrees to sell the property and the Buyer agrees to buy the property at the price agreed and under mutually agreed terms.
The Private Arras Contract (Contrato privado de arras) will contain all the relevant details such as a description of the property, the purchase price, the payment structure and the completion date.
Upon signature of the Private Arras Contract, the Buyer will be expected to make a downpayment. In Spain this is normally paid directly to the Seller’s bank account and is usually 10% of the agreed purchase price.
Within the Private Arras Contract there is usually an optional penalty clause, which must be explicitly stated as applicable in the Contract, called Penitential Arras (Arras Penitenciales), declaring that in the case that the Buyer withdraws from the sale the Seller retains the full downpayment. Likewise, if the Seller should withdraw from the sale the Buyer is entitled to receive double the downpayment as compensation. This also minimises the potential risk of gazumping where a Seller accepts a higher bid from a third party.
It is not necessary for the Buyer and Seller to be physically present to sign the Private Arras Contract. This can be signed remotely with original copies of the contract subsequently being interchanged between the parties or their representatives.
4. The Public Purchase Sale Deed (Escritura de compraventa)
On the completion date the balance of the purchase price (sales price minus any amounts paid to date and any outstanding mortgage balance, which is paid directly to the Seller’s bank by the Buyer) must be paid to the Seller. At the same time any existing mortgage loans must be cancelled, ensuring that the property is transferred free of any loans or charges. Normal practice is for the Seller’s bank to attend the signing, receive a cheque from the Buyer for the outstanding value of the loan and to grant the mortgage cancellation deed. This way, the loan is cancelled administratively and also recorded in the Land Registry. Alternatively the Seller’s bank may subrogate the mortgage, allowing the Buyer to take over the existing loan.
The Seller and the Buyer sign the Public Purchase Sale Deed (Escritura de compraventa), which is equivalent to the title deeds of the property. The Buyer is then issued with the Public Purchase Sale Deed in front of a Notary Public, who certifies the property transfer, and a copy of the Public Purchase Sale Deed will be passed to the Spanish Tax Office and on to the Land Registry.
The Notary Public in Spain is a public official who is required to witness the deed of sale. However, an expert and independent legal advisor should be instructed by the Seller to revise contracts and generally protect their own interests.
The Buyer and the Seller are required to be physically present for the signing of the Public Purchase Sale Deed before the Notary Public. If either party is unable to attend they can issue a Power of Attorney to a lawyer, spouse or representative to act on their behalf.
What documents are required?
- DNI or NIE and passport of the property owner(s)
- Company deeds and the DNI or NIE and passport of the Administrator if owned under a company structure
- Power of Attorney of those signing on behalf of third parties or companies (if applicable)
- Original Public Purchase Sale Deed (Escritura de compraventa)
- Cadastral Certificate (Certificado catastral)
- Occupancy Certificate (Cédula de Habitabilidad)
- Land Registry Certificate (Nota Simple)
- Energy Performance Certificate (EPC) (Certificado de la Eficiencia Energética (CEE))
- Latest local property tax receipt (Impuesto sobre Bienes Inmuebles (IBI))
- Latest Community Fees receipt
- Latest utility bills
- Copy of the Community Statutes (if applicable)
- Technical Building Inspection Certificate (Certificado de Inspección Técnica del Edificio (ITE))
- Certificate with any outstanding mortgage amount
- Property floor plans
- Mortgage-related documents
- Topographical map of the land (if applicable)
- Installation certificates for utilities
What are the costs involved?
Capital Gains Tax
Capital Gains Tax is liable on the profit you make on your property sale. All official costs relating to the sale and original purchase of the property, such as notary fees, real estate agency fees and solicitor’s fees can be deducted from the profit prior to calculating the Capital Gains Tax due. The cost of home improvements and building works can also be deducted.
For residents Capital Gains Tax currently starts at 19% for the first €6,000, increasing to 21% for further gains up to €50,000 and 23% thereafter. For non-residents it is 19%. If you are non-resident then the Buyer withholds 3% of the purchase price to be used as a downpayment against your Capital Gains Tax liability, which is then paid to the Spanish Tax Office on your behalf. Once both you and the Buyer have submitted the appropriate tax forms you will either receive a rebate or be required to pay the additional Capital Gains Tax.
If you are a resident then you do not pay Capital Gains Tax if the property you are selling is your main residence and you are reinvesting the money in another property to be your main home (both properties must meet certain conditions to qualify, such as being situated in a country in the EU or the EEA). This also applies to non-residents who are resident in another EU country or an EEA country that has signed up to the tax information exchange agreement with Spain. Spanish law also includes an exemption for people over 65 years old who sell their habitual residence, regardless of whether they reinvest the profit obtained or not.
Plusvalía Tax (land appreciation tax) is a local tax based on the incremental tax (cadastral) value of the urban land over the period of ownership where the increase of the land’s value begins with its acquisition and ends with its sale. No Plusvalía Tax will be payable if there is no increase in the urban land’s value or if the Plusvalía Tax turns out to be negative. In any case, the transfer of the land’s ownership from the Seller to the Buyer must be notified to the appropriate authorities through the procedures established by Spanish law.
Mortgage Cancellation Fees (if applicable)
If there is a mortgage on the property, and the Buyer doesn’t exercise the subrogation, then you will have to cancel it. This must to be done in front of a Notary Public on the day of completion and registered at the Land Registry. Banks generally charge between 0.5% and 1% of the outstanding mortgage balance. The Notary Public and Land Registry fees for a mortgage cancellation vary but are generally around €800.
Even if the mortgage has been fully paid off and cancelled administratively by your bank, you need to ensure that this is registered in the Land Registry. This will not have been done unless you have signed a mortgage cancellation deed before a Notary Public.
Real Estate Agency Fees
Real estate agency fees vary and depend on the agreement signed with the agency.
It is not obligatory by Spanish law to seek legal assistance for a property sale but it is strongly recommended to do so. The fees vary due to the complexity and value of the sale and the amount of work required by the solicitor.
Occupancy Certificate (Cédula de habitabilidad)
An Occupancy Certificate (Cédula de Habitabilidad) is required by Spanish law when selling a property. This is an administrative document that states and makes sure that the property complies with minimal habitability conditions, according to the legislation applicable in force, rendering it a legal dwelling. The cost to apply and process the certificate varies according to the size of the property but generally starts from around €50.
The Land Registry is a Spanish institution that contains the description of every property in Spain, establishing its exact location, size and boundaries. Such inscription and continual update is mandatory and must be accurately described so if you, or a previous owner of your property, have extended the home or, for example, constructed a swimming pool and this hasn’t been formally inscribed in the Land Registry, this will have to be declared either prior to or at the moment of sale and you will be required to pay tax on the additional declared square metres.
Energy Performance Certificate (EPC) (Certificado de la eficiencia energética (CEE))
Spanish and EU law states that all property owners who want to sell or rent out their property require a valid Energy Performance Certificate (EPC) (Certificado de la Eficiencia Energética (CEE)). This certificate must be issued by a qualified certifier such as an architect, surveyor or technical house engineer. The cost varies according to the size of the property but is generally between €100 and €500. Any properties advertised on the internet for sale or rent must be in possession of the EPC and the energy rating should be published online and in any related advertising.
Local Property Tax (Impuesto sobre bienes inmuebles (IBI))
The Impuesto sobre Bienes Inmuebles (IBI) is a local property tax where the total amount payable varies depending on the area where the property is located. There are some important aspects, such as the overall size, the property’s age or if it is urban or rural, that are taken into account when determining the total tax payable. By Spanish law the owner of the property on 1st January is liable for that year’s IBI tax, although you can come to a private agreement with the Buyer to share these costs on a pro-rata basis depending on the date of transfer of the property.
Top Tips to ensure a successful sale
- KEEP IT NEUTRAL: Declutter and tidy your home to give it broad appeal. Not everyone will have your taste so try to avoid strong statements and give people a neutral canvas to stamp their own identity on.
- MAKE SPACE: Clear up and make sure every room is spacious and inviting. Sort out the kitchen and leave worktops clear, put the children’s pushchairs and toys away, remove clothes hanging out to dry, organise the bathroom so the towels are clean and neat and put all the lotions and medicines out of sight. If you have lots of family photos on display, maybe tidy them away and just leave a few favourites.
- ADD LIFE: If the property has a terrace or garden then make it look as good as possible. Remove dead plants or those in bad condition and replace with new ones so that the potential buyer understands the value that this space adds to the property. Arrange furniture, barbecue and other features to indicate a wealth of al fresco potential.
- FRESHEN UP: Ventilate the entire property to give it a fresh, airy feel and eliminate any lingering odours.
- LIGHTEN THE MOOD: Turn on lights and open blinds before the potential buyer arrives. If the views are pleasant open the curtains and shutters. Clean the windows. Light means space, and if the sun is out then make the most of it. If it’s dark then make the most of different lights to create a warm and welcoming ambience.
- FIX IT UP: Investing in a basic makeover before putting the property up for sale can have significant benefits in the long run. Add a new coat of paint to walls and even the front door, fix that hole in the wall, put a rug over that worn carpet and replace that missing mirror.
- CLEAN HOUSE: Your house may be cleaner than usual, but is it viewing clean? Remember to clean light switches and mirrors, door handles and even the house number. Make sure corners, ceilings, light shades and other often forgotten areas are dealt with.
- DEFINE ROLES: Give each room an identity – an untidy storeroom can be a home office with a quick rearrangement, a soulless spare room can be a playroom with a bed for staying over, or a TV makes it into an overflow children’s or games room. Put a small table in the corner of the kitchen and it adds potential in the minds of potential buyers.
- KEEP IT REAL: Don’t overdo the design solutions and oversell your property. Fresh flowers look great, but a complete dinner party table setting may go beyond homely and into fantasy. The goal is to create the sense of a home that people can see themselves enjoying or easily renting out, not a movie set!
Please note the information is not to be intended as a substitute for professional legal advice.
Laws and tax rates are subject to change so please consult a tax specialist or the tax authorities for the latest information.
View more information on selling your property with Lucas Fox.