Property Works Mallorca has developed a simple guide to follow when considering a purchase in Spain. We hope this is of some use. This is not intended to replace any advice given by your lawyer, so make sure you appoint a good one. The information outlined below is to guide you only and should not be relied on.
Happy house hunting!
1. Consider your budget
In our view, the first step you should take prior to purchasing is to discuss finance options with both UK and Spanish Banks. Due to restrictive mortgage finance available and strict credit control you should identify how much bank finance is available and if a purchase is viable.
We can help you to identify competitive lenders here in Mallorca. Please see Property Works Mortgage and Finance section.
Please make sure finance is in place and approved prior to entering into a purchase agreement. Many deposits are lost because verbal approval is given by the banks, prior to them carrying out their own due diligence.
The purchase costs in Spain are very high. We recommend you allow at least 15% of the agreed figure. If you are selling one property in Spain and buying another, costs can get close to a whopping 20% if agency fees are included.
Taxes will vary depending on your resident status and the vehicle used for purchase. We recommend you consult a “Gestor” (a specialist in Spanish taxes and bureaucracy) or a Spanish accountant prior to purchase.
We highly recommend you do not overstretch yourself by risking your main house or savings.
2. Consider the area
Without stating the obvious, it is vital to get the area right.
Various aspects should be considered; everything from transport, to amenities, leisure, schools, distance to the shops, the beach etc.
You should also look at negatives such as local existing and future planning, road noise and distances from airports. Busy bars and restaurants may seem a fun place to be when you are out during the evening, but living close to busy nocturnal areas can be a nightmare.
Make sure you visit more than once and ideally in different seasons. Come to the area you are interested in and have a good sniff around. Spend a good couple of weeks over here, looking at the area you might like to be in and comparing it to others. Talk to locals, do research via the internet etc.
3. Consider what type of property you require
Make sure you buy the property which suits your needs.
Again, this may seem obvious, but we have seen this fundamental advice ignored time and time again.
- Do consider if you want to primarily be with Spanish, German or English communities.
- Consider if the area is seasonal and how that may affect your enjoyment of the area.
- Don’t buy a house in a remote village if you are sociable, cannot speak the local language and don’t drive.
- Don’t buy a large property which requires constant maintenance if you don’t enjoy the trials and cost of building in Spain.
- Don’t consider a property with lots of land if you are not going to be at the house for long periods or aren’t prepared to pay for maintenance.
- Ensure travel times from your home are not excessive and that flights are likely to be ongoing and throughout the year.
- Draw up a shortlist of properties.
4. Identifying a good estate agent or home finder
A good estate agent is likely to help no end. Even better, consider a property finder.
A bad agent will drive you mad, may feed you false information, cost you money and/or lose a purchase.
When choosing, consider the time they have been on the island, the languages they speak, the time they have spent with their company, the areas they cover and their general keenness.
Get as much info on the properties you are looking at before visiting
Remember they do not work for you (the vendor pays their fee) and they should not cost you money.
These days, the internet is a fantastic source of property but can be overwhelming. Take your time and create shortlists.
Don’t get carried away. Having viewed lots of properties, some agents are very good at sitting potential purchasers down on a nice terrace with a sea view to enjoy the wine and evening sun, buttering them up before signing a contract. Buy sober and with a cool head.
We are happy to recommend various local agents who we have working with over the years.
Property Works can also help by providing a high-quality home finding service.
5. Making an offer
Firstly, take advice from your lawyer/agent about how to make the offer.
Getting some info from the agent about the vendor’s situation is always a good idea.
This should be carried out at an early stage in order to help with the negotiations.
The vendor’s position is crucial when forming the offer and getting the best deal but be warned, Some vendors will not negotiate or offer very little margin to negotiate, even if it is a fair offer.
A formal survey and valuation document is then recommended. This can easily save you thousands when negotiating a purchase.
Vendors vary considerably and your approach to making an offer may differ. It may be that vendor is wealthy or is dire straits; it may be that they are Mallorquin or German and don’t consider bartering.
We suggest 1) a verbal offer is made, along with 2) a proposal for the process to proceed to purchase, explaining 3) how long you need to complete and 4) the logic to your offer.
6. Carry out due diligence and the paperwork
This is where your professionals really start to work for you.
When purchasing a property in Spain, it is advisable to appoint an independent lawyer to investigate important legal issues such as tenure, debt and ownership and to ensure the purchase goes through with the minimum of fuss. Our surveyors can assist in the due diligence, often working closely with your legal advisor and always acting exclusively for you as the purchaser.
We always recommend you appoint a competent, independent lawyer.
Be careful with accepting an Estate Agents recommendation for a lawyer. These lawyers may be pressured by the agent to push a sale through in order to get the next instruction. Some Spanish lawyers, in our experience, do not have the same level of duty of care to their clients (the purchaser) as they might in the UK. We can help here in selecting a lawyer who will work for you and you only.
You lawyer is likely to recommend you proceed to purchase with an “Opción de Compra” or “Purchase Option”
This is a contract signed by both parties outlining the terms and conditions of the sale.
It should describe:
- The property to be sold including the building’s size and land size, neighbours, rights of way, easements, etc
- The housing registry and deed number
- Its rating number
- The price
- The vendor and purchaser’s name, id and addresses.
- The deposit amount
- The date of completion
- What will happen if the contract is broken
- Who will hold the deposit
- the commission payable to the agent by the vendor.
- Consider a subject to survey clause.
- Consider defects disclosure clause.
- Do not confuse an ”opción” or option with a “señal” or deposit. A señal is a small deposit, perhaps 1,000-5,000€ to hold the property until contracts are drawn up. It has no legal status and is usually paid over a handshake. These contracts are often provided by the agents and often represent their interests or those of the vendors.
- Do not be afraid to suggest that your lawyer will provide the option document. This is always the best option as it is more likely to favour you as the purchaser.
- Never sign any purchase contract unless you fully understand its content. Ensure you have an English translation so you know what you a signing/buying.
- The days of paying 10% deposit are gone. Try negotiating down 5%. This is much more reasonable.
- Do not expect to get your option deposit back easily without a fight if the money is held with the agent, vendor’s lawyer or vendor, so make sure the money is held by a trusted third party. If it goes to court it can take years to recover. We encourage a deposit cheque being held by the lawyer, which can easily be returned if not cashed.
- Do not sign an option until a minimum amount of due diligence is carried out. Most vendors can and should wait for you to check out some basic pre-purchase details. Generally, three to four weeks should be sufficient for your lawyer and surveyor to give you the green light to proceed.
- Remember an unprofessional agent wants your signature as soon as possible in order to claim a commission.
- Forget paying cash for the option, however much the agent or vendor likes it. This is an antiquated and unreasonable request.
- Consider if you are purchasing the property with furniture. This is often quite a good idea and can save many thousands of pounds. It can also help with negotiations.
- Often the paperwork is irregular in Spain. If this is the case, your first question to your lawyer should be can this be corrected. If not, you need to be advised as to the consequences of not correcting the paperwork (which can very can vary considerably depending on the infraction and the area) and if you can live with any irregularities.