Property Sales Process | Selling Costs

Introduction

When it comes to selling your Spanish property, the main thing to consider is timing. Spain has a cyclical property market and you need to ensure that you are selling at a time when the market value of your property is high. However, if you are trading up in Spain it might make sense to sell during a downturn as the cheaper price of the larger property you're purchasing may offset the reduction in price of the house you're selling. If in doubt, you can always hold on to your property, rent it out and also rent in the new location you are going to and wait for the property cycle to move in your favour.

It is advisable to remain in Spain during the sale period, at least until the signing of the promissory contract, to ensure things progress satisfactorily. You will also need to consider the capital gains tax implications of selling up. You can find out how much capital gains tax could be due by consulting your tax office.

In Spain, estate agents are only loosely regulated by the law. The seal of quality of official estate agents (Agente de Propiedad Inmobiliaria, API) provides these professionals with a degree of professional respectability, however.

Legal requirements

The seller also has to comply with the legally stipulated notification requirements toward those having rights of pre-emption.

Vendors must ensure they possess relevant property ownership documents, including the escritura, and make sure they have paid any outstanding IBI tax or utility bills on their property.

The seller is obliged to sell the property free from defects. The seller is liable for defects, which reduce the value of the property, or prevent the use of the property for a particular purpose. If the property lacks a particular characteristic which the vendor claimed it possessed he/she is liable.

The process of selling property in Spain

1. Market research

Before you do anything, check out the market. Unless you're forced to sell, steer clear of slumps when prices are depressed and perhaps consider letting out long-term until the market recovers as an alternative.

2. Preparing your house for sale

It is worth doing some research through consulting with local agents to get advice on how to prepare your home to increase its attractiveness to prospective buyers.

3. Marketing your property

Once you have decided it's the right time to sell and are confident your property is in a condition which will appeal to prospective buyers, you are ready to go to market. The normal means of marketing a property in Spain is via an estate agent who can also value your property. If you used an agent to buy your Spanish home, it could make sense to use the same one to sell it, as they will already know the property. Before you take on their services, you should check carefully what they will and will not do in terms of marketing and what they will charge as commission – make sure you shop around to get the best service! In Spain , it is customary to commission several estate agents to sell your property, although exclusive contracts may be in your interest in certain situations. It's advisable also to find an agent who has an official API (Agente de Propiedad Inmobiliaria) number.

However, it's increasingly easy these days to sell without using an agent. There are an increasing number of specialist websites and magazines advertising property for sale in Spain. The key advantage here is avoiding the high estate agents' fees. You will need to do your research to get the price right. Just looking at the adverts will not be enough. You will need to get out and see comparable properties in your area and check out their facilities.

Alternatively, you could try to sell your property at auction.

4. Organising legal representation

There are three legal professionals you will probably deal with:

A public notary (notario ):
Unlike traditional lawyers, Spanish notaries (notarios) are neutral government legal representatives who act as witnesses to and registrars of property transactions. Under Spanish law, only deeds of sale (escritura de compraventa) witnessed and authorized by a notario can be registered at the land registry. He or she will prepare all the appropriate paperwork and ensure this has been filled out correctly according to the wishes of both parties. The notario also has a responsibility to make sure the appropriate property taxes are paid on time. Finding a notario is relatively straightforward. The local phone book will have names and numbers, and the estate agent will be able to put you in contact with the notarios they use regularly.
A reputable English-speaking Spanish solicitor (abogado):
It is essential to find an independent lawyer to represent your interests and offer impartial legal advice. Spanish Abogados are registered with the Spanish Law Society (Colegio de Abogados) or, if acting in the UK , with the Law Society or Bar Council.
An UK solicitor versed in Spanish property law:
Although you may be able to find a reputable, independent Spanish solicitor who speaks good English, this solicitor is unlikely to be versed in UK law. So it can be advisable to also engage the services of a UK professional who has specialist knowledge of Spanish property law and tax in addition to a Spanish solicitor to advise on the international dimensions of the transaction and on the critical issue of UK taxation.

5. Negotiating a reservation contract

Once you've found a potential buyer and have organised legal representation, you are ready to start negotiating over price. You should be willing to walk away from the deal if you don't secure your minimum requirements. If at this time you have already identified alternative buyers that you would be equally happy to sell to, this will be easier to do.

In Spain, there is a local practice where some of the purchase price is paid “under the table”. This means that some of the price is paid to the vendor in cash, undeclared to the tax authorities, while the balance is paid in the normal visible manner. Although the practice is common, it is illegal and there are severe penalties.

Once you are happy with the price you normally have the option of accepting a small reservation fee from your prospective buyer for the property to be taken off the market while your lawyer draws up the private purchase contract. This is an informal agreement and will not commit your prospective buyer to purchasing the property. However, if your prospective buyer then reneges on their expressed interest in buying, he/she will normally forfeit their reservation fee.

6. Signing a preliminary contract

Once all the necessary legal checks have been completed to the satisfaction of the buyer, you will be ready to sign an initial promissory contract (Contrato Privado de Compraventa). Before this stage you should have had the contract translated into English and ideally have English-speaking assistance on hand during the signing. The contrato privado can be signed in front of a notario or privately.

The contrato privado details the finer points of exactly what you are selling, and includes all the fundamental information about the sale such as the purchase price (including how and when it should be paid), the list of fixtures and fittings included in the sale, and the completion date when the deeds will be signed and the property transferred into your name.

This agreement commits both buyer and vendor to complete the transaction and at this point the buyer must pay 5-15% of the purchase price as a deposit. If the buyer walks away from the deal subsequently, this deposit will be forfeited; if the vendor walks away, they are liable repay the buyer twice the value of the deposit in compensation and the purchaser may retain the right to redress in most instances.

In Spain there is no requirement for the signatures of parties to a private contract to be witnessed.

7. Completion

After all the legal paperwork has been completed, you will be ready to sign the Public Deed (escritura de compraventa). This is the moment of truth when ownership of the property passes from vendor to buyer. The notary (notario) must be present at this event to formally witness and register the transfer of ownership on behalf of the Spanish government.

Both parties will need to provide passports or other proof of identity and unless you speak good Spanish, the notary will insist that a translator is present to ensure you understand the full implications of the contract you are entering into.

Upon completion, the buyer must pay the balance of the purchase price, all professional fees, transfer taxes and notary fees. Copies of the deeds are then sent to the Land Registry and the tax office.