Buying a house requires thought, financial investment, red tape and patience, so it is a transcendental decision in a person’s life. We help you make the best decisions and find the home of your dreams, whether second-hand or new. Before purchasing a home in Spain, it is important to know your situation and take into account that the process can last from a few months to several years, especially in the case of buying new off-plan homes.
The real estate market in Spain shows signs of recovery driven by the economic improvement and the increase in employment. The report reveals an annual growth of 6.6% in housing prices, placing the average price per square meter at €1,328 throughout the country. Decision-making when buying a home is not easy, but the success of the operation will depend on proper monitoring of price indices, legal procedures and financing conditions, among other factors.
New or second-hand work, which is better?
As a homebuyer, it is essential to consider both the offer available on real estate portals and the advice of professionals in the field. Additionally, choosing the right location requires extensive research and conversations with neighbors to determine if the home meets your expectations.
The price of second-hand homes has experienced an increase of 2.7% in the second quarter of 2018, according to Idealista, placing the average price per square meter at €1,664. However, this increase varies in each autonomous community, with Madrid leading as the most expensive region (€2,868/m2), followed by the Balearic Islands, Euskadi and Catalonia. Although the purchase of second-hand homes implies less taxes, such as the Property Transfer Tax (ITP), which ranges between 6% and 10%, it is also necessary to consider possible initial investments in reforms. On the other hand, new homes are ready to live in and require less remodeling, but face higher taxes, such as the Documented Legal Acts Tax (IAJD) and VAT, which vary between 4% and 21% depending on the type of property. property.
How do you negotiate the price?
When buying a home, price negotiation is essential and it is possible to obtain up to a 10% discount on the initial price. Having the help of a real estate professional facilitates administrative procedures and improves the possibilities of negotiating the price with the owner.
It is recommended to request an appraisal, compare prices in the area and obtain a simple note from the Property Registry to find out the circumstances of the home, such as mortgages, seizures or guarantees, before acquiring it.
Bank procedures: fixed or variable mortgage
When buying a home, financing through a bank loan is common, but it is important to consider the conditions of the mortgage, such as the type of index to which it is referenced and possible cancellation or amortization commissions. The choice between a fixed or variable mortgage is also crucial and depends on the point at which the Euribor, the interbank interest rate used for short-term loans, is located.
The decision is based on the amount of money available, the return period and the forecast of the evolution of the Euribor in the long term. Under normal conditions, fixed-rate mortgages have higher interest rates than variable ones, but currently there are entities that offer fixed-rate loans that are more attractive than variable ones.
The deposit contract (Agreement of both parties)
After completing the previous steps, the purchase of a home is formalized through the earnest money contract, a private agreement that commits the owner and the buyer to carry out the transaction. As a buyer, you must make a reservation deposit that is usually between 5% and 10% of the total price of the house. The contract must include details such as the amount of the sale, the method of payment, the distribution of expenses, the deadlines for the public deed and the formalization of the contract, among others.
There are three types of earnest money contracts: confirmatory, penal and penitential, each one establishing different conditions based on the agreement of the parties; however, the penitential earnest money contract supported by article 1454 of the Civil Code is the most common, allowing both parties to freely terminate the contract with the only obligation to return the amount specified in the earnest money contract.
Extra expenses to cover
Experts advise having a savings of 13% of the value of the house before buying a home. This financial cushion will cover notary expenses, taxes, registration, appraisal and the advance payment of the sale contract.
- The notary fees for the public deed of sale of a home vary between €600 and €875, depending on the value of the property.
- The property registry implies an outlay of between €400 and €650, depending on the price of the property, to register the deeds signed before the notary.
- Hiring an agency is an additional service to carry out procedures such as tax settlement in the opening of a mortgage, with an average cost of around €300, although it can be covered by the financial institution.
- When buying and selling homes, associated taxes must be considered, such as the Property Transfer Tax (ITP) for second-hand homes, and VAT and Documented Legal Acts Tax (IAJD) for new homes.
- When applying for a mortgage, you must invest between €250 and €600 in the appraisal of the property, carried out by an appraiser (generally provided by the bank), so that the entity can determine the percentage of financing, generally up to 80% of the purchase price or appraised value.
Delivery of keys
The day of handing over the keys marks the closing of the purchase of the house, with the presence of the notary, managers and owner. The signing of the last documents, including the deeds and the mortgage, is carried out with enthusiasm and emotion, finally opening the doors of the new home. Throughout the process, it is important to follow the guidelines and receive the appropriate professional advice to achieve the desired home, building a true home where we will spend many hours of our lives.
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