Pitfalls of buying property in Spain
- 👍 List of Pitfalls of buying property in Spain
- 📣 Zero Pitfall in buying a house: Buying in a hurry
- ☝️ First Pitfall in buying a house: Restrictions in Movement
- ⚠️ Second Pitfall : Holding a Spanish Bank Account
- 😊 Third Pitfall : Housing estate agent in Spain
- 👍 fourth Pitfall : Property tax in Spain
- 💻 fifth Pitfall : Omitting some of the details
- 🔍 Avoiding Corrupyion: Find a Proper Spanish Lawyer Team
Now may appear to be an ideal time to invest in a house in Spain. Travel and real estate websites promote the idea like it’s a golden ticket to sunset beaches and delicious food on the beach. Yet, buyers need to beware. There are many pitfalls to buy a house in Spain.
These include having a proper Spanish bank account, properly dealing with the land registry, finding English-speaking agents to help assist, and a variety of other potential issues.
When an opportunity arises, many look to make the most of the situation. Many changes are occurring in Europe, and now maybe the best time to capitalize on them. Real estate investment is one of the best opportunities to solidify a solid future for yourself and others. After the destruction and chaos of World War II, Winston Churchill was quoted as saying “Never let a good crisis go to waste”.
There is truth to this statement, as interest rates around the world are extremely low and appear like a steal from the surface. Yet, buying property in Spain contains many pitfalls buyers and investors should be cautious of. Even though many properties may display an appealing purchase price, it will come with many caveats one must be aware of before making any firm financial decisions.
List of Pitfalls of buying property in Spain
Here is a list of the main pitfalls that happen to our clients, so that you can avoid them or that we can advise you in the contracts of purchase/sale of the house.
Zero Pitfall in buying a house: Buying in a hurry
This is one of the most common pitfalls for our clients, as many times they make a trip to see the house and buy the property, so we recommend taking a little more time and having an expert team review the property and all the documentation of the same so that you are not deceived.
First Pitfall in buying a house: Restrictions in Movement
Travel movement limitations are the most immediate issue with buying a Spanish property. Due to lingering border restrictions, many bureaucratic pitfalls are taking much longer than usual.
This includes tax filing, land registration, and visa issues for immigrants. To improve your experience in property purchasing, it is recommended that you consistently stay alert of the current situation regarding the pandemic in Spain. It would seem reasonable that the extended length of bureaucratic processes may lead to discounts and waivers for tax and immigration fees, it appears that nothing of this sort is likely to happen shortly.
Another thing that must be considered is the administrative fees associated with these slow responses. For example, the more drawn out a process is, the more likely your legal fees for purchasing the property will only increase gradually over time. Legal advice is very costly in many situations, and now maybe the most expensive of them all.
Second Pitfall : Holding a Spanish Bank Account
Ownership of a Spanish financial account is also a consideration expats must consider when deciding to buy their dream home and another one of the notable pitfalls of buying property in Spain.
In order to purchase land or property, an account from a Spanish bank account is another group of strict pitfalls for home buying. It is not a simple process either, as a minimum amount of capital is required to be deposited into the account if you intend to open an account as a foreigner. Furthermore, down payments on mortgages are noticeably higher in Spain compared to other places, such as the United States.
Expect to provide a down payment of approximately 30% when buying a property. This could very much complicate the process of buying a house. With such a high down payment requirement, many investors and homebuyers may be better off simply investing in other countries with less strict payment requirements. Also, it is doubtful exchange rates will differ favorably or predictably in a positive direction.
Very little impact was seen in the long term in regards to Brexit or the pandemic, so it would be naive to consider this as a future benefit for property investment. An even riskier thought that must be taken into consideration is that exchange rates may be affected negatively in the buyer’s direction. This means that even though a property may appreciate over time, the buyer’s overall return on investment could mean that they will take a net loss overall due to the conversion of their initial currency compared to the Euro.
In our law firm we can avoid this procedure and facilitate the whole process so that you do not have any problem.
Third Pitfall : Housing estate agent in Spain
Housing estate agents in Spain are another mature consideration an investor must consider as a potential pitfall when buying property in Spain. Even though citizens of a wide array of nationalities have displayed interest in purchasing a home in Spain, Spanish housing selling agents generally seem to be behind the curve to capitalize on this great opportunity.
This is again another one of the realistic pitfalls of buying property in Spain. Spanish housing estate agents seem to focus more on the local clientele, and either due to personal choice or moral reasons they seem hesitant to deal with the influx of foreigners within the growing housing estate market. This should be coupled with the example mentioned above regarding the occasional economic depressions that seem to strike every decade or so.
Longer waiting times equal more money lost. SO even though there may be a logical reason for your Spanish housing agent to procrastinate or take a longer time than expected, it will likely cause a direct impact on your finances. This is especially true as time goes on, and could contribute to another obvious pitfall. Be aware that Spanish real estate agents usually focus their time and energy on their local areas, so you may have to travel to Spain and introduce yourself in person in order to find a quality agent and verify their personality in a more personal and intimate setting. Many times, buyers from the UK will attempt to find agents from their home country, but this also comes with notable pitfalls, as the agent’s awareness of the area coupled with the extensive fees that accompany a UK agent will usually cancel out any sort of positives in the decision.
Be concerned also with Spanish agents displaying their API or GIPE professional associations. These are indeed legitimate associations for property salesmen in the country, yet mean very little in terms of consumer satisfaction or safety. Commission prices are also notably outrageous. For example, in Costa del Sol they can average to about 7.5%. This could cause a property to drop outside a potential buyer’s price range, increase the cost of buying overall, and make living in Spain no longer a good alternative.
We work with a large number of real estate agents who will advise you without any problem in your language, so that you can invest in Spain more easily.
fourth Pitfall : Property tax in Spain
Property tax is another one of the main pitfalls of buying property in Spain. Property tax accompanies every decision when it comes to finding a place to settle and buy. With this said, there are particular difficulties in Spain for expats. Citizens of the EU can expect to pay upward of 20% property tax, with non-EU buyers can expect on average to pay approximately 24%!
If a non-EU investor intends on renting out their newly purchased property, the Spanish government does not offer any applicable tax relief, unlike in many other countries. With the damage that has already been done, renovations will be more expensive, and supplies may be lacking.
Logistical errors may occur and the sales tax will likely gradually increase, making it even more expensive if any modifications are needed to be performed before buying a house.
We have several economists and tax experts that will help you avoid any problems of this type, contact us for any questions.
fifth Pitfall : Omitting some of the details
After buying the house, many times other paperwork is omitted, such as the transfer of utilities, municipal tax, complementary taxes…
We will advise you throughout the process to avoid these pitfalls to buy a home in Spain.
Avoiding Corrupyion: Find a Proper Spanish Lawyer Team
Corruption with the lawyer profession is nothing unique to the country of Spain, but precautions must be made in order to safely negotiate terms, agreements, and legal paperwork. It is always recommended that the buyer of the property avoid using the exact same lawyer as the seller of the property. This could lead to a detrimental conflict of interest that will unlikely serve in your favor.
This is especially true if legal documentation and paperwork are not in your native language, then you almost must have a law professional with your interest in mind to properly review the wording. Your lawyer most likely needs to be Spanish and fluent in English speaking. This may require a little bit more money upfront, and is certainly the best option. You may be similar legal protections when signing housing agreements that you may be used to in the United States or the United Kingdom.
This would require a large amount of detailed research that advances well past a simple Google search. This will likely increase your lawyer fees and may lead to a potential conflict with the property salesman.
Whether you’re looking for an investment rental opportunity, a long-term house to settle down overseas, or a summer home to relax in a foreign land, it is essential that you are intelligent and diligent when deciding on purchasing a house or property in Spain.
Inconsistent agents, health-specific limitations, and the obvious language barrier come packaged with such a lofty financial decision. Even though it may be the correct decision for many foreign buyers, they must remain aware that a large portion of the media and articles portraying the real estate market in Spain as a gold rush is also produced and paid for by companies profiting from such deals.
Be aware of the many predatory money-grabbing journalists receiving kickbacks to produce articles that draw potential investors to a country with numerous economic and political issues.
Even if the present global pandemic has caused many people to consider leaving their home countries, they should at minimum wait out the storm. For example, travel protocols have been notoriously strict in the United Kingdom for many months now, but these seem to potentially be nearing an end.
If the pandemic does flare up again, it could lead to a depreciation of the Euro, which would throw a hammer through any potential appreciation you achieve in the near future, It should also be noted that Spain was one of the hardest-hit countries initially during the first outbreaks of coronavirus.
So if this happens once again, you can certainly expect those notoriously long and bureaucratic legal and visa processes to extend longer and longer. Be smart with your money, and do your research on investing in the nation of Spain for the time being.