Your real estate purchase in Spain can be done safely, as long as you are aware of the key steps and the differences compared to the buying process in your home country.
In this guide, we detail the steps of buying property in Spain, step by step.
Step 1, The buying Process in Spain: The NIE
A crucial step before embarking on the purchase of a property, obtaining the Foreign Identity Number (NIE) is your first move toward becoming a homeowner in Spain. At the same time, you can start step 2, the financing search, which can be done simultaneously and typically takes an average of two months.
What is the NIE?
The Foreign Identity Number (NIE) is a personal, unique number assigned by the Spanish administration to each foreigner.
This number is essential for many administrative procedures, including opening a bank account, setting up a phone line, renting or buying a home, and many other things.
What is the cost of obtaining the NIE?
It can range from a few euros to several hundred euros, depending on the option you choose.
What are the waiting times?
The average wait time is often 2 to 3 months. That’s why it’s important to start the process as soon as possible.
Complete guide
For more details, consult our complete guide on the NIE, which explains how and where to obtain it, as well as the necessary documents and forms.
Step 2, The buying Process in Spain: Property financing in Spain
Should you make an offer before starting your financing search?
No, this is actually the worst mistake you could make.
First, take care of your financing while obtaining your NIE. Only then should you proceed with your real estate purchase in Spain.
Why?
You risk underestimating the required personal contribution to buy in Spain. You could end up making an offer on a property you cannot purchase due to insufficient funds. Spanish banks typically lend only 70% of the property price, meaning your personal contribution will need to be 30%, plus additional fees. For the total project cost, expect 50% to be financed by a Spanish bank and 50% from your own funds.
Beware of this costly mistake
Failing to secure financing and determine your budget before making an offer can be very expensive. In Spain, sellers often refuse loan-contingency clauses, and you could lose up to 10% of the property price if you cannot complete the purchase. This corresponds to the 10% down payment, or « arras » in Spanish, which the seller is legally entitled to keep if you fail to follow through after signing the purchase agreement.
For more details, check out our complete guide on obtaining a mortgage for your real estate purchase in Spain.
Key points to remember:
- Financing from a Spanish bank
- Can finance up to 70% of the property price
- Typically excludes renovations and furnishings
- Requires a personal contribution of 30%, notary fees, real estate agent fees, and renovation costs
- Financing from a bank in your country of tax residence
- Can finance up to 100% of the total project cost
- Only available if you can mortgage a debt-free property in your country or provide other assets (life insurance, stocks, etc.)
Conclusion: Prepare personal funds covering 50% of the property price or 50% of the total project cost to avoid unpleasant surprises.
Step 3, The buying Process in Spain: Define your project precisely
Personal contribution, purpose of the purchase, and the incompatibility triangle
To avoid wasting time, it’s essential to define your criteria very clearly. Answer these three questions before starting your search:
- What is your personal contribution?
- What is the purpose of the purchase?
- What criteria are important to you?
- The personal contribution determines the price of the property you can buy
If your personal contribution is €100,000, you can buy an apartment priced at:
- €200,000 if you do no renovations or furnishing
- €150,000 if you do €25,000 in renovations and furnishings.
Conclusion: Since the Spanish bank will only finance 70% of the property price, your personal contribution will determine your budget. Do not start looking at property listings without clearly defining your budget.
- The purpose of the purchase
Is it a rental investment or a long-term purchase for a secondary residence?
Are you counting on passive income or a positive cash flow to supplement your income?
How much do you need to earn each month from rental income to retire early?
Many of our clients have purchased multiple apartments with our help to retire before the official retirement age. If we know your goal, we can work towards fulfilling your ambition.
- What criteria are important to you?
Here are a few questions to help you determine your project:
- Rental profitability is often inversely proportional to the glamour of the neighborhood.
- Rental profitability is often inversely proportional to property value appreciation (price increase when selling).
- Is it important to you to buy near universities, beaches, or public transport?
Step 4, The buying Process in Spain: Making a smart purchase
Clearly define the criteria that are important to you
- New or to renovate?
Buying a property to renovate has many advantages:- Greater room for negotiation
- Significant added value after renovation
- Makes the property more attractive
- Helps attract quality tenants
- Tailor the property to your needs
The incompatibility triangle
You need to sacrifice one of the three criteria:
- Rental yield
- Location
- Aesthetic appeal
A property that is profitable, well-located, and beautiful would be ideal. In reality, you’ll need to find a profitable property that’s reasonably attractive in an up-and-coming neighborhood. Or, a beautiful property in the heart of the city, but necessarily less profitable.
Know yourself, as Socrates said. What are your top two criteria?
Step 5, The Buying Process in Spain: The purchase offer
There are three steps, and we assist our clients step by step.
- Making a purchase offer
- Writing the purchase offer
- Bank transfer of the “señal” (typically €1,000 to €5,000) to show the seriousness of your offer
- If accepted, this amount is deducted from the sale price
- If rejected, the amount is immediately refunded
- Signing the purchase agreement – « contrato de arras »
- A contract between buyer and seller defining the terms of the agreement
- Additional advance to reach 10% of the property value
- « Arras penitenciales »:
- If the buyer backs out, they lose the amounts advanced
- If the seller backs out, they must refund the buyer double the amounts advanced
- Signing the final deed – « escritura »
- Payment of the balance
- Handing over of the keys
Step 6, The Buying Process in Spain: Your post-sale checklist
Once you’re the owner, the process isn’t quite over. A few more steps remain:
- Put the energy contracts (electricity, water, gas, etc.) in your name
- Notify the property management of the change in ownership
- Pay the taxes related to the transaction
- Register the purchase with the property registry
- Start renovating and decorating or furnishing the property
- Offer your property for rent if you want to generate rental income
