How to buy a house in Spain: A deep dive with a Spanish real estate lawyer
On this episode, I speak with Alejandro Cano of Lexidy, a law firm based in Barcelona that specializes in helping expats buy real estate, obtain visas, and more. This interview is truly a deep dive into the home buying process in Spain.
We cover every detail of the home buying process including; the steps involved, things to watch out for, fees and taxes, and even how to buy a property without stepping foot in Spain. So if you’re seriously considering buying a home in Spain, this is the episode for you.
Important links and contact info: www.lexidy.com
Contact Alejandro: alejandro.cano@lexidy.com
Watch the episode here:
Listen to the episode here:
Powered by RedCircle
Read the transcript here (edited for readability):
Chris 0:04
Welcome back to another episode of the Cheap Property Spain video podcast. On today's episode, I speak with Alejandro Cano of Lexidy, a law firm based in Barcelona that specializes in helping expats buy real estate, obtain visas, and a lot more. Alejandro is originally from El Salvador, but moved to Spain to practice real estate law after obtaining a master's degree in France. As you'll see, he's incredibly knowledgeable and very passionate about all things real estate law. So this interview is truly a deep dive into the home buying process in Spain, we cover literally every detail, the steps involved things to watch out for fees, taxes, and even how to buy a property without ever stepping foot in the country. So if you're seriously considering buying a home in Spain in the next few years, this is the episode for you. Enjoy.
What are the steps to buying a home in Spain?
Alejandro 0:56
Alright, the steps. So whenever you're looking for property in Spain, so all the viewers right now they're like, Okay, I'm interested in buying a property in Spain, right? The first step is to start looking for property. Idealista might not be the best place, even though lots of people think that. Like, for example, you Chris, you can help them with this. And because what we need is for our clients to look for the property first, and least to have an idea of the area that they're looking for. Because if they just have the broad idea of like, hey, I want to move to Spain, well Spain is big, not as big as other countries, but it's big, you know, so we would like for the clients to at least have, okay, I want to move to Catalonia, that gives us like, okay, they want to move over here, it's just a couple of cities in Catalonia. So we can put you in contact with a couple of real estate agents, such as yourself, and you can help them with this. And once they find the property, the only thing that we ask is for the client to submit the formal offer for this property.
So those are the first steps once the formal offer has been submitted, what we ask is that you do not sign anything. Some real estate agents, what they do is they try to take advantage and I'm talking about especially the Spanish real estate agents, they try to take advantage of expats, which is Lexidy’s specialty.
So what they try to do is like, oh, you know, you know what, he's an expat, he doesn't speak the language. So we're just gonna make him sign this contract, and we're just gonna make him sign it in Spanish. And so my advice is, do not sign anything. What, what we do is we contact them, and we handle the entire communication for you.
The steps to buying a home in Spain:
Find the property
Sign the reserve contract.
Perform due diligence.
Sign the Arras contract (deposit contract, we're where you pay 10%)
Sign the Sales and Purchase Agreement (SPA)
Chris 4:07
Yeah, yeah. Okay, awesome. At its basic level, it's pretty similar to buying a property in the United States or almost in any other western country.
What are some of the things to look out for in those early stages? (Common pitfalls of buying a home in Spain)
Alejandro 4:34
This is why we recommend for us to start right at the beginning because whenever we offer to go ahead with the reserve contract, that is where we ask the 10 to 15 days, right in this 10 to 15 days. There's many things happening at the same time. For example, first thing well, we're drafting the reserve contract. Second thing we started with a due diligence now and the due diligence this is the tricky part because for example some some buildings over here in Spain when not some sorry every building here in Spain but it's over 45 years old that needs to have an ITE. This is a technical inspection for the building that is performed by the City Hall. I mean, not by City Hall per se, but it's the City Hall who gives you a shortlist of inspectors. They’ll say to the community of neighbors, you need an ITE because your building has already hit the 45 year mark. This is a short list of architects that you may use. And it’s a closed list. All of these architects are trusted by the town hall or city hall.
For example, a typical thing that happens after 45 years, the facade of the building needs to be restored. So this, depending on the building, of course, it can be up to 300,000 euros to repair it. But let's say it's only 10 neighbors living in this building. Now you do the math, it's not that cheap, right? So if this 300,000 euros divided by 10 neighbors, that what happens a lot in Spain, and this is something this is why we always ask for these 10 to 15 days to be very careful. Because some sellers, what they do is like okay, you know what, here comes the ITE moment. So right now, let's see, oh, they eat it. Well, I need to pay 300k for the facade. Well, I guess this is the moment for me to sell. And this happens very, very often, unfortunately. So this is something that we need to avoid. And again, this is something that for example, everyone would say that oh, yeah but well, according to law, you cannot sell with any charges, encumbrances, liens, whatever. Yep, that's right. But what happens is the ITE is not registered anywhere, but the Town Hall. So only the community members and town hall know about it.
Chris 7:27
I've literally done so many hours of research on, you know, buying properties in Spain, and I've never seen anybody talk about the ITE before. That's a great example of something that if you don't do this every day, there is no way you would even know about that.
Alejandro 7:45
Yeah, exactly. So you have no idea the amount of purchases that they either break up because we find these out in the due diligence, period. And we're like, okay, Mr. Seller, we know what you're hiding. There's a 300k debt, or there will be because sometimes in the ITE, what it says is like, okay, community of neighbors, we gave you five years to repair these, because of course, 300k you're not gonna just get them overnight, right? So the townhall can give you, for example, Zack by 2027, you need to have this repaired. So this, it's nowhere. So what we do is like, Okay, we go read the ITE, it's like a 98 page report. Yeah, almost 100 pages report that we go through.. We read and we're like, okay, there's this that needs to be repaired by 2027. So we go to Mr. Seller, and it's like, okay, we know that this will have to be paid by 2027. So can we proceed? Either we discount this from the purchase price or how do we proceed? And sometimes, they're like, well, if you don't buy it, you found out but maybe the next one will not. So I'll take my chances. And unfortunately that happens.
Chris 9:15
Okay. Are there any other large things that you're looking out for specifically during the due diligence process?
Alejandro 9:23
Yes. Okay. So what happens in the diligence process. We're investigating not only with the community of neighbors, we're also doing it with a town hall. We're doing the land registry with the cadastral office. So with four entities, let's call them so while we're doing the research with this, what we highly recommend is to get a survey. It's not mandatory, legally speaking, for a technical survey to be performed over the property. Even though it's not mandatory, we always highly, highly recommend for a technical survey to be performed over this property. Now we do collaborate with architects all across Spain. So you can tell me that yeah, but Alejandro I don't know, any architects around there, because I come from the US. Don't worry about it because we actually have a network of architects down south over here in Madrid or wherever you are buying. So we got architects, literally everywhere in Spain. The most important thing about architects is not the price, it's that you trust them. Because, okay, so there's two sides of every, every purchase, the legal aspect, that of course, when you hire a law firm, like Lexidy, we make sure that everything is okay, and legally speaking. But structurally speaking, I can tell you that, I've only been to probably three properties out of hundreds or close to 1000s that I've helped my clients to purchase. So we don't know if the building is falling apart, we will never know. And ever since COVID, It's very, very popular that sometimes clients, they don't even come to Spain, and they simply go like, “Oh, Alejandro I trust you, I trust your law firm, just handle everything and just save my keys. And whenever I'm in Barcelona, I'm just gonna go and collect the keys.”
I wish I could show you a picture of this. We have a safe deposit over here. The amount of keys we have from all these clients. They’re like “I'll be in Barcelona probably by 2024. So just keep the keys over there.”
Chris 11:40
So it sounds like someone can purchase a property without ever stepping foot in Spain?
Alejandro 11:54
Yeah, that is correct.
Chris 11:59
So how does that process work?
Alejandro 12:01
It’s very simple, actually. So what we do is, as long as the country is part of the Hague Convention, it's easier. It's not that if the country it's not, it's impossible, but if it's part of the Hague Convention, it makes things easier. Why? Because you would have the apostille stamp. Now with the apostille stamp, I'm gonna give you two scenarios, the one the one with the one without, let's use the US as, as the one with the or the one part of the Hague Convention. So a country that is part of the Hague Convention, such as the US, it's easier to just go to a public notary, like we draft the power of attorney, we do absolutely everything we drafted, we make sure that everything is drafted, how it should be, because all the clauses that we have, in our power of attorney, we have checked with the tax agency in Spain, we have checked with the town halls in Spain, like the city or town halls, whatever you want to call them, we have checked with the banks in Spain. So we have checked with all these different entities, just to make sure that the power of attorney we're not gonna go there one day, and they're gonna be like, “Oh, this clause doesn't make any sense.”
Because one thing about a power of attorney is that you can draft them however you like. There's no specific way. Let's say there's, there's not like, of course, there are like, there's like a framework where you can work around, but how you drafted, it's more like your style.
So what we did is we checked with all these different entities that the city uses this power of attorney, and we made sure that they will accept all these clauses. So we draft the power of attorney for you, and all you would do is contact a public notary, which is basically half of the population in the US.
And so after that, you just asked that same person, the public notary to just apostille these document now, we can like, he can provide like a couple of services, like because there's some agencies that do that for a living, or we can we can suggest a couple more like depends on the country.
For example, US UK, we worked a lot with these two countries, so Well, US, UK, Canada, Australia. So these countries, we worked so much with them that we even know people from there, like we like some sort of collaboration, let's call it so are we recommend people from there. So we can tell you like Hey, Chris, you can use this one. They're actually good. They're not too expensive and they're past. So you will possibly document takes like a week, week and a half once you receive it because well, you will basically send it somewhere and then once you receive it back, you ship it to us basically ship it to us. The second that we received My power of attorney with all these classes, of course, the causes are subject to change. I'm not, I'm not saying that Lexi will imply classes on you, or anything, of course, every class that you told me like Hail 100. But I don't feel too comfortable in you being able to open a bank account for me. So okay, no worries, I mean, but if you if you don't want us to be able to open a bank account for you, you would have to come to Spain. Because after you purchase a property, you do need to have a bank account in Spain.
Chris 15:27
Do you need to have a Spanish bank account to be able to purchase a property in Spain?
Alejandro 15:32
Yes, sir. That's right. Okay. So you it's not that you needed for the actual purchase, but you need it post post purchase, like, for example, the utilities, you can not pay with out a bank account. This is something that we've been fighting over and over, but it's still is like an impossible fight. You cannot transfer utilities to an international bank account, not even in Madrid, or Barcelona, the 2 most cosmopolitan cities in Spain. And they go like, well, sorry, we just accept Spanish bank accounts. So there's no way around it. Unless you have a friend that has a bank account, and you'll be transferring, but you see it’s so much trouble. So it's easier if you just grant the power of attorney, we open the bank account for you, we can even make the power of attorney so limited that after we open the bank account, this power of attorney becomes useless. So like, we take into account all these little details, because of course, you cannot fully trust someone that is on the other side of the world, right? Or at least some people are more cautious, or they just don't like to do it.
Chris 16:45
Do you also need a NIE number to begin the property purchase process?
Alejandro 16:51
To begin, no, you can actually start the entire process without one. You can sign the reserve contract with your passport, we can do the due diligence, you can find the Arras contract with your passport, it’s not a problem. The second that you will need your NIE is for actually signing the SBA. So over there again, there's no way around it, you either have a NIE. But again, that is not a problem for Lexidy, we can actually obtain a NIE for you in 3 - 6 days. This is something that not every firm in Spain can offer.
Chris 17:35
Oh, that's great. Yeah, I know getting a NIE can be an annoying process. It has been difficult for my fiancé, she finally got one, but even as an EU citizen, it took her a very long time to even just get an appointment for a NIE.
Alejandro 17:50
We have some people that are like “Alejandro, I have an appointment.”
And I'm like, alright but the appointment is 6 months from now…
Chris 17:59
Well, I don't think the property is gonna be on the market anymore in six months. So yeah.
Alejandro 18:04
So what we do is like somewhere, three to six business days, and we have it. So it's not a problem. You don't have to be in Spain again.
Chris 18:15
What did you call that first agreement that you have to sign with the seller?
Alejandro 18:24
Oh, the reserve contract. You are actually reserving the property for 10 to 15 days with this contract.
Chris 18:51
Okay, and when you sign that is any money given to the seller like in the US we call it an earnest money deposit? Is there anything like that exchanged?
Alejandro 19:01
Yeah, so it doesn't matter if the property is 100,000 euros or the property is 1 million euros. Normally in the reserve contract we offer between 1,000 and 5,000 euros. Because it's going to be easier to claim it back. Some people suggest that it's better to go with the 1% in the reserve contract and then 9% In the Arras contract so that way you have a complete 10%. This is personal. I prefer for it to be between 1,000 and 5,000 euros so that way if it goes out, it's easier to claim back.
Chris 19:51
Within those first 14 days, what are you really looking for before proceeding to the next phase of purchasing the property?
Alejandro 20:09
So in between the reserve contract and the Arras contract, or let's call it the deposit. So in this period, what we're doing is the due diligence and the technical survey. So what happens behind the curtain, the due diligence part is, this is where we become lawyers / detectives. So because we're like, lifting every rock there is, we're looking for every possible thing that the current owner has, we're checking with the town hall, we actually read the last three years of minutes from the community of neighbors, because there can be some budgets that were approved that, let's say in 2019, saying that starting from 2022. Or from x month in 2022, we're gonna start paying X amount for, I don't know, to repair the roof, or I don't know what the facade, so they usually do these, they give like a three year heads up to all the owners, like, Hey, guys, start saving money. Because in three years, we'll have to start paying a monthly of X amount, and we will pay for the next, I don't know, 10 years or five years. So we go ahead and read the last three years, minutes from the community of neighbors. So yeah, lawyers / detectives / whatever you want to call us, because we just read and read and read and read just to find anything. And at the same time, we're checking with the land registry checking, because most of the properties in Spain, they they do have a mortgage, I would say, eight out of every 10 properties that we see they they have, they have mortgage now because their clients require one, but because he has a past mortgage, right? So we need to make sure that it is canceled correctly, that the amount is okay, that he has been paying all of these installments. So it's a lot of things that we need to check before making sure that these debts can actually be paid. And if the if the seller has the money to pay them before we actually advice for it to be canceled report. If not, we do a retention of the notary. Like for example, Chris is selling this house that still has a mortgage of I don't know 200,000 euros, but the property is 1 million euros. So what you've planned to do is grab the cash and then pay these 200k This is what we always do, and it's suggested to be done this way is for it to be either for you for your crease to pay before or to do a retention at the notary that means that you create will not get the 1 million exactly you will get the 1 million minus 200.
Chris 23:01
Right, that makes sense. That ensures all the debts are properly paid off.
Alejandro 23:09
Correct. And we make sure of that like this, this is part of what we do in the due diligence. And after well at the moment of the SBA, we make sure that everything is canceled correctly.
Chris 23:21
Okay, so then so moving forward in the process, then let's say you guys do all your detective work, everything's checking out the buyer still wants to proceed. What happens next?
Alejandro 23:32
Well, what happens, in the meantime, that we're doing the due diligence, the whole back and forth for the errors is going on, because it's kind of a big negotiation. For example, we will always give our clients two choices. Either you want to be kept in cc of every single email we exchange regarding your case, or for example, some choose the second option, which is like “just give me a quick call whenever there's something big that I should know.” So whenever the client they choose the “I want to be in cc of everything.” They go like, “wow, what are you guys doing over there? Because sometimes for one case, it can be 30 emails because they're suggesting for this case to be drafted this way we're like nah, that's not going to work.”
We want it this way because our client he's interested in this so we always before start before starting the negotiation, we normally have a quick 10 minute call with the client like “hey, alright Chris, what do you want? What are your expectations? First, when would you like to find the to sign the final SBA? Are you going to purchase this property with a mortgage or not? Do you want something to be kept inside the property?”
For example, some clients, like according to law, properties need to be delivered completely empty but components, they get to an agreement where it's like, “Hey, you don't want to just leave this last because I really liked them.”
So we make an inventory. So all these little things are a big back and forth that it's happening behind the curtains. If you decide to have the second option, all you know is that something's happening back there, but you're not really aware of what's happening. So this is a negotiation. So this is happening in the 12 to 15 days, between the research contract and Dr. Ross contract. After this is done, let's say that we agreed over everything that technical survey came out to be good. From a legal perspective, everything was okay. So we just go ahead, and alright, that's fine. And we established a final purchase, like a maximum purchase date. Why did we do this just in case something happens? Like, we always, let's say, you tell me hey, I'll 100. And what I want to and at least by the, or you told me I want to finalize the date on or before the I don't know, the 15th of April. So I will ask you if we can just stretch a little bit more around like the 20th or the 25th. So we have some margin just in case something happens. Because if not, we would have to sign an extension of the contract. And it's something that is very to avoid. So because sometimes they would not like to do that, for whatever reason, even though everything is done digitally nowadays, or electronically. Every contract that you signed with Lexie, reserve contract address contract, you don't have to be in Spain, we have a like we use a platform, which is that we just upload the document over there. We put both parties and this was two parties can signed the document digitally. And then is he? Yeah, and it does like this digital certificate, which is valid, and it's legally valid everywhere. So you don't have to move anywhere. Like why wouldn't you want to sign another one? Yeah, of course.
Chris 27:14
What are all the fees and taxes and sort of things that the buyer should expect to pay on closing day for the property?
Alejandro 27:32
Lexidy fee structure:
- 1.3% over the total purchase value if it is under 250k*
- 1.2% over the total purchase value if it under 500k
- 1.1% over the total purchase value if it under 999k
- 0.75% over the total purchase value for anything over 1M
*Anything under 190k would be a flat rate of 2.300 € + VAT
Architect: €600 - €1200+ (depending on property size and location)
Notary: €800 - €2,000 (About 0.2% of total purchase price)
Taxes: About 10% of the cadastral value (varies by region in Spain)
We also handle the registration process for you once the sale is completed. This legally takes 30 days but always takes longer (around 2 months). Some people are in a rush to get this done because they are applying for The Golden Visa (Click here to learn more about visa options in Spain).
Can you buy a property in Spain without a visa? (or with just a tourist visa?)
Yes absolutely. We have many clients that just want to buy a property in Spain to use as a holiday home. They just come to Spain on a tourist visa with their passport and stay up to 90 days at a time. You don’t need anything but the NIE to purchase a home.
What are your thoughts on the current state of the Spanish market?
Right now, the market is starting to calm down. In 2021, the market was crazy. 9 out of 10 clients didn't need a mortgage but they were getting 30 year fixed for 0.85%. Things seem to be settling down now because interest rates are rising a bit. It’s still very good. For example a client last week signed with 1.05%. Still pretty good but not 0.85% like it was last year.
The hottest regions are always Catalonia, Galicia, Madrid, Basque Country and of course the southern coast.
Is seller financing an option in Spain? Do people ever buy homes in Spain with seller financing?
To be honest, I have checked everywhere for this because you’re not the first person who asked about it. Unfortunately, we’ve never heard of a case like that. Here, mortgage brokers are very popular and it seems like they always find a way to get you a mortgage. I don’t know how they do it but they always find a way. So I think maybe this is one reason it’s not done.
To learn more visit: www.Lexidy.com or email Alejandro at alejandro.cano@lexidy.com