Buying property in Spain offers an entirely different experience compared to purchasing in the United States. While both countries share the common goal of helping people secure their dream homes, the processes, costs, and roles involved can vary dramatically. Whether you’re a seasoned buyer or stepping into the market for the first time, understanding these differences is key to navigating the property market with confidence.
1. The Role of the Broker
In the US, brokers (commonly referred to as real estate agents) play a central role in the buying process. A buyer’s agent represents the buyer’s interests and helps find properties, negotiate deals, and navigate the closing process. Sellers also have their own agents, and both agents typically share a commission—paid by the seller—averaging around 5-6% of the sale price.
In Spain, brokers have a slightly different role. Often, a single broker represents the seller, and their primary loyalty lies with the seller. As a buyer, you can still hire a property advisor or independent broker to help you, but this is less common. Commission fees are generally around 3-5% and are included in the property price, so the buyer doesn’t pay them directly. However, the buyer should always confirm how the broker is compensated to avoid surprises.
2. Legal Representation
In the US, the presence of a lawyer in property transactions is optional in many states, with escrow companies often handling the legalities of the purchase. Buyers rely heavily on brokers to guide them through the legal and procedural aspects.
In Spain, hiring a lawyer is essential. Spanish property laws can be complex, and a lawyer ensures that the property is free of debts, legal disputes, or other encumbrances. They also oversee the signing of the “escritura”(deed) before a public notary. Unlike in the US, buyers bear more responsibility for ensuring due diligence, making legal support crucial.
3. Financing and Mortgages
In the US, mortgages are widely available, with lenders offering fixed or adjustable interest rates. Approval depends on credit scores, debt-to-income ratios, and proof of stable income. Closing costs, typically 2-5% of the purchase price, can include lender fees, title insurance, and escrow costs.
In Spain, mortgage terms are slightly different. Spanish banks typically offer mortgages to non-residents for up to 70% of the property’s value, while residents can borrow up to 80-90%. Interest rates are usually variable, tied to the Euribor (the Euro Interbank Offered Rate). Spanish banks also require extensive documentation, including proof of income, tax returns, and sometimes a larger down payment. It’s worth noting that obtaining a mortgage can take longer in Spain, so planning ahead is crucial.
4. Taxes and Fees
Property taxes and closing costs differ significantly between the two countries:
- In the US: Buyers pay annual property taxes ranging from 0.5-2% of the property’s assessed value, depending on the state. Closing costs, including lender fees, title insurance, and appraisals, can add 2-5% to the purchase price.
- In Spain: Buyers face a combination of taxes and fees when purchasing property. Resale properties are subject to a Transfer Tax (typically 6-10%, depending on the region), while new builds incur VAT (10%) and Stamp Duty (1-2%). Buyers also cover notary and land registry fees, adding 1-2% to the overall cost.
Additionally, property ownership in Spain includes an annual IBI (local property tax) and, for non-residents, a Non-Residents’ Income Tax on the deemed rental value of the property.
5. Property Inspections
In the US, home inspections are a standard part of the buying process. Buyers hire licensed inspectors to assess the property’s condition, ensuring there are no hidden structural issues or defects before closing the deal.
In Spain, property inspections are not standard practice. While you can arrange for an inspection, it’s not common, and buyers often rely on their own judgment or their lawyer’s advice. If you’re purchasing a rural property or older home, arranging an independent survey is highly recommended to avoid surprises.
6. Negotiation and Pricing
In the US, property prices are often listed higher than the expected sale price to allow room for negotiation. Offers are typically made in writing, and a back-and-forth process ensues until both parties agree on a price.
In Spain, negotiation is less aggressive. While there is some flexibility in pricing, sellers often expect offers close to the asking price, especially in competitive markets like Madrid, Barcelona, or the Costa del Sol. It’s important to research the market or consult a broker familiar with the local area to ensure you’re making a fair offer.
7. Cultural and Market Considerations
The US property market is dynamic, with buyers and sellers relying on data like comparative market analysis (CMA) and online tools to make informed decisions. Properties often sell quickly, and auctions or bidding wars are common in hot markets.
In Spain, the market moves at a slower pace. Properties can stay on the market for months or even years, particularly in rural or less popular areas. Additionally, cultural norms play a role in the process; Spanish sellers may prioritise finding a buyer they trust, and the pace of negotiations can reflect a more relaxed approach.
Conclusion
Buying property in Spain offers a unique set of challenges and opportunities compared to the US. The slower pace, differences in taxes, and reliance on legal professionals make it a distinctive experience. However, with the right guidance from a skilled broker and a clear understanding of the process, you can successfully navigate the Spanish property market and find your dream home or investment.
At Hygge Journey Real Estate, we specialise in helping international buyers understand the nuances of purchasing property in Spain. Whether you’re seeking a luxury villa on the Costa del Sol or a charming apartment in Seville, we’re here to ensure your journey is seamless, secure, and satisfying. Let’s make your dream of owning property in Spain a reality!