The Buying Process
Once you have found your property, the purchase process begins with a reservation agreement. This is a contract that freezes the purchase price and takes the property immediately off the market for, usually 15 to 30 days on a payment of a small fee of between €3,000 and €10.000. The reserve deposit is usually held by your lawyer or your agent in a client or escrow account. Within this time your lawyer should complete all the searches on the property – confirming that the seller owns the property being sold, there are no mortgages, debts or that planning consents are in order. Within 15 days of signing the reservation agreement, the full private purchase contract (contrato de arras) is signed between the buyer and the seller. Once both parties sign the main contract, it is binding. The arras contract or full private contract will require a 10 per cent deposit to be paid on a second hand property and usually 20 per cent on a new build. In this binding contract it will also state the dead line date to complete the sale of the property before a public official called a Public Notary or Notario.
The buyer is then committed to pay the balance of the price, and the seller (once the money has been paid) must transfer ownership to the buyer. If the seller pulls out of the transaction before the Notary date, he must return double the amount of the deposit received by way of compensation. If the buyer pulls out he will lose the deposit paid. The property sale is formally completed when the title deed (“Escritura de Compraventa”) is signed before the Public Notary, or Notario. This will happen at the Notario office and be accompanied by the agreed final payment and all the relevant purchase taxes. The deeds (Escritura) is then presented by the Notary to the Land Registry for registration and the property is passed to the new owner. Final registration of the title deed can take several months.
With a new-build property, obviously completion can take a lot longer, and the payments are split over stages of the build process, and the developer should provide bank guarantees against each payment. This protects your payments in the event the developer fails to complete the property or goes bust. Finally, make sure that you have insurance for your property, ensure all service contracts are in your name (telephone, water, electrics etc.) and register your ownership of the property with your local Town Hall (Ayuntamiento) – all of which your lawyer or agent can help you do.