Your Buyer´s Guide in Madrid

WHAT IS THE BUYING PROCEDURE?

Purchasing a property is very straightforward in Madrid, and with our support you can be assured that the process will be conducted professionally and correctly. Our experienced team handles negotiations between buyer and seller, answering all queries along the way, and the purchase can be broken down into three basic stages:

1.   OFFER AND ACCEPTANCE

The buyer places a non-binding offer which our team negotiates with the seller. When the offer is accepted, a reservation deposit is paid in order to take the property off the market. We then guide you through the process and prepare a Private Option Contract or a similar contract.

2.   PRIVATE OPTION CONTRACT

When the lawyers have confirmed that the legal standing of the property is in order according to regulation, the Option Contract is drawn up and signed by both the buyer and the seller. If any irregularities that relevantly affect the property are discovered, the buyer can withdraw, and the reservation deposit will be returned. If all is in order, 10% of the agreed purchase price is usually paid by the buyer (as a reservation deposit) and held in escrow at the notary, for example, to protect both sides. This Contract is then binding and locks in both parties; if the buyer withdraws, (s)he forfeits the deposit. 

3.   CLOSURE

Closure takes place before notary public where the deed of conveyance (escritura pública) is signed by both parties, the balance of the purchase price is paid, and the buyer takes vacant possession of the unencumbered property. Your lawyer will then file the deed at the land registry to assure legal title.

WHAT ARE THE PURCHASING COSTS?

1.  VALUE ADDED TAX (IVA) OR STAMP DUTY LAND TAX (SDLT)

IVA is payable at a rate of 21% on commercial properties and developable land and at 10% on new-build residential properties. Stamp duty (Impuesto de Actos Jurídicos - AJD) also applies in this case and currently amounts to 1.2%.  For subsequent transfers, and all other sales which are not subject to IVA, ITP (PROPERTY TRANSFER TAX) must be paid according to the following scale: 

Purchase price:  

up to € 400,000 - 8%

€ 400,001 to € 600,000 - 9%

€600,001 to €1,000,000 - 10%

from € 1,000,001 - 11%

2.   URBAN RATE (IBI)

IBI (municipal property tax) is an annual real estate tax based on the land or cadastral registry-assigned value of the property. The amount varies from municipality to municipality but is generally between 0.3% and 1.1% of the land value. 

3.   NOTARY PUBLIC AND LAND REGISTRY FEES

These are fixed by law on a sliding scale, and amount to around 0.25% to 0.5% of the purchase price. 

4. LAWYER’S FEES

Around 1% of the purchase price.

5. WEALTH TAX

This is an annual tax levied on assets over €700,000 if your primary residence is not in Spain. If you do have your primary residence here, there is an additional exemption of €300,000 so, taking into account the real estate (primary residence) and other assets in Spain, it can be an amount of €1,000,000 fax-free. The tax is payable on a sliding scale by non-residents (if they own property in Spain) although with slightly different rules, varying from 0,2 to 2,5%. 

6. MORTGAGE FEES

If you are using a mortgage to finance the purchase, you must pay a bank valuation fee, an opening fee of around 1% of the value of the mortgage and stamp duty (AJD), which is 1.2% of the total guaranteed amount (mortgage amount plus regular interest, default interest, court costs and costs of the judicial foreclosure in accordance with every bank’s policy).

7. BROKER'S FEE

This will be paid only by the selling party. The fee is usually around 5-6% of the selling price.

8. GOLDEN VISA

The purchase of a property of 500,000 euros (without financing) allows non-EU buyers to acquire Spanish residency.