5 mistakes expats make buying a home in Spain « Euro Weekly News

Fortunately enough, Spain’s Prime Minister Pedro Sanchez’s proposal to hike taxes to 100 per cent for expats seeking to purchase a home in the country has not proceeded. At least not yet.

When he brought up the idea, he seemed fed up with wealthy expats inflating the property market. Of course, the huge tax would only be for folks from outside the European Union. Sanchez’s proposal has not been discussed or at least has not progressed any further since January, when he first floated the proposal.

For now, Spain has many legal protections for international property buyers. However, that does not mean purchasing a home in this country is risk-free. For expats, the Costa del Sol is one of Spain’s most sought-after locations for luxurious real estate. Beautiful beaches and 300 days of Mediterranean sun are arguably two of the most compelling reasons to feel drawn to this area. There are also many beachfront apartments, golf residential villas, and gated communities in Estepona, Marbella, Benahavis and the la Nueva Milla Dorada. For those who don’t know yet, this new location in Estepona has taken its name from the Milla Dorada of Marbella. 

It’s relatively new, 20 years or so. It’s route between San Pedro de Alcantara in Marbella to the oriental part of Estepona. Its beaches are blanketed by fine, golden sand and crystal-clear waters. 

Top five mistakes to watch out for

Let’s get down to the Euro Weekly News’ selection of the five top mistakes expats make when purchasing property in Spain.

1. Not hiring a lawyer: From purchasing a home or flat that has been illegally modified to property restrictions that sellers do not disclose, makes it critical to have a lawyer who can save lots of money and unnecessary hassles. Don’t listen to those who reassure you don’t need a lawyer if you have a notary public. You need a lawyer to investigate all the potential legal nightmares buying your dream home may cause.
2. Underestimating costs and other financial pitfalls: Let’s say you are from the UK and have found a lovely home. Congratulations. But did you know that if the euro gains 3 per cent on the pound it could cost you thousands? Suddenly, dream home no more, right? The other critical issues to watch for stem from focusing solely on the listing price, and forgetting there are also additional taxes and fees that could increase your purchase by up to 15 per cent. Here are some additional costs to consider: Resale properties are subject to a 7 per cent Transfer Tax (ITP). This could vary depending on the location. Newly built properties are subject to a 10 per cent VAT (IVA), plus 1.2 per cent Stamp Duty (AJD). This could also vary. Notary, registry, and legal fees are typically anywhere between 1 to 2 per cent of the purchase price. Potential mortgage Fees, bank charges, commissions, and costs of property valuation, and insurance costs.
3. Believe it or not, buying in the wrong location: The best recommendation is to visit your preferred location or locations several times during different times of the year. Make sure you will be happy and that your location has all the extras and amenities you would hope for, including shops, supermarkets, pubs, gyms, schools, and other services.
4. Tempted by the ‘devil’: This is a big one to consider. You may be asked to underreport the amount you paid or are paying for the home so both parties can save cash on taxes. While you might get away with this ploy, you might still end up paying the consequences if you sell at a higher price, because then you are slammed with capital gains tax. This makes the number one mistake, not having a lawyer, all the more important.
5. Don’t forget the property/structural inspection: It’s not common practice in Spain to conduct a full property inspection. However, that doesn’t mean you should pay for one. It’s for your own good. Poorly built properties were common in the early 2000s, but even presently, you might come across hidden issues with land or structure that could cost you tons of cash later. Many older homes have renovations that might have required a permit. Oops! That could be a problem.

Those are Euro Weekly News’ top picks, but surely there are more mistakes, such as ignoring rental laws and tax obligations, and the hidden risks of purchasing off-plan market, in other words, residential areas that are still being developed. Construction noise and dust could be a deal-breaker for many people in the real estate market.