SELLING A PROPERTY
THE BEST TIME TO SELL…
For anyone asking, ‘when is the best time to sell?’ The simple answer is, when you are ready! There are various months throughout the year when you find more visitors to the Costa del Sol, but we find the best time to place a property on the market for sale is immediately. Our attention to detail with all our direct listings, coupled with our targeted marketing, ensures your precious property is placed in front of the right clients, leading to a speedy and hassle free sales process.
The following steps outline the usual process for selling a property in Spain:
1. RESERVATION OF THE PROPERTY
During this phase we will make contact with the buyer and draw up a document to seal the agreement. For you as the vendor, this step is necessary to ensure that the buyer has shown commitment to proceed with the purchase. For the buyer it means that the property comes off the real estate market, so that it is not available to any other prospective buyer.
2. SEARCHING PROCESS
The buyers will want to make sure that the property is free of charges, encumbrances and other kinds of outstanding debts and therefore they will carry out certain searches. On the other hand, in order for us to be able to complete the sale before the notary, we will need to carry out our own searches as well.
It is important that the buyers can start their searches as soon as possible and therefore we will need to provide:
– Title deeds / Land Registry details
– Last IBI
– Last Garbage (Basura)
– Electricity invoice
– Water invoice
– Community contact details
– Energy certificate
– Copy of the First Inhabitation License (if available)
– Inventory list (if sold with inventory/contents)
– If the property has a mortgage, the bank contact details
3. PRIVATE CONTRACT
Providing all the searches have concluded successfully and the buyer’s Due Diligence is positive, we can go to the next step in the process which is the signing of the Private Contract. The Private Contract will set a date for completion and includes the terms to protect your interest. By signing the Private Contract, we make sure that the sale will proceed.
In some cases, where the completion stage is scheduled straight after satisfactorily conclusion of the Due Diligence, there is no need to sign the Private Contract.
Before the completion of the sale can take place, there are certain preparations to be carried out.
MORTGAGE CANCELLATION (Only if applicable)
If there is a mortgage in place, you would need to cancel your outstanding mortgage before completion. The cancellation would involve: payment of the outstanding mortgage amount, cancellation fee, if there was any (normally 1% of the outstanding amount); to this we have to add the notary and registry fees so that the mortgage cancellation is registered not only at the bank but also at the Land Registry. Normally the mortgage cancellation takes place at the same time of the completion of the sale.
Depending on your fiscal status as vendor we may need to obtain a fiscal certificate for you. Apart from this, the buyer will want to see a confirmation from the community which shows your (financial) status as community member.
DEBTS RELATED TO THE UTILITIES OF THE PROPERTY
Payments related to water, electricity, IBI tax, Basura tax or property owners association will need to be up to date when completion is signed. The purchaser could deduct the necessary amounts to pay on your behalf any outstanding bills, if there were any.
As many payment dates (community, IBI, Basura etc) do usually not coincide with the completion date, we will carry out a calculation to determine which part of the payments made in advance should be reimbursed by the buyer. This balance will be taken into account to calculate the final amount to be received from the buyer.
On the day of the handover of the property, the Title Deeds of the property are signed. This formal act takes place before a Spanish Notary. The Spanish Notary will verify the identity of both parties, and the formal legal representation, will check that the basic legal formalities of the Deeds are in order, and will sign the Title Deeds too.
From that moment, you are no longer the property owner.
5. UTILITY CONTRACTS AND STANDING ORDERS
The utility contracts will normally be taken over by the buyers. They should not be cancelled as the buyers may encounter problems to re-connect. The registrations for IBI / Basura will be cancelled automatically when the buyers complete their inscriptions.
We advise you to regularly check your accounts to make sure that no further amounts are direct debited. If you notice that this happens, please contact your bank and ask them to undo the payment immediately. We would appreciate it if you advise us in that case as well so we can contact the buyer’s lawyer. Alternatively you can cancel your direct debits with the bank directly after the completion of the sale has taken place.
FORMALITIES : POWER OF ATTORNEY
It is essential that you grant a Power of Attorney to your chosen lawyer. This document authorizes the firm to sign the private contract, title deed and to carry out any necessary procedures on your behalf.
This power of attorney can be signed in Spain in front of a Spanish Notary, or at your nearest notary office in your country, with the assistance of one of your lawyer’s members of staff.
CAPITAL GAINS TAX
As you are non-residents vendors, you are obliged by Law to pay this tax at the time of the sale of your property in Spain: it is the so called Capital Gains Tax (government tax). This tax is 19% of the profit obtained with the sale: 19% of the value on the sale deeds, less the value on the purchase deeds, plus the costs incurred with the purchase. To the resulting amount, we have to apply certain temporal coefficients depending on the time elapsed since you bought the property. This tax is paid in two stages:
The purchaser is obliged by Law to withhold the 3% of the declared sale price (this will be stated in the deeds). This tax deduction is obligatory and cannot be avoided; the notary public will make sure that this 3% has been deducted. This amount is paid by the purchaser on your behalf, and therefore he is responsible to make sure that this payment is made to the Tax Authorities. This tax deduction is a payment on account of this tax.
If the tax (19% of the profit made) turns out to be higher than the amount withheld in the 1st stage, you would need to pay the difference to the Spanish Tax Authorities. However, if the tax is lower, you can claim to be refunded the difference. In any case, you would be obliged to file this tax. The term to file this tax is four months after the sale. Your lawyer will be pleased to assist you with this tax declaration after the sale.
In order to be entitled to such refund, you must be up to date with payment of your non-residents tax, which is due once a year.
LOCAL TAX: PLUSVALIA
This is a local tax on the increase of the value of urban land, and the normal practice is for the vendor to pay it. Normally, the amount of this tax is not very high, it depends on where the property is located and the number of years elapsed since you became owners. Plusvalia has to be paid within the first month after the sale of a property and your lawyer could also assist you in paying this local tax. In some cases, the buyer’s representative will insist on retaining this amount and he/she will take responsibility for arranging payment of this tax. The Plus Valia amount can be calculated once we know:
1) the catastral reference (it shows on your IBI / Basura receipts)
2) the date that the property was bought
3) the date that the property is sold (the date that the property will be transferred to the new owner)
BREAKDOWN OF COSTS
Once a buyer has been found and a price has been agreed, your Lawyer will prepare a breakdown related to the sale in which you will be able to see all related costs, fees and taxes. Legal fees for representing you in the sale of your property tend to be around 0,8% to 1% of the selling price with a minimum of 1,200 euros, plus IVA (VAT at 21%)