Real estate market in valencia

1 - Costs associated with the purchase of a property in Valencia

ITP - Tax on Property Transfers

The Tax on Property Transfers is a tax that is imposed on all the operations that involve the transfer of property between individuals and / or legal entities. In Valencia this tax amounts to 10% of the sale amount. It must be paid within a maximum period of 1 month from the signing of the public sale deed at the notary. There are some particular cases where this percentage can be lower (8%):

    1 - People under the age of 35 purchasing their first property.
    2 - The purchase of social housing.
    3 - Large families.
    4 - Family member with a type of disability.

Notary

The fees to be paid for notary services vary according to each Notary office. Normally, notary costs are paid “in accordance with the law”, according to article 1455 of the Civil Code. In this case, the seller assumes the cost of the master copy (70%) and the buyer pays for the 1st authorised copy and successive copies (30%). The distribution of expenses can also be agreed between the parties involved, in accordance with the negotiations carried out.

Registration

After the signature before the Notary it is necessary to register ownership of the asset in the Property Registry. Notaries normally offer this service in order to speed up the procedure.

Capital gains tax

The payment of the capital gains tax resulting from the sale of a property is the responsibility of the seller. There are two types of capital gains:

    1 - Municipal: Tax calculated by each Council based on the increase of the land value.
    2 - Equity: Tax calculated by the Tax Authority based on the increase in equity resulting from the difference between the purchase price and the sale price. This tax is paid in the tax return of the year following the sale.

PLEASE NOTE: Owners who reinvest the capital obtained in a new regular residence within a period of two years will be exempt from paying the capital gains tax on equity.

 
Agency commission

In Valencia it is very common for property agencies to divide their fees between the buyer and seller. In the case of Cicerone Group, the agency commission, except in particular cases, is set at 3% + VAT for each of the parties.

Mortgage

When applying for a mortgage, it is necessary to bear in mind the following costs:

    1 - Taking out the mortgage, fees required by the bank
    2 - Administrative costs.

2 - Standard steps for formalising a sale

Contract of reservation

The document through which, having agreed the sales price, the buyer pays an amount in order to reserve the property for a short period of time.
The amount paid normally ranges between €3,000 and €5,000 and is used to reserve the property for a maximum of 2 weeks. Via this deed, the seller outlines their agreement with the agreed sale price and undertakes to not receive more visits or handle other offers.

This reservation period will be used in order to draft and approve the earnest money contract by both parties. The amount paid as a booking contract will be deducted from the earnest money.

Pledge contract

There are 3 types of pledge contracts: earnest money, deposit and security deposit. Unless outlined otherwise, it is the earnest money contract that will always be referred to.

Through the earnest money contract, both parties stipulate a sale amount and a deadline for formalizing the public deed before the Notary. In addition to the above, the parties can stipulate the clauses on which to base the sale. In this act, the buyer will have to make a payment, generally 10% of the sale price, via a transfer or bank cheque.

In the event that the sale is not formalised in a public deed within the margin stipulated in the contract for causes that can be attributed to any of the parties, the provisions of art. 1454 of the Civil Code shall apply, and the buyer will lose the amount paid as earnest money, or the seller will have to return twice that amount, within a period of no more than 7 calendar days from the end of that period.

Public deed before a Notary

The final step in the purchase process.

If the property has a mortgage charge, it must be cancelled before the sale-purchase act and the cancellation costs will be paid by the seller. If a mortgage is required, it should be signed in an independent act and the associated costs will be paid by the buyer.

3 - Requirements for purchasing in Spain (Foreigners)

Foreigner Identification Number (NIE)

Purchasing a property in Spain is a simple procedure. In the case of Spanish clients, it is necessary for them to present their National Identity Document (DNI). Foreign clients must obtain the Foreigner Identification Number (NIE) from the Police in Spain. They can also do so at the embassy or the Spanish consulate of their country of origin. It normally takes 2 to 4 weeks to obtain the document.

Bank account in Spain

National and foreign clients are both required to have a bank account in Spain in order to formalise the purchase of a property. The purchase amount must be paid from a national account, with some exceptions.