Buying a home in Tenerife
Most people at some point in their lives have dreamed of owning a luxury villa with their own private swimming pool, us at Amulet can help you to achieve just that! Knowing exactly what you can afford before you start your search for that special Tenerife property and using the right professionals to help you along the way, can save you time, money and even worse, heartache!
Just like conveyancing in the UK, the purchase procedure here in Tenerife can be quite a convoluted one. Like any process, there is an order to which it is best to do things. There is nothing worse than spending hours and hours searching and viewing, then finding a property and setting your heart on it, even putting a deposit on your dream home to then discovering that you can't raise the money!
If you are serious about buying a property in Tenerife, then arranging your mortgage early will not cost you anything and allow you to shop around for the best deal. Property Development Group «Amulet» S.L. can assist you with locating financial assistance via the numerous financial institutions here in Tenerife.
How is Tenerife Property sold?
Most property in Tenerife is sold through Estate Agents, and usually offered through a number of different agents. When you see an advert or find a property you would like to view on an agents’ website, you can visit the property in the same way as back home with the agent’s representative, and if you are interested in purchasing, make an offer to the Estate Agent. Property owners here generally know the value of their property, so only a minimum of negotiation normally takes place (unless the property has been for sale for a long time). It is very common here for properties to be sold furnished. Remember building standards have improved dramatically here in the last 10 years or so, therefore a newer property is probably more likely to be free of unforeseen problems.
What is the procedure for purchasing?
The total cost of purchasing property in Tenerife depends on whether you are buying a new or a re-sale property and also upon whether or not you are using a mortgage.
Once you have found the right Tenerife property for you - and if your offer is accepted - it is quite normal for you to be asked to pay a deposit, normally 10% of the property price, and you will need to agree who will hold that deposit - there are a few options:
ü Pay the deposit to the seller - This may well suit the seller, but if they were to pull out of the sale, the deposit may prove difficult to retrieve. This is definitely something to be avoided!
ü Pay the deposit to a lawyer - If you are paying the deposit to a lawyer it is preferable to pay it to your own lawyer rather than the seller's!
ü Pay the deposit to the Estate Agent - If you are using a reputable estate agent who has a bonded Clients Account for Clients monies, then this is perfectly normal and certainly the most common route.
And after I pay the 10%
Having paid your 10% deposit what next? Well, your lawyer should immediately apply for a “Nota Simple” from the local Town Hall. This is a document which tells the lawyer if there are any charges, mortgages or repossessions on the property. REMEMBER, IN SPAIN, ANY MORTGAGES OR CHARGES OUTSTANDING WHEN YOU BUY THE PROPERTY BECOME YOURS! Assuming all is well, the Estate Agent or the Solicitor will draw up the “compraventa” (purchase and sale agreement) and this document needs to be signed by you and the sellers as soon as possible. Spanish language contracts are valid in law, but most good Estate Agents or Lawyers will provide a translation in English. If you have any doubt about what you are signing, don’t! After signing please note that if you fail to complete the transaction in the agreed time, you may lose all of your deposit.
The public Title Deed is signed in the presence of a Notary. Notary offices are busy places and it is quite normal to have to wait for a couple of hours until it is your "turn". This normally involves talks with a Bank Manager (if you have arranged a mortgage) who will have the banker's draft, your lawyer, the vendor and perhaps their lawyer too! But - if you are using a good estate agent, they will be there to guide you through the process and keep your nerves at bay.
The Notary checks and confirms the terms and conditions of the transaction. It is required by law that the buyer(s) and the seller(s) or their nominated representatives, are present. If you cannot attend, you need to grant a power of attorney to the person (Lawyer, Estate Agent, friend etc) representing you. You will be asked for a number of banker’s drafts (guaranteed cheques) to total up to the agreed purchase price. If the seller has a mortgage, you will probably provide a banker’s draft made payable to the sellers bank to pay off the mortgage. If the seller is a non-resident, 3% of the price will be paid directly by you to the tax authorities as non-resident sellers must pay this then satisfy the hacienda (taxman) that they do not owe any tax, before having it refunded. Everything else is paid directly to the seller by banker’s draft.
What costs do I have to pay?
Your lawyer will need to have sufficient funds from you to cover taxes and costs arising from the transaction as follows:
1. Resale properties do not pay IGIC (Sales Tax - like VAT or stamp duty in the UK) but you do have to pay ITP which is 6.5% of the value of the transaction. New property purchases pay IGIC of 7% of the property value - but this figure is only charged for new properties.
2. Notary fees - Notary fees are set by the government. There are a number of factors notaries take into account when calculating their fees. There is a fixed amount based upon the price of the property and the number of clauses in the deeds. They will also charge for every copy of the deeds requested (currently at 30 Euros). This makes the total fee difficult to predict in advance, but, as a rule of thumb, they will range from 0.1% of the price of a property (for properties of 400,000 or more) and 0.4% for properties under 100,000 euros.
3. Land Registry - This figure is calculated on a sliding scale depending on the price of a property. As a rough guide this will be about 0.1% for expensive properties and 0.3% for a less costly one.
4. Lawyer / Gestor - Lawyers fees do vary, ideally choose a lawyer who has been recommended to you rather than simply the cheapest. Many lawyers charge around 1% of the value of the property (plus IGIC), some charge by the hour, and others will charge a flat fee (generally between 1,500 to 3,000 euros), regardless of the price of the property. If your lawyer does not include processing all the paperwork after the sale then you will also need to add the fee for the Gestor.
5. Document Tax (AJD) - This is a tax charged when you pay IGIC instead of ITP, and is only for the first registration of a property. It is currently 0.75% of the sale price.
6. Mortgaged properties only:
1. Survey - The cost of a survey varies with the value, type and area of the property.
2. Mortgage set up fee - This is charged by the bank as a percentage of the loan value - commonly between 0.5 and 1%.
3. A second Notary Fee - A separate function is required to notarise the loan, and although done at the same time as the purchase of the property, it requires another fee. This will be about the same as the fee you pay for notarising the sale.
4. Administration Fee - The Gestor appointed by the Bank will also charge an administration fee for the inscription of the mortgage in the Property Register.
5. A Mortgage Brokers Fee - If you used a mortgage broker to help you shop around for the right mortgage deal, then their charges need to be added. This will vary from a fixed fee of a few hundred euros to a percentage of the property, depending upon what you agreed with them.
6. Buildings Insurance - A lender will normally insist that you take this insurance, normally through them. Even if you don't use a mortgage, it is advisable to take out a policy. The cost of this policy is normally based on the re-build cost of your property - not necessarily the purchase price.
7. Life Insurance - A lender will also insist on life insurance and that they will be the beneficiary so that the loan is paid on your death. The cost of this will depend on your age and the amount borrowed etc.
7. Other associated costs:
1. Plus Valia - This is a tax on the increase in the value of the land on which your property stands. This should be paid by the seller - but normally is paid by the purchaser.
2. Power or Attorney - If your lawyer is representing you at the Notary office, then the Power of Attorney will typically cost you in the region of 150 - 200 euros.
After the Notary - Congratulations!!!!!
After all this, you should now be the proud owner of your dream home in the sun. If you live in a community (all apartments from part of a community) you will have to pay community fees to maintain the pool, take care of the gardens, lifts and other communal resources. Otherwise other on-going bills include electricity and water. Please see ‘Annual and Monthly Expenses’ page for a detailed list.