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Congratulations on your decision to purchase a home in Ibiza! While this decision is an exciting one, the steps required to purchase a home are numerous and can become confusing. This guide has been made to help you clarify the process and assist you on your endeavour.
BENEFITS OF HOMEOWERSHIP
While there are many benefits to owning a home, we should mention investment as a main reason. For most homeowners, their second home is one of their largest assets. With a high percentage equity invested in this home, as is typical in Ibiza, for most buyers this property is a major investment. As you live in and make improvements to your property or decide to rent it out, and gradually pay down the principal on your mortgage, you are building on this equity. In fact, Ibiza has proven resilient to the loss of value properties of the rest of Spain have suffered, due to the crisis and the housing bubble. The reasons for this stability are mainly the almost evermore growing reputation of the island, the international clientele, the relatively small size and overall the quality of life on the island.
THE 5 TIPS FOR BUYERS
There are five crucial rules to follow as you embark on the purchase of a property:
- Choose your agent carefully as this person will be the most important advisor in your search. You will spend considerable time with this person so, in addition to knowledge and experience, trust and fit are key qualities you should seek.
- Before you begin searching for your property, get pre-approved for a mortgage with a bank and/or a mortgage broker so you have a clear understanding of your budget. Your realtor can provide recommendations of trusted lender contacts.
- Educate yourself on the market by speaking with your realtor about property values in different neighbourhoods. Take advantage of publicly available information to research prices of comparable properties.
- Once you find a home you are interested in be sure to do your due diligence. Your realtor will help you obtain information about the building’s financial condition as well as any renovation or major repairs that may have been done to the property. Building policies, financing and subletting vary considerably, and can affect property values.
- Build out your team wisely. It is recommendable to hire a local lawyer to represent you in the purchase. Your realtor can provide recommendations of competent, experienced professionals from whom you can choose.
THE 3 STEPS OF BUYING A PROPERTY
The purchase process is basically divided into three stages:
1. Reservation Agreement and Deposit
The first step is a simple agreement signed by the buyer and the seller that works as a reservation of the property. The buyer will pay a small deposit to take the property off the market during the period where lawyers prepare the Option Contract and confirm the legal postion of the property is in order. If any irregularities are discovered during this process, the deposit would be returned to the buyer.
2. Option Contract
When lawyers confirm that the property is legally in order, the buyer and the seller will sign the Private or Option Contract, in which the buyer usually pays 10% of the total agreed price of the property. This contract is binding for both parties, so if the buyer withdrew from his offer the deposit would be forfeit.
The last step is the Escritura Pública (deed of conveyance), document that both parties will sign at the notary and where the buyer will pay the remaining balance of the sale price and take possession of the property. After this, your lawyer will lodge the deed at the property registry, for publicly stating the legal title. These three steps are relatively simple and, if all parties comply and no setbacks do appear, the operation can be completed in a period of 2-4 weeks. However, it is not unusual that this period is lengthened considerably, since not one property is the same as the other.
After the purchase
Generally, your lawyer will deliver the deed to the Land Registry, change the services and municipal taxes in your name, aswell as the Property Tax (IBI) and garbage collection. If your purchase is within a community of house owners, normally there are community fees to pay, which vary depending on the community. If you need advice on taxes, licenses, financing, insurance or any other aspect of Ibiza, we can recommend several professionals who can advise and help you.
Although the operation is finished in Kelosa Real Estate we are at your disposal to provide necessary assistance and answer any questions that may arise in the future. Our success over the years is based on the satisfaction of our customers, so we will continue taking care over this aspect.
THE BUYING COSTS
The costs and taxes vary according to the final sales price:
The vast majority of homes on the market are resale property and a transfer tax applies for the following sections of sales price:
- Prices below 300,000 € are taxed with 7%
- Prices from 300,000 to 500,000 € are taxed with 8%
- Prices from 500,000 to 700,000 € are taxed with 9%
- Any price above 700,000 € is taxed with 10%
- New construction homes are subject to a 10% VAT plus a stamp duty of 1%.
- The VAT for plots, garages or commercial premises is 21%.
Notary and Land Registry fees
The costs of the notary and Land Registry are fixed according to the price of the property. In most cases the costs are shared with the seller.
Lawyer, processing agency and mortgage fees
Fees are subject to rates of each lawyer and can vary considerably from one lawyer to another.
Processing agencies normally governed by established prices.
In case of taking a mortgage, an arrangement fee of 1% of the advance is normally charged and they are taxed at around 1.5% of the advance.
In order to view a simulation of the costs described above, you can use this calculator: https://www.afi.es/barclayshr/simGastosCV.aspx