This page covers the key processes and points involved in selling a vacant possession (tenanted properties are not covered here) property in Galicia.
Appointing an inmobiliaria (and solicitor)
There are a large number of bureaucratic issues to deal with when selling a property in Spain. If all of these are not put in order at the start of the sales process then it may well cause problems and delays or even kill a sale later on.
Estate agents (inmobiliarias) are well versed in this process and will study all of details and advise you how to start to put things in order before doing anything else, logically enough because if the sale doesn’t go through for bureaucratic reasons there is no commission for the inmobiliaria.
A good inmobiliaria will therefore act as a guide through the labyrinth of bureaucracy and will typically accompany you or even act on you behalf for visits to pay taxes, get assessments, etc..
As the interests of the inmobiliaria are aligned with yours in all respects other than the price you wish to achieve for your property you may well feel a solicitor is unnecessary and work solely with an inmobiliaria.
As in the UK and other countries, in Spain property transactions are so commonplace that contracts are extremely standard and often little more than a cut and paste exercise that many would say an inmobiliaria can do just as well as a solicitor (abogado).
Additionally considerations when contemplating appointing a solicitor are that the notary performs the majority of the necessary checks on a property and will also highlight any concerns with contracts that are part of the sale and that it is far more important for the buyer than the seller to eliminate risk from the transaction.
The reasons you might have for wanting a solicitor are to ensure adequate protection under any clauses specific to your situation that are added into sale contracts and also to inform you of any ongoing potential liabilities that you might have after the sale such as structural guarantees sellers of recently built houses are legally required to give.
A solicitor is also someone who can act as your representative in other matters such as banking, acquiring a NIE, etc., although a Gestoria (a Spanish concept, basically a person who deals with bureaucracy for you) can often perform the same services for a lot less money.
A solicitor will typically charge 1% of the asking price, and never less than approx 1.200€ to handle the legal aspects of a property sale (advertising, negotiating and general legwork will always be left to the inmobiliaria). A solicitor’s fees are also, of course, payable whether you sell the property or not.
The key criteria for appointing a solicitor are that you can communicate effectively with them, that you trust them (and that this feeling doesn’t change as things proceed!), that they appear to be effective, organised and reasonably fast, and, most importantly, that they specialise in property law (ie. not a solicitor with a different speciality happy to take your money and research as they go along).
Structuring a contract with an inmobiliaria
An inmobiliaria will typically charge you no upfront fees plus a fee around 3% of the sale price of the property, with more expensive properties (250.000€+) able to negotiate this down slightly and cheaper properties (less than 150.000€) costing a higher percentage with a typical minimum of about 3.000-4.000€ commission.
As these amounts are defined in a private contract they can be negotiated. The two principal ways of getting a inmobiliaria to lower their fees are to give them exclusivity (ie. if you sell the property within a contractually defined time period they are guaranteed their commission) and setting a competitive asking price that gives they inmobiliaria confidence that they can sell the property quickly.
It is also worth considering how the contract you agree motivates your inmobiliaria. If it contains a flat percentage or, even worse, a fixed fee, then they have no real motivation to push for the best price for your property and will instead focus their energies on convincing you to accept a lower than desired offer if they get one as this effectively banks their commission.
To avoid this problem, especially in the current tough market conditions, it is worth trying to agree a contract where your inmobiliaria’s commission has a base fee for any sale and then a sizeable percentage of any sale price above an agreed price.
To illustrate this let’s take an example of a property marketed at 250.000€ with two different commission structures:
- 3% commission if sold for 250.000€ = inmobiliaria 7.500€, you 242.500€
- 3% commission if sold for 200.000€ = inmobiliaria 6.000€, you 194.000€
- Flat fee of 3.000€ plus 10% of anything over 200.000€ sold at 250.000€ = inmobiliaria 8.000€, you 242.000€
- Flat fee of 3.000€ plus 10% of anything over 200.000€ sold at 200.000€ = inmobiliaria 3.000€, you 197.000€
It’s clear from this example that one commission structure motivates the inmobiliaria to aim for a higher price much more than the other. This sort of structure effectively aligns the inmobiliaria’s and your interests, and it has a second benefit which is that if an inmobiliaria finds a client who they feel will go to a high price and doesn’t have a particular property in mind they are motivated to pitch your property to that client ahead of other properties they have where the commission structure is flat.
Check the property’s registration
The first stop for your newly assembled team is the local Registro office (which comes under the aupices of the Xunta, Galicia’s autonomous community government).
When properties are built, bought and sold in Spain the details are notarised and the resulting document, known as the Escritura, logged by the Registro (which also collects property transaction taxes).
There are three things that need to be checked here:
- Ownership – your ownership and right to sell the property needs to be confirmed. This applies particularly if you have inherited the property or own it jointly.
- All the charges (mortgages, debts, access rights, etc.) against the property are understood and the relevant people informed.
- The physical property as is matches the information logged in the Registro – in my experience it normally doesn’t as a result of some enlargement or alteration of use that has not been registered or has only been registered with the local Concello and the Catastro. If this is the case there are normally ways to legalise the situation or you may find a buyer who is quite happy to buy it without the discrepancy being rectified.
If your property is within 100 metres of the demarcation of the coast (which includes some river estuaries) then you will also need to check that the property complies with Spain’s strict coastal laws.
Check that all tax and utilities payments are up to date
Documents showing that all relevant taxes have been paid will be required for the sale to go through. The taxes that you need documentary proof of having been paid before the notarised sale (step 8 below) are:
Plus Valia tax – this is a tax on the increase in the value of the land the property is built on in the time you’ve owned it. As local councils revalue land in infrequent (often decades apart) but large jumps this tax can be a nasty sting if there was a revalution during your ownership.
The current and last 5 years of IBI and local garbage collection tax – IBI is the tax paid to your local council . Whoever owns the property on Jan 1st each year is responsible for the entirety of that year’s IBI. Unpaid IBI from the 5 years preceding a property sale can be reclaimed from the buyer, so proof of 5 years worth of IBI payments, which the current year’s receipt effectively shows, is necessary for any sale to go through.
If you inherited the property or it was gifted to you you may need to prove that all relevant taxes have been paid, not including Capital Gains tax which is something to sort out after the sale with the Agencia Tributaria when you make your annual tax declaration. If you are non-resident or leave Spain after selling your property you will still need to make a tax declaration for the year of the sale – this is enforced by a withholding tax (see point 9 below).
As utility companies may try to reclaim unpaid bills from new owners you will also need up to date paper bills showing that bills for all connected utilities (electricity, water, gas) are paid up to date. Similarly if the property has any community fees (typically only more modern, multi dwelling developments have these) evidence that these are paid up to date will be needed.
Advertising the property
Your inmobiliaria should now have everything in order for a sale and the next step is photographing and marketing your property. Your inmobiliaria is likely to send out a low paid minion with an average camera at a time that suits them (even if it’s raining and bad light) to photograph your property.
As I believe that a comprehensive set of good photos is an essential part of marketing a property I would advise asking your inmobiliaria to photograph the house at a time that a) the weather is good, b) you’ve tidied up, moved cars, mowed lawns, etc., and c) when the lighting of the property and any views are at their best. You could also consider providing some photographs yourself if you have good ones.
Your inmobiliaria will typically advertise the property with a “Se Vende” sign out front, an A4 poster listing in its office window, a listing on their own website and listing on one or more metasite (such as pisos.com, idealista.com, fotocasa.com). It is worth asking them for links to everywhere they have advertised the property and checking the adverts to ensure that they are factually correct and also that they all have full sets of photos and details.
Galiciaproperty provides a guide to the international marketing of your property that details the most effective way to photograph and describe the property. It is worth ensuring that your inmobiliaria’ advertising runs along these lines and discussing it with them if you feel it falls short.
Viewings
As explained in Galiciaproperty’s selling guide, you should leave viewings to your inmobiliaria. What you do need to do is support your inmobiliaria with these viewings in a number of ways:
Provide them with a key to the house and good contact numbers so that viewings can be arranged easily and at short notice. If you keep a potential buyer waiting to arrange a viewing they may go off and buy a different property, and it’s also annoying.
Ensure that when the inmobiliaria’s agent arrives with people to view the house it is clean and free of smells.
Tempting as it may be to join in, you should stay out of the way whilst the agent conducts the viewing and also if there is any subsequent discussion – if your agent is halfway competent at their job then you will only be a hindrance.
Negotiating
This is something that you should again leave to your inmobiliaria, especially if, as covered above in 1), you have structured the agent’s commission to encourage them to push for a high sale price.
Ultimately, of course, how you negotiate is a factor of the qualities and desirability of the property, the market conditions and how keen you are to sell quickly. Your inmobiliaria should be able to advise you on the first two themes, but in the end dcisions regarding offers will come back to you to make.
Sale contract & deposit (contrato de arras)
If you accept an offer on your property then next step is to sign a sale contract and for the buyer to pay you a deposit to secure this. Inmobiliarias will often push for a deposit of 5-10%, but in fact it can be anything and there is one important factor you should consider relating to this:
The standard sale contract contains a break clause which states that if the buyer pulls out then the seller keeps the deposit, but if the seller pulls out then they have to pay the buyer two times the deposit. The contract also contains a clause specifying when the sale must be completed by.
If, therefore, you have received a good offer you’re very happy with and are immensely relieved to have found a buyer you should aim for a good sized deposit to effectively secure the sale. Similarly you would want to do this for security if you are worried about your seller’s ability to eg. get a mortgage or if they have requested an unusually long time to complete the sale.
If, on the other hand, you’ve grudgingly accepted a very low offer and want to keep your options slightly open then it may make sense to take a low deposit so that any higher offer you subsequently received might be able to fund breaking the contract …and of course what normally happens if you try to break a contract is that the other party suddenly ups their offer!
This may seem evil, but you can call it entirely legal capitalism if that makes it more palatable.
The contrato de arras is a private contract that does not require witnessing by a notary. Typically it is a very standard contract and therefore you can take the view that there is no real need to employ a lawyer to be involved in drafting or checking it unless either you or the buyer wants to introduce clauses or conditions into the contract, which of course either party is free to request.
The payment of the deposit is done at the same time as signing the sale contract, and in Spain the deposit is paid directly by the buyer to the seller.
Personally I find this process alarmingly insecure for the buyer, but as this section is about selling property there is no need to go into why here.
Notarised sale
Once you have signed a contrato de arras and received a deposit your inmobiliaria will contact a local notary and they will start preparing the sale document.
The choice of notary is, in fact, more down to the buyer than the seller, since it is the buyer who pays the notary’s fees, but generally accepted practice is to use one close by. If you have specific notary requirements, for example speaking English (which some but by no means all notaries do) then you should consider including this requirement in the contrato de arras or at least making sure that it is agreed verbally with the buyer.
Once appointed the notary will request and check all the required documentation for the property, which is detailed above, and will draft a document called the Escritura de Compraventa. This will contain full details of both parties, all payments, any mortgages or other charges on the property, the property as registered in the land registry and any conditions specified in the contrato de arras.
Once all parties, which includes representatives of any bank holding a mortgage on the property, and the notary are ready to proceed a date is set for a meeting in the notary’s office. All parties gather there and the notary reads through the Escritura, the remaining monies are handed over, and the sale is complete.
An important point to note is that if you are not officially a Spanish tax resident when you sell your property the buyer is required by law to retain 3% of the purchase price and pay it to the Spanish tax authorities against any capital gains tax liabilities you may have from the sale of the house.
The notary, acting on behalf of the Spanish tax authorities, will enforce this and will collect the money direct from the buyer.
The inmobiliaria will also collect its commission at this point. The buyer will have been asked to prepare separate cheques for this and, if applicable, the Spanish withholding tax above.
In the following days the notary will produce a formal Escritura document complete with all official stamps and the buyer will collect that, pay the notary’s fees and take the Escritura to the Registro office where the Galician and Spanish registers of property will be updated according to the Escritura.
At this point the buyer also has to pay a 10% purchase tax. As a seller it is worth asking your inmobiliaria to check with the Registro office that this process has been completed, because if it hasn’t you may find any liabilities associated with the property targeting you, as you will still show as the registered owner.
Sorting out capital gains tax issues
The calculation of capital gains tax must be done whether you are a Spanish tax resident or not. How this tax is calculated is described in the sales finances section.
In all cases you, or a lawyer or gestor acting on your behalf (your inmobiliaria will not be involved with this aspect of the sale), need to make a declaration to the Spanish tax authorities relating to the sale of the property and probably submit a tax return for the year of the property sale.
If any tax is due you will be given an aggressively small number of days to make payment within, after which above inflation interest will accrue, and if you move elsewhere in at least Europe and don’t pay any tax due you may (it’s unlikely, but can happen) find the Spanish tax authorities coming after you.
If a refund of some or all of the 3% withholding tax (non-residents only) is due you can look forward to a wait of anything up to a year to get your interest-free refund paid to you.
Galiciaproperty can represent sellers and aid with this process on the same basis as its purchase assist service. If this would be of interest to you then please contact Galiciaproperty.