Information about real esate purchase
First, set your budget for the purchase of your property. Be aware that there will be side-costs of about 10%-12% of the purchase price for the notary, the inscription in the registry and taxes, so you can only spend 90% of your budget as maximum purchase sum. Also consider that there might be renovations necessary or you may want to modernize bathrooms and kitchen or furnish the property according to your own taste.
Property on Majorca is rarely sold because the owner discovers any negatives and therefore wants to sell, but most sales are by elderly foreign owners who are less mobile because of their age and sell after 20-30 years of owning their holiday property. The present generation of buyers usually have different taste and preferences , so cost for modernization should be taken into account.
II. Realistic prices
You know your budget now - you also know what you can get for it? A house with private pool and sea views on the South-West coast of Majorca for €500,000 is an illusion and has nothing in common with the real market prices. You should check all available sources such as the websites of local brokers, market reports of relevant property magazines or the islands own British newspapers such as "The Daily Bulletin". All of these sources of information for research at home are the first step to answer the following considerations:
Where on Majorca do I want to live?
Checking different locations, significant price differences in €/sqm will be found. The South West coast between Palma and Puerto Andratx is certainly the most expensive residential area (also with regards to the annual property taxes, which are set by each municipality itself), still with significant differences from place to place, followed by the West, North and East Coast. In the middle of the island homes are still less expensive, but due to steady demand, prices increase everywhere.
Do not only consider the price in the decision-making process. Majorca has many faces which include the still very natural East, the lively capital, or the year-round busy Southwest for everyone. It has proven that a city person will not enjoy a rural setting in a less expensive - but remote - area for long, but enjoys more a buzzing infrastructure with short distances to shops and restaurants.
So, think first how much time you want to spend in the next few years in your property. At what time of year will you be on Majorca? What kind of activities would you carry out there, how mobile you are on the island - what should be in the vicinity? Is a 20 minutes drive a normal thing for you or considered a day trip?
What kind of real estate do I want to purchase?
Here, the options are a villa, a town house or an apartment, the latter mostly in a community area with swimming pool and other services such as concierge, etc.. Property in a community is easy to maintain and can remain uninhabited several months without problems whereas a private house - perhaps even with pool - requires regular maintenance which has to be organized.
What price should I expect?
The area and the type of the property is set, now comes the price check. Compare real estate offers, which have the same criteria as requested by you (living area, number of bedrooms, amenities) and check whether the budget you set for the desired property is sufficient. Do not wait for a great bargain and 50% discounts. In these rare cases neighbors, registered customers or investors are usually a snake ready to strike quickly and within a few days to complete such a purchase. Therefore it is advisable to lower your own expectations or to increase the budget, so that the desired property goes in line with a realistic budget
III. First selection
Check out websites of brokers in your preferred area. In addition to well-known names also check out the smaller agencies, even if they represent a smaller number of properties, as they know these in detail and often provide more personal care to each client. Don't be surprised if you find the same property with several agents. Unlike in other countries, there hardly exist any exclusive contracts with estate agents in Spain and the owners offer their home to several brokers.
Start with a picture of the market situation, what equipment is standard/extra, which age of construction and location are common, Is the property offered furnished/unfurnished. Get a first feeling for the property on offer in your budget scale.
You can request more details or arrange a viewing appointment on almost all websites with little effort from your home country. You should use this service, if you are planning a stay in Majorca with the sole purpose of viewing potential properties. This will give the brokers opportunity to prepare for your visit and to seek out other properties that may be of interest to you. As this service is absolutely free to buyers, make use of it. Any broker will be pleased to receive your ideas of your desired property and budget and prepare a tour when you arrive in Majorca to match your requirements - at no obligation.
IV. On site in Majorca
Use the days in Majorca to check your criteria set at home. Places grow and change their landscapes. Industrial areas and golf courses are added and highways extended. Stroll through the area you are interested in, check the local business and restaurants, drive around in the car and see whether everything you need on Majorca, can be found within an acceptable distance. Some towns are multicultural, others show more English or German influence and have adapted their offerings to their respective clients. A detailed test now will save future negative surprises.
When having viewings with an agent, you should also request details of the yearly costs for the property. Community property comes with a monthly charge for the maintenance of the community pool, garden and employees salaries, in addition to the annual property taxes and refuse collection fees, which are collected by the municipality.
Also, make up your mind about the broker you are dealing with. Are they well prepared, do they provide not only the key data but also details such as e.g. the monthly levy? Do they give you time to look around in peace? Do you get expert answers to your questions regarding the further procedure (option contract / notary)? The chemistry should be good between you and the real estate agent. He is not only your partner on-site up to the notary date and beyond, but should be a reliable person who prepares all contracts and paperwork for the notary and advises you what are the necessary actions from your side (e.g. open a Spanish bank account).
V. Reservation and option agreement
When you have found your dream home, you should sleep a night on it and think things over.
For a small fee (usually 1% of the purchase price) you can reserve the property for 2-3 weeks, if you cannot or do not want to decide immediately. If you cancel the purchase after the reservation period, you will forfeit the reservation fee to the owner. If you can make an immediate commitment, you can already sign an option contract which is the next stage of a "reservation" and binding the parties for a longer period of time. The broker requires your personal information and writes a contract that includes all relevant data of the seller, buyer, description of the property, sale price and payment.
This contract must be in Spanish in order to be valid by Spanish law. In addition, the contract should contain the translation of each paragraph in the language(s) of the seller and buyer. Trilingual contracts are therefore not uncommon due to the large number of German and British clients in Majorca. The broker should be able to do this and you must only sign any agreement written in languages that you fully understand. Make sure that you and the seller have understood all the points of the agreement and sign the same contract content.
The option fee is usually 10% of the purchase price. Once the option contract is signed by the seller & buyer, this amount will be transferred to the account of the assigned notary within 7-10 days of the signing. The option contract will legally state the period of time agreed by all parties in which the purchase should be completed. Please ensure that this is a minimum of 3-4 months to allow plenty of time for the application of your Spanish tax number (NIE), as this application alone can take 3-4 weeks. There may also be mortgage arrangement procedures taken into consideration, or flight arrangements to be made if neither you nor the seller are residents here. The deadline of the option contract does not imply that the sale/purchase cannot be realized prior to that fixed date, but it is the date when the 10% held in the notary account will be released to the seller as compensation, should the purchase not have taken place by then.
If it is the seller who withdraws from the sale within the option period, he must pay you the double of the option fee as your compensation (so reimburse your 10% paid + 10% of his pocket as his penalty). This point should also be included in the option contract stating the exact amounts.
VI. Preparation for the notary
First of all, you should apply for the required NIE number which you will need anyhow as future property owners in Spain. This number (número de identificación de extranjeros = foreigner identification number) you need for all administrative procedures such as opening a bank account, applying for electricity, water or a phone, even for purchases where you need an invoice. Without this number, you are non-existent in Spain and you cannot take part in the economic life.
Preferably, you can request the NIE number at one of the Spanish consulates in the UK (London / Edinburgh). You get this tax number for a fee of 13€ with a processing time of less than 4 weeks. On the website of the Consulate London you can see all the important information: http://www.exteriores.gob.es/Consulados/LONDRES/en/InformacionParaExtranjeros/Pages/NIE.aspx
On Mallorca, the application is possible usually within fewer days. The tax offices or the notary, which offer this service, take about 150€ due to the long waiting times between the authorities involved.
Also consider who should be the owner of the property. For married couples, often both partners should be equally registered as owner, so both must have a NIE number! If you have adult children, you may consider that the property is bought in their name in order to avoid the currently high inheritance taxes for non-residents. In that case, you can include a life-long right of usufruct to avoid any problems. As you can see, there are points which are worth having second thoughts.
For the notary, you will need a valid passport / ID card, a copy of it is also required for the preparation of the contract and should be in the hand of your estate agent. Bring also a bank statement of the bank account, from where you have transferred the option fee/ purchase price to the notary trust account. Due to the prevention of money laundering-act, the notary is obliged to include this information in the official document .
Opening a bank account
You need a bank account in any case (sometimes it has to be a Spanish one, please check it in advance), since all utilities such as water/electricity/internet can only be contracted against direct debit bank account (also handy for comunity fees). Also the annual municipal taxes should be authorized to be debited directly in order to avoid penalties (see point 8). It is however not necessary to establish the Spanish bank account before the notary date, as all necessary purchase related payments until the deed can be made from your foreign account to the notary trust.
To open a Spanish bank account you need to present as well your valid document (ID, passport) and the above mentioned NIE number. Without this NIE number, a bank can take only your request, but a bank is not able to open the bank account.
Look for a bank that is located in your area and has staff that speaks your language. Spanish banks have discovered the foreign property owners as their potential customers and are mostly equipped with English-speaking employees. Compare the fees because free accounts or free transfers are still not standard and the fees can vary greatly. Make sure that you have access to your account via internet banking and can check at your account from home.
Should you need a mortgage to finance your property, there are different alternatives: If the previous owner has still a mortgage on the real estate, it can often be switched to the buyer . A review of the agreed terms and conditions is advisable, but quite rewarding, as this bank has already valued the property in the past and considered to be creditworthy, while any other bank will check first on this before giving you a positive commitment.
For a loan request with your Spanish bank, you will need your salary statements of the last couple of months, as well as your tax declaration of the past three years. Assume that the bank will grant a maximum of approx. 60% of the total purchase price and that the remaining amount as well as the purchase fees have to be provided by yourself.
Loans with your UK bank are usually considered difficult because a proper evaluation of your Spanish property by them is usually impossible and thus the creditworthiness evokes doubt, especially as real estate prices on Mallorca are often above those of comparable UK/German real estate.
If you have property in the UK though, it might be worth checking on a mortgage for that property or trying to enlarge an existing mortgage and use the money for your purchase in Spain.
At the notary, the seller, all future owners as well as the broker, the sworn-in translator (if necessary), as well as the representative of your loan bank, if any, should be present.
The purchase price paid by you to the notary trust account should now have been converted into several bank drafts. Often a whole handful of cheques will be issued by the notary, but this has its accuracy. One cheque goes to the seller, if necessary to his bank, if his mortgage has not yet been fully paid. Another cheque of 3% will be withheld by the notary, if the seller is a non-resident, and will be forwarded to the tax department. In order to make sure that non-residents will still declare their gainings in the following year, the law requests from the buyer to retain this "tax amount" of the seller and pass it to the tax authorities, in practice though it is the notary to handle it. And last, but not least, one cheque goes to the estate-agency, which has earned its brokerage commission also with the signature of the notarial deed.
Should there be an still an existing mortgage on the property, which has to be paid, also a representative of this bank must be present, who confirms the cancellation of this mortgage with his signature. Usually, the cancellation of the old mortgage will be done immediately before the actual purchase deed to ensure that the new owners buys the property without any encumbrance.
While reading out aloud the deed, the notary will draw your attention to all essential points of the contract, especially on special features. There should be no more surprises at this point, as otherwise the estate- agent has done a bad job. Do not hesitate to ask questions, if something is not clear to you, now it's the last chance before making your legally binding signature.
After the signature you and the seller will receive both a certified copy of the purchase contract. The original document, where you already appear as registered owner, takes 8-10 weeks and will be handed out to the buyer.
To cover all pending land registration costs, fees and taxes, etc., which are usually handled by the notary´s office on your behalf, it is common practice that these costs will be paid by you in advance to this office . Together with the approx. 1,5% notary costs for the notarial certification, they sum up to an average of 10%-12% of the purchase price. This can be done via bank transfer, either from your UK or Spanish account, and should be instructed immediately after the notary date, as property taxes have to be paid within 30 days in order to avoid penalty charges.
At present, the real estate purchase tax in Calvia has to be calculated in the following way:
sales price < 400,000€ = 8%
sales price 400,000€ - 600,000€ = 9%
sales price > 600,000€ - 1,000,000€ = 10%.
sales price > 1,000,000€ = 11%.
VII. Checklist for new property owners
As new property owner you should consider - after all the joy over the successful purchase – that there are still some essential tasks to carry out, but also your estate-agent will provide his assistance with the following:
Contract with electricity supplier
In the 2-3 days immediately after the purchase, the change in ownership will be communicated to the electricity– a job usually carried out by your estate-agent. Do not worry about which company to choose as the current contract must be first changed to your name, before you can switch to another company.
A number of documents are required for this registration, starting with a copy of the deed and ending with an account confirmation of your bank.
It will take a minimum of 2-3 months before the change is registered (at least with the supplier Endesa) and the invoices are billed to the new owner´s name. In the meantime, the next electricity bill (every 2 months) may arrive; therefore you should remain in contact with the previous owner and agree with him that he keeps his Spanish bank account as long as it takes to get all bills on your name. It is the best solution if he even admits this debit from his account and you reimburse him.
A re-registration with a water supplier is only required if you have not bought a property in a residence (as water will be billed by the administration)and works the same way as mentioned above.
Telephone / Internet
Often your new property comes without landline phone as it was only used for several weeks per year. Would you like to register a phone or internet access, check the various providers (Vodafone, Movistar, Orange are the biggest players). To gain an overview check their website for the different tariffs and compare carefully.
Information to the administrator
If you have purchased a property in a residence, you should get in touch with the administration of the community. You should provide them with your necessary personal information, forward your email and how you wish to communicate with them (language) and give them authorization to debit the monthly community charges to your Spanish bank account. That is the easiest way to handle these regular payments and via your internet banking you keep full control of it.
Also the town hall taxes should be debited to your Spanish bank account. At the townhall in Calvia (with responsibility for the communities of Paguera / Costa de la Calma / Santa Ponsa / Magaluf) there are two employees, who can answer your questions in English and take you to the relevant department.
These taxes are collected always in June/ July for the current year and must be paid until the end of July. In order to avoid late payment surcharges of 20% because you are not in Mallorca, you should necessarily offer bank withdrawal authorization. More info can be found in our section “Taxes for foreigners”.
Have you successfully worked through all these steps, you can pat yourself on the back! Now you have successfully managed the most difficult tasks as a property owner and can start to enjoy life. For all of you who have cursed Mallorca in that time, be sure that everyone else has gone through exactly the same hurdle race.
Don't forget in the heat of the battle, to conclude a corresponding home insurance for your property. In case you own now an apartment in a residence, the community has in general a basic building insurance, but this does not cover the content of your property. If you think that an additional insurance is not necessary , just consider that already the cost of a water damaged apartment is several thousands of Euros just replacing furniture, the kitchen or electrical appliances such as televisions, etc.. Speak to your estate-agent, he should know good independent insurance agencies which work with a variety of leading insurance providers (Zurich, AXA, Allianz, Liberty, etc).
VIII. Last but not least
You have bought a real estate, and a very good quality of life- but in Spain - not in the UK! In order to enjoy Majorca to its fullest, it is advisable to keep yourself informed. Ideally, you will learn basic Spanish to get contacts to the locals. The English-speaking island-community has various internet forums, where current issues, changes in laws, amendments that do affect you as foreigner, etc. are discussed. Learn emergency numbers for police and ambulance and the fastest way to the nearest hospital. Collect useful numbers of handyman, plumbers, electricians and restaurant addresses etc. and create a small booklet. Gradually, you will have your own list of recommended places. But especially in the beginning, be open, try something new, explore the area. Buy at the local market, directly from the farmers, try to order your food and to speak with the cashiers in Spanish, rather than to expect them to speak English. Any attempt will get you further and offers a far more intense experience of Mallorca´s lifestyle.
We wish you a successful real estate search!
All information without guarantee. 01/01/2017
Copyright by Mallorca Best Homes SL, Santa Ponsa / Mallorca 2017