Complete guide to the buying process in Orihuela Costa and Spain

As with any financial commitment, when buying a property, research and preparation are key to starting successfully. Especially when looking for properties in Orihuela Costa, selecting the right real estate agent is the first crucial step in this process.

This is where the power of the Internet becomes important. In the digital age, this tool has become indispensable, allowing people to research virtually anything around the world. This is particularly beneficial for those who live abroad but wish to purchase properties or move to Orihuela Costa. It provides them with an opportunity to preview the real estate market.

We recommend starting your search by selecting agents or real estate agencies that pique your interest during your research. However, it is crucial to narrow these options down to one, as trusting them is essential to realize your projects. For this reason, at Mevilla we take pride in having expert agents in their areas, possessing the knowledge and experience needed to maintain your trust. Trust us to make your ideas a reality in the real estate market of Orihuela Costa.

Now that you have been able to plan ahead, you are ready to organize your trip to the Costa Blanca. If you decide to continue with the planning during your stay in the city, the next step will be to coordinate visits to the available properties. Here are some valuable tips to effectively manage these visits and optimize your search for the perfect property in Orihuela Costa:

Tip 1: It is essential to do some prior planning and pre-select properties that fit your interests and needs.

Tip 2: Once you have chosen the real estate agency and the agent who will accompany you, allow the agent to organize multiple visits during the day to make the most of your time and to get a good understanding of the market.

Tip 3: It is recommended to limit visits to about 5 properties per day to avoid becoming overwhelmed and to maintain a clear perspective. However, for short trips, you may consider increasing the number of visits to a maximum of 10 properties per day.

Tip 4: It is essential to evaluate not only the property itself but also its location. Explore the area to ensure it meets your preferences and needs, such as proximity to the beach, schools, tranquility, among other aspects.

Tip 5: If you find a property that interests you during the day, consider returning at night to assess it in different lighting and environmental conditions.

Tip 6: Expressing your opinion clearly and honestly during visits is crucial. Open communication with your agent will allow you to receive more precise recommendations tailored to your preferences, which will facilitate decision-making.

Tip 7: Be prepared for adjustments and changes in your preferences during the search process. Trust in your agent's ability to adapt to your needs and provide quick and effective solutions. Choosing an experienced and adaptable agent is key to a successful property search.

Before proceeding, it is important to highlight that, although not mentioned as a specific step in the guide, it is essential to ensure that all required documentation is in order both before and during your visit to Orihuela Costa. This step will allow you to optimize time and ensure the economic viability of your purchase.

After exploring different real estate agencies and agents online, you will be prepared to plan your trip to Orihuela Costa and make sure you have all the necessary documentation in order before your arrival. It is essential to keep in mind that in Spain, administrative procedures are required, so we recommend verifying that all your documentation is in order before scheduling any property visits. This will save you time in the future and facilitate the purchasing process.

Although there are no specific restrictions for non-resident foreigners wishing to acquire a property in Spain, certain requirements must be met before starting the purchasing process:

APPLY FOR AN N.I.E.

The Número de Identidad de Extranjero (N.I.E) is a sequential identification number assigned to foreigners, essential for carrying out procedures in Spain, such as opening a bank account, obtaining a phone number, working, studying, among others.

If you are planning from abroad, you can apply for the N.I.E through the Spanish consulate. If you are already in Spain, you can do it in person at a police station or through a management agency.

In the Valencian Community, the necessary documentation to apply for the N.I.E includes:

• For holders of European passports: present the main identification page and its photocopy.
• For holders of other passports: present the complete passport with a photocopy of all the pages, plus two passport photos and two copies of the Ex-15 form duly completed and signed.

A valid justification for the need of the N.I.E (e.g., for work, buying a car, acquiring a property, etc.).

OPEN A BANK ACCOUNT IN SPAIN

Once you have obtained your N.I.E, you will be able to open a bank account. We suggest looking for banks that offer services for foreigners, such as Sabadell, CaixaBank, Santander, and Bankinter, among others. It is important to note that in Spain it is necessary to visit a branch in person to open a bank account.

Additionally, other requirements necessary to open an account include:

• Identification document (e.g., passport or national ID card). Normally, these must be presented in person.
• N.I.E
• Proof of funds / Tax declaration
• Any other document the bank may deem necessary.

In addition to the standard documentation, proof of residence, such as a rental contract or recent paid bills, may be required. Some banks, like BBVA, may request a Non-Resident Certificate. To obtain it, you must manage it at a police station, which usually takes about 10 business days.
Documents may need to be officially translated into Spanish and, if they come from abroad, they may require an apostille stamp. Most banks do not charge fees for opening an account, but you may have to pay an annual fee for administrative expenses, either monthly or quarterly.

When choosing the right bank, it is important to pay special attention to the fees applied for incoming and outgoing international transfers, as well as for bank drafts, which are the standard payment method when acquiring a property.

It is important to mention that, based on our experience, there have been cases where people have missed significant purchase opportunities due to lack of proper documentation preparation in advance. Therefore, we strongly recommend that individuals verify their legal, financial, and tax situation before beginning to search for properties in Orihuela Costa.

In any case, Mevilla helps you manage these procedures in a relaxed and comfortable manner.

When you find a property that fits your idea of a perfect home, you will enter the negotiation phase in the process of buying a home from a private owner. Here are some steps we recommend considering during this crucial phase.

MAKING AN OFFER

When making a purchase offer, we always advise doing so in writing (usually in a letter of offer) through your agent. The letter should include the price being offered, the proposed payment terms, and the timelines.

When making an offer, ensure you understand what will be included in the property sale, such as furniture or fixtures. Make sure you propose a reasonable and serious offer; the more serious your offer appears in writing, the better chance you have of securing the best possible deal.

When making an offer, we have seen cases where the buyer has decided to sit face-to-face with the seller to negotiate the offer. We have noticed that these negotiations are more personal and less controlled. And, when negotiating through an agent or making an offer in writing, the process is more gradual and more controlled. From our experience, we have been able to confirm that negotiating through an agent is generally more beneficial for the buyer when agreeing on a final price, especially thanks to the agent's experience in the negotiation process.

It is worth mentioning that, if you are thinking of adding any special condition or requirement that you would like the seller to consider before buying a property, these contingencies should be clearly established in the original offer.

REQUESTING A TECHNICAL INSPECTION

It is crucial to bear in mind that before, during, or even prior to making an offer, a thorough technical inspection of the property can be requested. This inspection will provide detailed information about the potential risks associated with the property during the purchase process. The resulting reports may range from aesthetic issues like cracks in the walls or damp spots, to more technical aspects like plumbing, pipes, heating systems, gas installations, water tanks, electricity, among others.

It is essential that all these details are recorded in writing, as they could influence your initial offer and, eventually, your decision to purchase. This ensures adequate transparency and provides a solid basis for any further negotiation related to the terms of the purchase. Moreover, having this detailed information allows you to properly assess the risks and costs associated with the property, which is crucial for making an informed and solid decision.

Once the seller accepts your offer, you move towards the legal phase of the purchase process. When acquiring a property, you will be asked to sign a reservation contract, a purchase contract, and an official deed in the presence of a notary on the day of completion. Although this is the most common way to proceed, there are several alternatives in terms of "standard private contracts" that might require your signature:

1. 1. RESERVATION CONTRACT – RESERVATION DOCUMENT

   A reservation agreement is a document signed by both the buyer and the seller that allows reserving the property for a mutually agreed period, usually between 7 to 14 days or more. In this agreement, the seller may apply a reservation fee that the buyer must pay. This fee can range from 5,000 to 20,000 euros, represent 1% of the purchase price, or any other amount agreed upon between the parties. The purpose of this payment is to ensure that the property is taken off the market.

   However, if the buyer decides not to proceed with the purchase, they will lose the reservation amount as compensation since the property has been taken off the market. Unless special conditions have been established in the reservation agreement that allow the buyer to retract without incurring financial losses.

2. 2. PRIVATE CONTRACT WITH A 10% PAYMENT

   After signing the reservation contract, you will need to sign a private contract and then make a payment equivalent to 10% of the purchase price. This payment will include the previously paid reservation amount (if you have paid 1% at reservation, then you will need to pay the remaining 9%). Importantly, in some cases, it is possible to skip the reservation contract and go directly to a 10% private contract. However, this practice is usually reserved for cases where the purchase price is high, and the seller cannot take the property off the market for a smaller reservation offer.

   There are three different types of contracts you can sign. All of them require a 10% payment, and are similar in this respect:

   1. a. Earnest Money Contract

      This type of contract sets a penalty for the seller if the property is not sold according to the previously agreed terms. If the seller decides to withdraw from the sale, they are obliged to pay the buyer twice the amount that the latter initially paid. Technically, this means that the seller has the option to break the contract at any time; although the penalty is significant, the risk for the seller is relatively low. On the other hand, if the buyer decides not to continue with the purchase of the property, they will lose the 10% payment made, and the contract will be voided.

   2. b. Private Purchase Agreement

      This type of contract is more common as it commits both parties to buy and sell the property. This means that the loss of the 10% paid or the refund of twice the amount by the seller may not be enough to cancel the contract. If one of the parties does not wish to carry out the transaction, the other party could still force them to do so through legal action. In this scenario, the seller could be forced to sell, even if they refuse to go to the notary, and the buyer to buy, even if they do not wish to do so. However, it is important to note that these cases are rare.

      It is crucial to bear in mind that the above descriptions of the 10% private contracts are only general summaries of their implications. Each contract is subject to additional clauses and penalties that may influence its execution. According to the law, it is not the name of the contract that determines its intention, but how it is drafted and the conditions it contains.

   3. c. Option to Purchase Contract

      In this type of contract, the seller is not allowed to withdraw from the agreement once established. No penalties are set, as the seller is not granted the right to retract. It is the buyer who has the power to exercise this option during the term of the contract and proceed with the purchase. However, if the buyer opts not to acquire the property, they will lose the 10% payment made, and the contract will be void.

3. 3. MORTGAGE

   If interested, you can also opt to apply for a mortgage in Spain. If you are considering doing so, make sure to start the process as soon as possible, as obtaining mortgage approval in Spain can take up to 2 months from the initial application.

   If you decide to go ahead and apply for a mortgage, the bank will also require additional documentation, although what they are most interested in are proofs of recurring income. The typical conditions for a mortgage currently are:

   • Mortgage amount: up to 60% of the purchase price
   • Rate: 1.5% to 2.5% per year
   • Term: 15 to 25 years
   • The early amortization commission for closing the mortgage is about 0.5% to 0.25% of the reimbursed amount.
   • The bank may also require life insurance and property insurance as a prerequisite for granting a mortgage.

4. 4. COMPLETION OF THE PURCHASE OF A PROPERTY IN SPAIN – DEED OF SALE

   All involved parties must attend: buyers, sellers, and their legal representatives or lawyers, bank personnel for the amortization or subrogation of an existing loan, a bank issuing a new mortgage, etc.

   At the time you sign the property deed at the notary, possession and full responsibility of the property are immediately transferred to you. The payment for the purchase of the property is also made at the same time through bank checks. In Spain, this payment method is the safest for both parties, as the payment is made when the property is transferred to the buyer, and banks can provide a quick and verified confirmation that the payment has indeed been made.

   Once you have signed the deed of sale and paid all the required taxes, the deed is registered in the Property Registry. This process can take up to three months. After registration, the original deeds and all invoices related to the transaction will be available. At that point, you will be free to switch all the utility contracts, such as water, electricity, gas, telephone, and neighborhood community bills, to your name and bank details.

Once you have acquired a property, the following steps will help ensure all taxes are paid and your property is registered. This process can be facilitated with the help of a lawyer and a solicitor.

It is important to remember that the expenses associated with buying the property are not the only ones you will have to pay, as there will be additional costs after the transaction is completed. On our website, you will find an informative article that provides guidance on the taxes and fees related to buying a property in Orihuela Costa. We also have a section dedicated to general tax advice and other topics that we recommend you review.

REGISTERING YOUR PROPERTY

As mentioned earlier, it is crucial to ensure that the name and bank details on all utility and community bills are updated to yours. In some cases, your lawyer can assist you in this process.

Once all taxes have been paid, it is necessary to register the property with the local property registry to secure your rights to it. Below is the documentation required. Please note that your lawyer can handle this procedure:

• Foreign Identification Number (N.I.E) and an authorized copy of your passport.
• Confirmation of payment of the Property Transfer Tax (ITP).
• Copy of the seller's payment receipt for the Property Tax (IBI).

BEING A HOMEOWNER

Now that you are a property owner, here is useful information about the expenses you will need to cover as a homeowner in Spain:

PROPERTY-RELATED EXPENSES

1. Maintenance fees
   Maintenance costs (cleaning, repair, renovation, utility bills, garbage collection, etc.) vary depending on the size and type of property. For example, a large villa with a garden and pool will require considerably more money and effort for maintenance compared to a smaller apartment.

2. Community fees
   Owners of a property that is part of a development, building or complex with shared common areas are legally required to be members of the homeowners association and to pay community fees for the maintenance of these common areas and other services approved by the annual general meeting. These fees can range from hundreds to thousands of euros.

3. Property Tax (IBI)
   The local property tax depends on whether the owner is a resident or not. Based on the cadastral value (general administrative value usually lower than market value) set by the town hall, in Orihuela Costa the tax rate goes from 0.65% of the cadastral value depending on the region (200-1500 € annually).

4. Garbage tax
   Everyone must pay the garbage tax for the disposal of municipal solid waste. The tax rate is based on the amount of waste present for collection by the municipality or local authority. The price varies depending on the area, but on average it can cost 300 € per year.

EXPENSES RELATED TO YOU AS A HOMEOWNER

1. Wealth Tax

   Progressive state wealth tax rates start at 0.2% on assets up to 167,129.45 € and rise to 3.5% on assets above 10,695,996 €. Regional rates vary.

   This tax has been changed several times in recent years. It was reintroduced during Spain's financial crisis, but with a much higher tax-free allowance of € 700,000 per person which also applies to non-residents.

   It appeared as a “temporary” measure, but there is no clear indication of when it will be abolished, if ever.

2. Income Tax for Non-Residents – IRNR

   The Income Tax for Non-Residents (IRNR) is a tax that applies to incomes earned in Spain by individuals and legal entities that do not have tax residency in the country. This tax applies to income generated by economic activities carried out in Spain, such as rental income from real estate, income from movable capital (interests, dividends, etc.) and capital gains.

   The IRNR is regulated by the Non-Resident Income Tax Law and its implementing regulations. Tax rates and applicable deductions may vary depending on the type of income and the international agreements to avoid double taxation that Spain has signed with other countries.

   It is important to highlight that individuals and legal entities that do not have tax residency in Spain are subject to this tax for the incomes obtained in Spanish territory, regardless of their nationality. Non-residents must file the tax return and pay the corresponding tax before a deadline established by Spanish tax regulations.

   Residents in Spain pay income tax based on their annual income. Rates vary in different regions, but the last few years have brought taxpayers positive news, and the government plans further reductions in tax rates. Often, non-residents simply pay a flat rate of 25% on the gross income they earn from their property in Spain.

3. Please Note: Golden Visa

   If you are not a citizen of the European Union, you may face difficulties moving freely within the Schengen Area without a tourist or short-stay visa. This can complicate establishing oneself in Spain for many non-European citizens. However, in real estate, a method has emerged that facilitates the process of obtaining residency in Spain for non-Europeans, known as the Golden Visa (residency by investment in real estate).

   Regarding real estate requirements, an investment of at least 500,000 € in a property located in Spanish territory is required. Additionally, the following prerequisites apply:

   - The applicant must be a non-resident of the European Union and have no criminal record.
   - The value of the property may exceed 500,000 € and be encumbered with mortgages, but the 500,000 euros investment must be free of legal encumbrances.
   - The applicant must demonstrate sufficient financial resources to reside in Spain.
   

   This visa allows the holder and their children to live and work in Spain, and grants residency for 2 years, with the possibility of renewal as long as the applicant remains the owner of the purchased property. Additionally, it facilitates free movement within the Schengen Area without the need for another visa. Physical residency is not required, and there is no need to pay taxes in Spain. This process can be managed through an agent as a representative.

   Therefore, if you are a non-European client and the property you have purchased in Orihuela Costa exceeds 500,000 euros, you are eligible to apply for a Golden Visa.

Before embarking on purchasing a property in Orihuela Costa, it is crucial to have everything well organized and to thoroughly understand the purchasing process in Spain. This process can seem overwhelming, as it involves handling a large amount of information and paperwork. Therefore, having an experienced real estate agent you can trust is essential. Your real estate agent should be someone you feel comfortable with and who acts as a professional intermediary to guide you through the entire process and provide moral support.

At Mevilla, we rely on knowledge, trust, and experience. With a broad portfolio of international clients, we are accustomed to working with people from all over the world to help them find their dream home in Orihuela Costa. We trust in our abilities and consider our real estate agents to be the best in their field. They are more than just intermediaries; they are your tour guides, consultants, and problem solvers throughout the buying process, which can last between 3 and 6 months. We are confident that once you are settled into your new property, you will fondly remember your experience during the purchasing process and be glad you trusted us.