BUYING GUIDE PALMA DE MALLORCA
Here is the ultimate buying guide when buying a property in Palma de Mallorca - regardless of if it is an apartment, a luxurious house or a penthouse with roof top your are interested in. We asked our Palma office owners - Ninos Younan and Kalle Wallroth for their best tips and tricks mixed with facts and recommendations.
Important to think about and common pitfalls when buying property in Mallorca
Buying a home in Mallorca does not have to be that complicated - as long as you are aware of a few important things. Already after an initial meeting, our customers tend to feel more secure about what is required to make a purchase. We are with our customers all the way - from the first viewings until you have the keys to your new dream home. We have long experience in the real estate market and collaborate with experts in finance, law, architecture, construction and maintenance.
3 quick tips when buying a house or apartment in Mallorca
- In Mallorca there are more brokers than objects for sale. Stick to one broker that you trust - then you will get the best help. Look at several properties and be open to suggestions from the broker who knows the market.
- Have the funding ready before you start looking so you can move quickly when you find the right property .
- If it feels right then don't hesitate, a chance will rarely come back. Also, get help from a lawyer for a safe and secure deal.
5 pitfalls when buying a house or apartment in Mallorca
- Illegal alterations
Illegal extensions and alterations of both houses and apartments can cause major problems. The fines for future owners can be high and parts of the property may need to be demolished before further renovations can take place. Your broker will help you with this.
- Incorrect information in the ad
Not always sure that advertised information matches reality. Very common with discrepancies about the total square meters and whether the terrace is included or not. Excerpt from relevant records is a must to know the facts. Your broker will help you with this.
- Certificate of residence must be provided
Ensure that all documentation on the property is in place. Example; without a Certificate of residence (Cedula de Habitabilidad) you cannot, for example, connect electricity, gas and water. Your broker will help you with this.
- Building permits
Just because the neighbor has built a terrace or pool you may not be allowed to do the same. Investigate what can be done specifically on the property you are interested in. Your broker will help you with this.
- No agreement without a lawyer!
Do not sign a contract and do not pay any down payment without a lawyer, the risk is that you will get locked up in a deal you will regret. Your broker will help you with this.
How do I go about buying property in Mallorca?
Where on the island should I look?
Mallorca is a relatively small island but with a lot to offer and with a fantastic variety between different areas and villages. Find your favorite area by traveling and discovering. Everyone who works at Fantastic Frank Palma has lived here a long time and we are happy to share our hidden gems and favorites to guide you right.
How do I best finance my purchase of a property in Mallorca?
We always recommend that you investigate the possibility of a loan in your home country, it is often the easiest and provides the best conditions. Then you are also ready to move quickly when the dream home shows up. Loans can also be taken at a Spanish bank, we can help you with bank contacts we cooperate with.
2. The buying process
What is an option contract and when is it done?
Once you find the right property, your broker will negotiate the best terms for the purchase. Thereafter, an option contract is signed and a down payment of about 10% is paid. Since the same property is often for sale by several brokers, the option contract serves to reserve the property and gives time for the legal and financial aspects that need to be done.
In addition to the price and what is included (eg furniture), the contract regulates the entry date, which is usually 4-6 weeks away. Obviously there is the possibility of not going ahead with the purchase and then the buyer loses his paid down payment and if the seller does the same, the down payment is paid back plus a penalty fee which usually corresponds to the same amount as the down payment.
As a buyer, you usually hire a lawyer to help with the legal parts and also writes the option contract that both parties sign. For the signing of the option contract, nothing special needs to be prepared by the buyer, but before the completion date you need to have your NIE number, your financing and an account number in a Spanish bank in place.
Buyers responsibility to check (Caveat Emptor)
Properties in Spain are sold in existing condition and it is up to the buyer to ensure that there are no surprises after the entry. Among other things, the lawyer looks over the legal aspects, whether the property is mortgaged, what is registered in the property register and what the ownership conditions look like. When it comes to houses or larger properties, the buyer sometimes also takes the help of a technical architect to check the condition and if there are illegal extensions or alterations made.
How do I get a NIE number?
In order to own a home in Spain, you need a Spanish tax identification number, a so-called NIE number. Only then can you open a bank account and sign the purchase letter. You can apply for NIE number with the Spanish police or via the Spanish embassy in your home country. The application is usually made through the lawyer.
Do I really need a lawyer?
No, a lawyer is not a must, but every deal is unique and being able to lean on a good lawyer is an excellent assurance that the legal aspects are well taken care of. It is the buyer's lawyer who writes the options contract, handles the NIE application, the payment of the down payment, informs about taxes, ensures that all mandatory documents are in place, provides documentation to the bank for the payments, and accompanies to the notary and translates documents where needed.
Prior to the option contract, the lawyer requests extracts from the property register so that the reality can be compared with what is written in the register. Some discrepancy in square meters is common and if there are illegal extensions or alterations this is when it gets discovered. The lawyer also investigates whether the property is mortgaged and what ownership conditions apply. The lawyer also makes sure there are no open cases and reports that burden the property which you can risk taking over.
The lawyer is involved throughout the process and ensures that the purchase goes right and that the property becomes yours according to law. Ask us and we would be happy to recommend a good lawyer.
What happens on the completion date?
On the day of completion, the deal is settled with a Notary Public. The day before, an inspection of the property is done together with the seller to ensure that everything is in working order and left as previously agreed. At the notary, a purchase letter is signed, the remaining payment is done and the keys are handed over.
The notary registers the purchase in the property register and after about three months the buyers receive the legal deed where they are registered as the new owners of the property. Both buyers and sellers can be represented by someone who has a power of attorney.
Notary Publicus is an officially appointed lawyer who has the task of checking the identity of the parties, the debts of the home and that the payment to the seller is correct and made according to Spanish law. Notary Publicus also draws up the letter of purchase which is the basis for your application of the purchase deed. The notary never checks the condition of the home or any illegal alterations or extensions.
3. Fees and taxes
What taxes and fees should I count on the purchase?
Your lawyer can calculate the exact costs but allow about 10-13% of the purchase price for taxes and fees that apply.
VAT: For useed properties that are sold, ie not new production, the VAT is 8-10%. VAT is calculated incrementally, 8% up to € 400,000, 9% for values between € 400,000 and € 600,000 and 10% for parts exceeding € 600,000. For newly built properties, the VAT is 10%. VAT on land, commercial properties and parking spaces in garages is up to 21%.
Notary fees: The notary charges both a fixed and a variable fee, based on the property's valuation. When the notary sends the purchase letter for registration to the local property register, a stamp tax is levied. Expect to pay about 1% of the price for notary costs and stamp duty to the property register.
Legal fees: Allocate about 1% of the purchase value for legal fees.
Wealth tax: In Mallorca the wealth tax ranges from 0.28% - 3.45% of the asset value. A €700,000 tax-free allowance applies for everyone, and Spanish residents get up to an extra €300,000 against their main home. For resident married couples who jointly own property, this could mean a total allowance of €2 million. We advise you to seek specialist advice on this matter.
What annual taxes and fees should I expect?
The property tax, IBI, varies between 0.4% and 1.1% depending on the area and is calculated on the appraisal value. For apartments it is common with an annual IBI of 200-300 euros and for houses 1000 euros and above.
The tax for waste disposal is about 200 euros per year, depending on the municipality.
Running costs to count with are electricity, gas, water, internet and community fees. We usually have information from the current owner on the costs for the particular property you are interested in. Expect about € 300-400 per month for an apartment for running costs.
Property owners in Spain must declare their holdings and for those who are not resident in Spain, a tax representative is required by law. We can recommend several tax representatives who can handle tax returns, payment of property taxes and assist in simpler legal and tax matters.
Also look at what we currently have for sale in Mallorca.
This information should be seen as a guide, for legal matters we always recommend to get help from a lawyer.
Real estate agents Palma