Here, I have outlined the the process of buying a property in Mallorca. So, the necessary steps for getting it. I would be delighted to further detail these steps and assist you in the home buying process in Mallorca.
Before to keep reading, keep in mind I am offering the opportunity to prove my abilities by giving you a free custom report regarding the potential risks of your future property purchase.
The Steps for Purchasing a Property in Mallorca
1. Select the property you intend to purchase
Rural or urban, big city or small village; with a vast 3,640 square kilometers, Mallorca has so many possibilities. In just about an hour’s drive, you are able to cross the entire island from one side to the other. The location of your future property can offer boundless opportunities in the way you live your life here on the island.
Pro Tip: Don’t rush the process. Certainly, the seller is going to try to convince you that someone else is extremely interested in purchasing the same property. There’s a real persuasion in trying to hurry you into buying a property immediately, or you may miss out on the house of your dreams. Pay no mind to the pressure. Don’t be forced into signing any papers until you are absolutely certain that it is, in fact, your dream home.
2. The process of buying a property in Mallorca requires careful review of the property status
Verify that the property is in good, legal standing
It may seem inconceivable, but a property with completely valid paperwork can still be considered illegal. The property can have a signed and notarized deed, record in the Land Registry and Cadaster, and somehow still find itself in violation of the law.
Determining the legality of a property is an essential part of purchasing a property in Mallorca. The seller or real estate agent’s (who is just an extension of the seller) guarantee on the property’s legality is not enough. In the event that something is amiss, the seller might not inform you of the problem. Keep in mind that if the seller is willing to hide something from the buyer, the seller may also be willing to hide information from the real estate agent as well.
Trusting the legality of the property based on verbal assurance and surface level research is ill-advised. With that said, discovering these violations is not easy. Learn the tools to detect property violations here.
Every moth Consell de Mallorca orders to knock it down illegal properties. Be sure non of them it’s yours.
Make certain that your future property doesn’t have any remaining charges or claims to the property.
Whether the property is in good, legal standing is, unfortunately, not your only concern. The process of buying a property in Mallorca implies to be sure the property is also be free of debts such as mortgages, pending payments to the current owner(s), and land development costs that may hinder your ability to purchase the property. On the other hand, it’s equally important to verify that the property is up to date on payments and taxes.
Pro Tip: Hire a lawyer who specializes in real estate. A good legal professional will make certain that the property you are buying is exactly what it claims to be. Going with a professional will save you serious time and trouble in the future.
3. Moving forward with your decision to buy in Mallorca
Make an offer
Once you are sure that you’ve found your dream property, inform the seller of your decision.
Your offer will be the starting point of the negotiation and, with that in mind, it’s important that you clearly define: the price, the date of signing, and any additional factors that are crucial to your offer.
For example, if your concern is legality, make it exceedingly clear that the offer is conditional upon good, legal standing of the property. Other conditions to consider would be the property being free of remaining charges and guaranteeing that the necessary documentation is provided in proving this.
Draft an “Reserve / Option Contract”
An Option Contract allows the buyer and seller to enter into a contract, but it is strictly contingent upon certain terms. The Option Contract is not mandatory, so if you decide it’s not necessary in your purchasing process, you may continue to the next step. Despite it being a voluntary step, in most cases the Option Contract is implemented and a short time period, normally two months, is left between the contract signing and the signing of the purchase deed. Even though it’s not the definitive deed, it’s still considered a very important step in the home buying process as it will help to determine the final agreements, pricing, and additional documents.
During the time between the Reserve contract / Option Contract being finalized and the signing of the deed, the buyer can prepare funds if they are not readily available or take out a mortgage.
All the while, the seller will be able to prepare the required documents, resolve any remaining charges, and vacate the property.
Although this reserve contract is optional, once signed, the clauses of said contract are binding for both parties. Therefore, it is of the utmost importance that all conditions of the future purchase are negotiated prior and included in the contract.
When signing, the seller pays something called an Option Premium / reserve. This is typically 10% of the purchase price and helps to safeguard your property purchase. As the contract is binding, there’s a penalty for those who fail to comply. If the seller doesn’t comply he must return double the original amount of Option Premium /reserve. However, if the defaulting party is the buyer, the Option Premium remains in the hands of the seller. Within this, the Option Contract levels the risk for both parties.
Pro Tip: Leave a clause that allows you to terminate the Option Contract between the period of the Option signing and the signing of the Purchase Deed, if a property violation is discovered within that time frame.
Sign the Purchase Deed
The Purchase Deed has to be signed in front of a public notary. The notary will draft the deed in Spanish and will verbally translate the document into English.
4. The process of buying a property in Mallorca will keep on after signing the deed.
From the moment you sign the deed you will have 30 days to pay taxes.
File the property in the Land Registry
This step is not obligatory, but highly recommended. The Land Registry protects you and your property from third parties. It is a public registry, so no one can buy the registered property in your name without your formal consent.
Register yourself as the owner in the Cadaster, Homeowners Association, and change supplies (water, electricity, etc)
Once you sign the Purchase Deed, you will be the legal owner, but the status of ownership must be properly registered through the necessary channels.
Taxation after purchasing property in Mallorca
After purchasing a property in Mallorca, you will find that there are multiple taxes that must be paid, such as:
- Transfer Tax: This tax is for the transfer of property. It is only paid once.
- Periodic Taxes: Other taxes outside of the transaction.
As a new owner you are also expected to pay a Land Tax, Garbage Tax, and a Non-Resident Tax (specifically tax code 210) In cases of owning Spanish assets over 700,000 euros, a Wealth Tax will also be issued.