In any real estate transaction, the buyer must know the property conditions, its market value, any legal parts of the transaction, and the ins and outs of the taxation system. But, not all buyers have enough experience and knowledge.
To avoid unpleasant surprises and unexpected expenses, many people do an inspection before buying a home in Spain.
In this article, we’ll tell you how to expertise a property before buying a home, what its advantages are, how to choose an agency to do an audit, and what these inspection costs can be.
Content:
- What’s is the purpose of a real estate assessment?
- How to check the legal purity of real estate in Spain before a transaction
- Legal audits
- Technical and urban planning audits
- Technical expertise
- Tax audits
- Real estate assessment before buying a property in Spain
- Is it possible to order an audit online?
- Who orders an audit?
- How to choose an agency for an audit?
- Stages of Due Diligence
- We’ll help you choose a property in Spain
What’s is the purpose of a real estate assessment?
Ask these questions when you buy a property in Spain:
- Who’s the real estate owner? Is the person trying to sell the house the owner of the property?
- Does the property have tenants? What’s the agreement with the landlord? Will they leave the housing after the title deed is transferred?
- Are there debts and property taxes?
- What taxes do you have to pay to buy a property?
- What’s the total cost of buying a home and what are the maintenance costs afterward?
- How much is the property tax?
- What’s the cost of insurance for a house in Spain?
Many unclear issues can easily be solved by a real estate audit. Its main advantages are:
- You’ll find out all the information about the property before you sign the sale act.
- Guarantees that the house you buy is a profitable financial investment.
- You can renegotiate the sales contract or cancel the agreement if the transaction seems too risky.
How to check the legal purity of real estate in Spain before a transaction
To fully check all information before buying or selling a property, a homebuyer or real estate owner in Spain applies to independent tax and legal expertise companies for a Due Diligence assessment of investment properties.
The term "Due Diligence" is used in legal practice. It’s an audit or an expert assessment. Auditing a home before buying it means knowing its legal status and making an economic assessment to negotiate the final price with the seller. There are also many cases when the seller orders an audit to know the housing value and any unexpected circumstances or technical problems.
Statistics say about 35% of transactions in Spain go through Due Diligence.
The audit processes give a preventive legal measure and are carried out to avoid administrative sanctions, disputes between the parties, losing the deposit amount, etc.
These checks may be more complex depending on the buyer (individual or company) and the type of property (residential, commercial, and so on).
Due Diligence is carried out with the consent of the selling party. So, if the transaction between the owner and potential buyers fails, a confidentiality agreement or NDA (Non-Disclosure Agreement) is signed to prevent the illegal transfer of real estate information.
There’s no model for all types of legal real estate transactions and each specialist uses the one that he or she thinks is the most suitable.
The main types of Due Diligence expertise are legal audits, technical and urban planning audits, and tax audits.
Legal audits
Checking the legal purity of a transaction when buying real estate means:
- Studying the title deed and its compliance with the real estate cadastre (area, boundaries, etc.).
- Debts and property taxes.
- The lease and its term. There may be private lease agreements for housing and/or commercial real estate (or industrial) that are not registered in the Land Registry.
- Charters of the housing company and updating data on any debts.
Technical and urban planning audits
Urban planning audits mean collecting any relevant documentation, including an urban planning map, a building passport, building technical inspection protocols (ITE), photographs, plans, permission to install equipment, etc.
The urban soil is also checked; municipal and regional real estate laws (if the house is in a protected area, work will be difficult to perform); energy-efficient real estate rating; regulatory requirements for noise, emissions, parking equipment, etc., which will depend on what the property will be used for.
Technical expertise
Technical assessment is the stage before a buyer decides to buy the property or not. The assessment is done to check that the qualities and conditions meet the legal requirements.
If the property is secondary, the focus is on the rules of technical inspection. This is an analysis of the general and specific conditions of the property. This is the administrative and legal status, area and actual plans, suitability for use, compliance with regulatory requirements, maintenance status, and deterioration of materials, elements and systems.
Tax audits
The tax audit of real estate transactions affects the transaction.
Real estate assessment before buying a property in Spain
Where to apply for an audit?
You can contact an agency or hire a lawyer to do an audit in Spain. Also, a realtor will help here to determine the homeowners and if there’s any debt or encumbrances. This information is in an extract from the property register (Nota Simple).
The cost of an audit
The cost ranges from 300 to 2,000 euro depending on the size of the property and the type of report.
Types of reports
You can choose these reports depending on why you need the assessment:
- Housing status report with photos.
- Real estate price and quality report.
- Mortgage research.
- Technical inspection of new buildings.
- Construction inspection (for old buildings).
Is it possible to order an audit online?
A real estate audit can be ordered using digital tools and/or video conferencing. In the past, a real estate inspector gave a written report with photographs of property defects. Now they can provide an informative video report.
Who orders an audit?
A potential buyer orders the analysis to check investment risks but there are other situations where it can be ordered. The seller uses the report to benefit the potential sale and speed up negotiations.
Property owners who don’t plan to sell or buy but want to know about business and investments in the short, medium and long terms, also order audits. The latter case is for people who chair homeowner communities, especially large ones and want to properly plan current and future expenses.
How to choose an agency for an audit?
Signs of a reliable audit company:
- Proven work experience and good recommendations.
- Guarantees and responsibility.
- Professional level and team.
- A wide range of company services.
Stages of Due Diligence
1. Checking documentation
The first step is to collect and analyze the building documentation. The most important are:
- Construction plan.
- As-Built documentation, i.e. documents of the actual state of properties.
- Checking changes in the structure of the building.
- Building plan.
- Insurance company repair reports.
- Building technical inspection reports.
- Building maintenance company reports.
- Maintenance costs.
- Urban planning documentation.
2. Preliminary real estate inspection
This inspection gets all the necessary information to inspect buildings, inventory equipment, and real estate and compare everything.
3. Action plan
When the preliminary property inspection is done, a verification action plan is drawn up.
4. Preliminary report
This is based on data from the analysis of verified documentation and field data.
5. Housing inspections
According to the action plan, property inspections will be carried out for:
- construction structure;
- facade;
- roof;
- partitions;
- flooring;
- tiles, wall covering and painting;
- carpentry;
- suspended ceilings;
- sealing and insulation;
- electricity;
- heating;
- plumbing;
- sewerage;
- ventilation and air conditioning;
- fire protection installation;
- access control installation;
- data transmission and telephone communication;
- elevators;
- violations.
6. Additional expenses
After inspecting the building and checking the conditions of urban planning, corrective, restoration or repair work may be needed.
7. Final report
This report contains any documents that can be used as evidence for the information.
It is structured according to the following main points:
- Description: the general condition of the property per the data and images from various inspections.
- Historical sketch of the building: the most important stages of the building operation, interventions, and changes.
- Building assessment based on 2 separate points:
- constructive technical real estate;
- urban planning law.
- Indicative planning of events.
- Activity budget.
- Conclusions.
This report is a tool that will allow the client to buy or reject a property.
8. Conclusions
Creating a common Due Diligence protocol increases the efficiency of decision-making.
Sharing the protocol means you compare estimates from different sources and get solid information from this to improve any decisions made.
So, to avoid any problems before finally signing a sales contract, it’s important to check the property in Spain before buying it.
We’ll help you choose a property in Spain
Real estate in Spain can give you many income opportunities.
Real estate agencies in Spain offer a wealth of home options for every taste and budget. Spain-Real.Estate is ready to help you find the right investment option.