It often comes as a nasty shock to foreign buyers when they find out that most Spanish property sales involve payment of various fees and taxes that normally amount to around 10% of the purchase price. So when you start house hunting and set your price limit it's important to bear these considerable "extras" in mind.
The estate agent's fee is normally built into the asking price in Spain and it can be as high as 10% or more. If you have the time and energy it's worth trying to find a property being sold privately in order to save yourself several thousand pounds worth of commission. Many vendors advertise in newspapers, magazines and even on notice boards in local pubs, clubs and supermarkets. You'll also see "se vende" (for sale) signs on the walls and gates of properties for sale.
Besides the agent's fee your biggest expense will probably be VAT or transfer tax on the property you're buying. If you go for a new property you'll be charged 7% VAT (called IVA in Spanish) because the sale is seen as a business transaction rather than as a private deal between two individuals. If you buy a resale property you'll pay a property transfer tax of 6% of the declared sale price. We use the word "declared" here because it has been a common practice in the past for both vendors and buyers to understate the property's sale price in order to pay less tax. The buyer gains by paying less in transfer tax and the seller gains because he or she will pay less "plus valia" - the municipal tax levied on the increased value of the land since it was last sold. The lower price is declared at the notary's office when the deeds change hands and the buyer pays the vendor the balance in black money. Be careful with this one though because people have been taking too many liberties and the Spanish authorities are starting to crack down in cases where the declared price is obviously wildly off the mark.
Buying a new property also incurs stamp duty of 0.5%. If you're planning to make any additions to the property in the foreseeable future (putting in a pool or building a garage for example) it's a good idea to get them included in the sale documents because otherwise you'll have to pay 16% tax on any new construction project. Buying a plot of land for development also incurs 16% tax plus 0.5% stamp duty.
Expect to pay your lawyer approximately 1% of the sale price although this can vary depending on whether any complications arise. Agree the fee in advance and be clear about what legal services you'll be getting for your money (local council searches, checks for debts on the property, property registration etc are all standard services which should be included in your lawyer's fee).
All property sales have to go before a Spanish notary who will charge another 1% (more or less) of the sale price. This is payable at the point of signing the purchase agreement. There's also a property registration fee to pay - this is usually about 40-50% of the notary's fee.