Buying a property in Spain

The importance of counting on a professional economist

At DA Advisers we offer a complete and comprehensive service in the purchase and sale of a property so that the purchase process also has objective and empirical valuation elements. 
Let us not forget that all investors aim to diversify their portfolio, both in terms of the type of assets, whether they are more or less liquid or volatile, and in terms of their asset allocation. 
For example, let us take the case of a Swiss investor who wants to acquire a property through his foreign company. 
The casuistry requires not only legal coverage, to guarantee the success of the purchase, but also tax and financial advice, as we would do if we wanted to invest in equity assets of companies we have not even heard of, in order to carry out the operation with a 360º vision, i.e. a legal+tax+financial vision. 
 
From a legal point of view, a buyer may encounter numerous problems when purchasing a property due to the existence of encumbrances registered in the Land Registry, which limit or infringe the real estate asset, and among others, we can highlight the following: 
-The existence of mortgages that encumber the ownership of the property. 
-Third party debts (unpaid local taxes, commercial credits, debts guaranteed by the property, etc.). 
-Rights of use (usufruct, leasing contracts...) 
Right of first refusal and pre-emptive rights.... 
 
Let us consider that, in general, the following are involved in a real estate transaction: 
-The seller, owner or heirs of the right in rem (the property). 
-The Real Estate Agent or intermediary 
-The buyer (natural or legal person) 
There are often conflicts of interest between these parties and it is important that they all act in good faith, transparently and in accordance with the principles of legality and the legal requirements of the country where the real estate assets are acquired. 
It is of vital importance to be aware of these and to have a legal representative duly empowered by a power of attorney, and above all to have good and reputable professionals who can communicate all the necessary information in the investor's language of origin. 
 
Well, buyers increasingly require this type of professional services, because they provide them with additional security and accompany them all the way to the end of the process and even after the sale. 
The investor-buyer contracts security, legal support and advice, and this is what this type of professional service provides. 
 
We know that the internet provides a lot of information to interested parties free of charge, but unfortunately it is not always complete, up-to-date or verified information. 
An example of this is the obligation to obtain and present at the time of purchase the buyer's identity card. 
Most of the information circulating on the internet stresses the obligation to have a N.I.E. (foreigner's identification number) before the moment of purchase, given that, otherwise, the notary would not give his consent in making the agreement agreed in the deed public. However, this information is incorrect, as the purchase can be signed, although it is important to underline that you have one month to obtain these tax identification numbers in order to prepare and present the taxes that are due with the purchase and other essential things such as opening an account or taking out a home insurance policy. 
 
It is the professional's job to refute and check all the contractual terms and conditions of the purchase (earnest money contract, existing charges on the property, preparation of the signature at the notary's office, obtaining nies, checking the seller's tax residence, interceding between the agent and the buyer, representing the buyer before the tax office and public bodies and any other accessory needs inherent to the purchase, such as opening a bank account or reviewing the financing conditions, if applicable). 
From the point of view of taxation, there is inevitably the question of taxation and taxation, because on numerous occasions we have seen investors acquire properties and after a few years, they unwound their positions and the tax toll was enormous, and they have even made losses because they had not acted under the criteria of a good tax advisor. 
Even more so if we use a corporate investment vehicle, which requires more in-depth advice in order to optimise the investment. 
And finally, from a financial point of view, since any investment project requires prior knowledge of the expected income and expense flows over the life of the investment, the conditions of the real estate market and the economy as a whole (let us not forget in 2007 when the interest rates on mortgage loans, as is happening now, triggered a rise in loan repayments that owners could not afford; or also the effect of high inflation that negatively affects the income generated, with the profitability obtained being negative in some cases. 
The purchase process should not only be the process of choosing a property based on our tastes and the desired location, but the result of carrying out a methodical, objective and professional valuation study. 
 
At DA Advisers we offer advice on the purchase and sale of real estate, valuing the investment and the expected return. In addition, we can carry out estate planning prior to the transaction. 
 
Gabriel Díaz García 
Chartered Economist of Alicante 3611 
Actuary & European Financial Advisor 
Wealth Manager Mapfre Alicante