We had found a flat that met our needs and more. We established a contract to purchase and headed home to organize ourselves for this delightfully unexpected opportunity. Transactions in Spain, however, are not like transactions in the US. We had a lot to learn about power of attorney, the importance of relationships, reserves and deposits, naked property and usufruct, the need for cashiers checks, and the clarity of closing.
Power of Attorney
Spanish property purchasing is very different from what we know in the United States. We signed a full power of attorney to our lawyer. This is simply not done in the US. In fact, it would be considered ridiculously stupid and dangerous. In Spain, our attorney holds over 300 full powers of attorney. He says it makes him nervous at times, and he will not do anything without clear, written instructions from his many clients. He is not willing to risk his license or standing in the legal community.
Relationships are of the Essence
More relevant to the immediate moment is the question of putting in an offer. We told our realtor David that we wanted to buy the unit. He said, “Great!” And then we didn’t hear anything for more than 24 hours. It would have been 48, but we couldn’t stand it any longer and pestered him. You see, in the US, an offer needs to be made and pursued with vigor, or one could lose the opportunity. As Patrick always says to his clients in the US, “Time is of the essence.” Not in Spain. In Spain it is more about relationships. David said another buyer was “sniffing around,” but the listing agent knew Valencia Property from many transactions and felt confident they and we would close. This was a priority for the sellers. Relationships are of the essence.
Reserves and Deposits
We put down a reserve. This was also new for us. We put down a modest amount (€2,000) to take it off the market while our lawyer investigated the situation to make sure it was a clean sale (for more on this, read this article by Graham Hunt). After a couple weeks, Javier gave the all-clear and we put a full deposit on the property. This is typically 10% of the purchase price. This is significant as the Spanish try to prevent what the British suffer as gazumping by making the seller liable for 200% of the deposit if they break the contract for another offer.
The sellers were the people who grew up in the flat. Their parents purchased it in 1977 and raised their children there and lived there until their mother was in her nineties and moved elsewhere for more care. This is a typical situation where a property becomes available in Spain. Unlike in the US, it is less often that one sells to buy a larger or different place. The taxes are significant, and the culture is less mobile than what we have in the US. These sellers were interested in being done with the apartment, so everyone was happy with the transaction, and they were happy to wait for us to return to the US and re-organize our portfolio for this unexpected opportunity.
Naked Property and Usufruct
So, we set the date to close the transaction in early February. Everything was moving along when, several days before closing, Señora Giron, at the remarkable age of 93, returned to her creator. This caused remarkable confusion and revealed some of the less developed sides of Spanish real estate. Initially, it was thought by some that she was a title holder. This is typical. Spanish inheritance law is vigorous in its Napoleonic character. When Señor Pérez died in the early nineties, he would have been required to leave his half of the property interest divided into thirds with one-third to Señora Giron, one-third divided between her and the four children, and one-third to whomever he designated. This means that the typical scenario would mean that Señora Giron had a property interest. We would have to process her estate before completing the purchase. Some suggested pretending we hadn’t heard and moving forward immediately, but as I’ve learned to say, “Yo soy un inmigrante. No puedo jugar con la ley.” I am an immigrant. I cannot play with the law. We would wait if need be.
As it turned out when I consulted our attorney Javier, Señora Giron was more clever than the average. In 1991, she had arranged, after the death of her husband, to transfer nuda propiedad(naked property) to her four children and retain only usufructo (or right of use). The right of usufructo dies with the holder. By producing an official certificate of death, we were able to proceed with the transaction on schedule.
I arrived at our bank. It was necessary to provide each seller with a bank cheque in the amount of their portion. I had a near miss heart failure when I realized that my banker was waiving the fee for each check since I was purchasing home insurance via the bank. This saved us more than €2,000! Remember the most important essence of Spanish real estate transactions? It is the same with banking. Relationships are of the essence. Patrick and I have a lovely relationship with our banker. We ask after her children and check in with her from time to time. She made the effort to bend the official policies and waive the fees. This is Spain.
Why do I need physical checks? Because Spain has no concept of escrow in real estate.(Read: The Purchase Process Requires You To Dance with the Devil) In the US, your bank wires funds to a title and escrow firm who hold the funds for a day or two while papers are signed. Then they transfer the funds to the seller. This means the title and escrow firm can attest to the transfer of funds. In Spain, the Notary, for all their importance, do not typically provide this function. One brings paper bank drafts, and these are photocopied and included in the formal title transfer document to demonstrate the transfer of funds. Even the Spanish are confused by this. One of the sellers was most put out when we handed paper checks across. He wanted an IBAN transfer, or what we call a wire in the US, but that is not possible in a Spanish closing.
Clarity of Closing
The final unusual part for us was the actual closing. As with all significant legal or business events in Spain, we gathered at the office of the chosen Notary. This is not your US notary. This is more as if a magistrate, a notary, and a paralegal walked into a merger and came out as a Spanish Notary. After some waiting about for last minute paperwork, we gathered in a conference room and settled in our chairs. I was advised to make no indication that I did not understand everything being said. Respond with “Si” or the very Spanish “Vale” or the whole process will stop for an official translator in a week or so. An elderly gentleman came in, and with some bonhomie, he began to read the title transfer document. All fourteen pages in a beautiful Castilian accent. Then he handed it to the first of the four sellers. They each signed in turn. Then I signed. Then Javier signed for Patrick (who could not come across due to his business). Checks were distributed. Smiles were shared all around. Keys were handed across. We all left.
You now own property in a country different from your passport.
You now own your retirement property.
You now own a small piece of València.
Next… the renovación!
Well done, very informative, and better you my son than me!
Very informative! We purchased our rural property on A Coruña in March 2022 and were able to transfer the full payment to the seller via IBAN transfer on the day of the sale. We set things up ahead of time but didn’t do the actual transfer from our account at Wise until our lawyer indicated we were good to go (we were all sitting in the notary’s office). The transfer took just a few minutes.
Very interesting! I expect we will see more of that in the years to come.
I hope you are enjoying A Coruña! A good friend from college days lives there and we are looking forward to visiting soon!