The Ultimate Guide to Selling Your Property in Madrid

Navigating the Spanish real estate market can be challenging, but with the right preparation and expert advice, selling your property in Madrid can be a smooth process. This comprehensive guide breaks down every essential step—from gathering property information to finalizing the escritura de compraventa—to ensure you meet all legal requirements and optimize your sale.

Step 1: Preparing to Sell

Gather Essential Property Information

Before listing your property, collect and organize all necessary details:

• Property Details:
  • Address, size, and layout (number of bedrooms, bathrooms, etc.).
• Community Fee Information:
  • Monthly costs, what they cover (e.g., cleaning, common area electricity), and any special assessments.
• IBI Receipts:
  • Copies of recent Impuesto sobre Bienes Inmuebles bills to display annual tax obligations.
• Referencia Catastral:
  • Found on your IBI bill; include details for the apartment and any additional spaces like storage or parking.
• Energy Certificate:
  • A mandatory document when listing a property. If you don’t have one, engage a certified technician or architect to issue it.

Engage a Lawyer (Abogado)

Hiring an experienced lawyer is crucial. Here’s what to look for:

• Service Agreement:
  • Sign a written contract that clearly outlines the lawyer’s fees, payable upon completion of the sale.
• Scope of Work:
  • The lawyer will verify debts, review property registration, draft or review contracts, handle legal formalities, and represent you at the notary if necessary.

Determine Your Sale Price

Setting the right price is key:

• Market Analysis:
  • Conduct a detailed market study to estimate a realistic asking price.
• Valor de Referencia:
  • Retrieve the official taxable value via the Cadastre system to avoid legal or tax issues.
• Capital Gains Estimates:
  • Consult with an accountant or lawyer to determine potential capital gains tax, keeping receipts for any renovations that may be deductible.

Step 2: Listing and Finding a Buyer

Prepare Your Marketing Materials

High-quality marketing materials can make a significant difference:

• Professional Photos:
  • Showcase key features, appliances, and any included furniture.
• Energy Certificate Rating:
  • This must be featured in all advertisements and listings.
• Property Features & Inventory:
  • Clearly list what is included (appliances, furniture) and what isn’t.

Agent Commission and Agreements

If you decide to work with a real estate agent, ensure clarity on the following:

• Commission Percentage:
  • Typically around 5% of the sale price, plus VAT (IVA) at 21%.
• Written Agreement:
  • Have a contract that outlines the total commission and VAT.

Schedule Viewings

• Keep the Property Presentable:
  • Regularly maintain the home to attract potential buyers.
• Documentation and Compliance:
  • Provide buyers with property information and comply with anti-money laundering (AML) regulations by verifying their identity.

Step 3: The Contrato de Arras (Earnest Money Contract)

Agree on the Arras Amount

• Standard Deposit:
  • Commonly set at €10,000, though it may vary depending on property value.
• Non-Refundable Clause:
  • Protects the seller by allowing them to retain the deposit if the buyer fails to finalize the sale.

Drafting the Contract

Work with your lawyer to include these key elements:

• Identification Details:
  • Full names and identification numbers (DNI/NIE/passport) of both parties.
• Property Description:
  • Include the address, Registro de la Propiedad information, and Nota Simple reference.
• Purchase Price & Payment Terms:
  • State the agreed purchase price and detail the deposit payment process (often via an escrow or lawyer’s account).
• Timeline:
  • Typically set a final sale date within 4–6 weeks.
• Inventory List:
  • Attach a detailed list of included items with photos.
• Breach Consequences:
  • Specify that if the buyer withdraws, the deposit is forfeited; if the seller backs out, they must return double the deposit.

Supporting Documentation

• Seller:
  • Updated Nota Simple (not older than 3 months), a copy of ID, and the Energy Certificate.
• Buyer:
  • ID, proof of funds or mortgage approval, and, if applicable, apostilled company incorporation documents.

Finalizing the Arras Contract

• Signing Options:
  • The contract can be signed in person, at a real estate agency, lawyer’s office, or before a notary.
• Proof of Deposit:
  • Ensure the buyer provides a transfer receipt for the deposit.

Step 4: Preparing for the Final Sale (Escritura de Compraventa)

Update and Verify Legal Documents

• Updated Nota Simple:
  • Must be no older than 3 months at the time of signing.
• Check for Liens/Debts:
  • Confirm that any mortgage is cleared or in the process of cancellation.
• Energy Certificate:
  • Verify its validity and update if necessary.
• Valor de Referencia:
  • Ensure your declared sale price meets or exceeds this official reference.

Set the Notary Appointment

• Notary Selection:
  • Although the buyer usually chooses the notary, you may propose one.
• Pre-Signing Documentation:
  • Submit all necessary documents (seller’s ID, updated Nota Simple, Referencia Catastral, Energy Certificate; buyer’s ID, mortgage details, etc.) to the notary in advance.

Arrange Financial Aspects

• Payment Method:
  • Decide on bank transfer or banker’s draft for the day of signing.
• Lawyer and Notary Fees:
  • Confirm fee arrangements; typically, notary fees (around €1,000) are paid by the buyer.
• Other Costs:
  • Plusvalía Municipal (municipal tax) is usually paid by the seller, while capital gains tax responsibilities should be confirmed with your lawyer.

Step 5: Signing the Escritura de Compraventa at the Notary

Final Preparations

Before the final signing, double-check all documents:

• Draft Deed (Escritura):
  • Review with your lawyer.
• Identification:
  • Ensure all parties have valid DNI/NIE/passport.
• Contracts and Payment Proof:
  • Have the signed Contrato de Arras, inventory annex, and confirmation of funds ready.

The Signing Process

• In-Person or Via Power of Attorney:
  • Both parties (or their legal representatives) must be present.
• Notary Verification:
  • The notary confirms identities, reviews documents, and ensures legal compliance.
• Exchange of Keys and Funds:
  • After signing, the buyer transfers the payment, and the seller hands over the keys and other relevant items.

Post-Signature Responsibilities

• Notary’s Role:
  • The notary sends the signed deed to the Land Registry to update ownership and notifies local authorities (such as “ZUMA”) to update IBI records.

Step 6: After the Sale

Tax Payments and Fees

• Capital Gains Tax:
  • Spanish residents are subject to a progressive rate, while non-residents typically face a retention (commonly around 3%).
• Plusvalía Municipal:
  • This municipal tax must be paid at the local town hall (Ayuntamiento), usually within 30 days.
• IBI and Community Fees:
  • Clarify who is responsible for IBI if the sale occurs mid-year, and notify the community administrator about the change in ownership.

Notify Service Providers and Retain Documents

• Utility Contracts:
  • Inform service providers (water, electricity, gas) of the change so the buyer can set up new contracts.
• Document Retention:
  • Keep all signed contracts, receipts, and notarial deeds for future reference and tax filing.

Step 7: Special Considerations

Addressing Unique Scenarios

• Student Rental Contracts:
  • For properties rented to students, note that new short-term contracts (up to 11 months) may apply, based on law changes effective October 2024.
• Foreign or Company Buyers:
  • Ensure that company documents are apostilled or legalized and that compliance with money-laundering regulations is met.
• Renovations and Structural Changes:
  • Verify that any structural modifications are registered in the Land Registry and reflected in the updated Nota Simple, retaining permits or architect certifications if required.

Final Overview

By following these detailed steps, you ensure compliance with Spanish legal requirements and streamline the selling process in Madrid. Maintain open communication with your lawyer, buyer, and notary, and organize all documents in a digital folder for easy access. Remember, while this guide provides an in-depth overview, it is always wise to consult professionals for tailored legal advice.

Ready to sell your property in Madrid? With careful planning and expert assistance, you can achieve a smooth and successful sale.