What expenses are paid in the sale of a home and how the seller is paid

Buying a home is a tremendously important decision due to the price of the transaction. To give you an idea: a square meter of second-hand homes in Spain costs, on average, 2,025 euros, so a flat of about 80 square meters has an average value of 162,000 euros. In addition, this amount will vary depending on the province or city in which the home is located. In Madrid and Barcelona, for example, the square meter is at 3,380 euros and 3,009 euros respectively.

But that is not all. To this generous amount must be added the expenses involved in the sale and purchase operation. Generally, it is usually calculated that additional expenses represent between 10% and 12% of the price of the home. Of course, this percentage may vary depending on whether the purchased home is second-hand or newly built. To clear up your doubts, below we will tell you what are the 3 basic expenses that any buyer (with or without a mortgage) must pay and how payments are managed in the public deed:

4 Sales expenses to be paid when the deed is signed

1- Notary fees

This expense corresponds to the notary's fees for the completion of the deed of sale, an essential document in any home sale operation that serves to register it in the Property Registry. This expense is calculated based on a fee set by the State and the price of the property, so it is usually between 500 and 1,000 euros.

2- The Property Registry

It is what it costs to register the acquired home in the registration of the property in the Property Registry. This expense, like the previous one, is calculated based on a price set by the Government and will also vary according to the price for which you bought the home. This cost ranges between 100 and 500 euros.

3- The ITP or VAT

The transfer of a home implies the payment of taxes, which will vary depending on whether the home is second-hand or newly built. In both cases, it is the home buyer who is responsible for paying the tax.

    - ITP if the house is second-hand

The Property Transfer Tax, colloquially known as the ITP, is the tax applied to the sale of second-hand homes. This regional tax is different in each autonomous community, so it will vary depending on where the property is located. Currently, the ITP in Spain is between 6% and 10%.

    - VAT if it is a new construction

The Value Added Tax is the one that is paid when making a sale of a new home. In this case, the percentage paid is always 10%, yes, if it is an Officially Protected Housing, the tax is reduced to 4%.

Generally, to guarantee that the payment is produced correctly, these expenses are established as notary expenses, with the notary being in charge of managing the payment to the Administration.

4- More expenses with mortgage

Keep in mind that if you are going to apply for a mortgage, the list of expenses is extended. In addition to the above, you must take into account other additional expenses:

• The appraisal costs. This service can have a cost that ranges between 200 and 600 euros depending on the company that performs the appraisal. It is a procedure that you will only need to carry out if you request a mortgage loan, although you can also pay it if you are interested in knowing voluntarily if you are buying at market price
• Notary copies. If you request copies of the deed you will have to pay a cost of approximately 20 euros

In addition to these two expenses, other costs derived from commissions or loan ties are added:

• Mortgage origination fee
• The mortgage study commission
• Life and home insurance
• The costs of linked products (pension plans, cards, bank account...)

How are the purchase and sale payments managed at the notary?

To give you an idea of how the purchase and sale payments work before a notary, we summarize it in these brief points:

• Most commonly, the seller's bank issues registered bank checks
• Checks are issued to the beneficiaries (the seller, the seller's bank if the seller has a current mortgage, the real estate company...) in a public deed before a notary
• The bank issuing the checks will immobilize the amount of the account, making sure that its collection does not generate an overdraft

Methods of payment in a sale

The most common forms of payment in a home sale are:

• By bank check. The most common and recommended.
• By Bank transfer.
• Cash. The least common, since there is a limitation on the amount.

Here is an example of the payment process by personal check, (the most common and recommended):

The checks are delivered, which are issued by the banking entities and guarantee that the beneficiaries collect the corresponding amounts: the seller, the seller's bank if the mortgage or real estate has not finished paying.

In principle, the bank issuing the check will have proceeded to immobilize the amount in the buyer's account so that the collection does not generate an overdraft, making sure that there are sufficient funds.

How to prepare checks for a sale?

If the seller has a mortgage, a check must be prepared for the amount of the balance of the mortgage loan to cancel the mortgage, known as administrative cancellation

If the seller has debts (electricity, water, IBI...), the buyer must ensure that they are paid

If there is a mortgage, it must be known if a provision of funds must be retained to cancel it in the registry

Regardless of the payment method chosen to pay the expenses of the sale, it is necessary to provide proof of all payments made and report the origin of the money.