What Are the Buyer’s Costs When Purchasing a Property in Cullera?

Everything You Need to Know Before Buying a Home

Buying a home is an important decision and involves several additional costs beyond the purchase price.

Many buyers focus only on the property’s price, without considering the taxes, fees, and other costs associated with finalizing the purchase. This lack of awareness can lead to setbacks and disappointments, especially when working with a tight budget or requiring financing. The actual budget available for purchasing a property may be lower than initially expected due to these additional costs.

Below, we detail all the expenses that a buyer should consider to avoid unexpected surprises during the property acquisition process.

1. Taxes on the Purchase

The largest expense a buyer typically faces is taxes, which vary depending on whether the property is new or second-hand. The taxes are as follows:

• Property Transfer Tax (ITP): Applied when purchasing second-hand properties. The tax rate varies by region. In the Valencian Community, the general ITP rate is 10% of the purchase price. However, there may be reductions in certain cases (large families, people with disabilities, young buyers, etc.), which can lower this percentage.
  
  
• VAT and Stamp Duty (AJD): If the property is new, VAT at 10% is charged instead of ITP, along with AJD, which ranges from 0.5% to 1.5% depending on the region.

2. Notary Fees

The purchase of a property must be formalized before a notary through a public deed. Although the buyer usually chooses the notary, notary fees are regulated by law and depend largely on the property's price.

• Estimated notary fees: Between €600 and €1,500, depending on the property value and the complexity of the deed.

3. Property Registration

Although it is not strictly mandatory by law to register the purchase in the Property Registry, it is highly recommended. Registering the property protects ownership rights and prevents future legal issues. In practice, nearly all property sales are processed through the tax office for tax payment and then registered in the Property Registry.

• Estimated registration cost: Between €300 and €1,000, depending on the property's price.

4. Real Estate Agency Fees

If the purchase is handled through a real estate agency, there may be additional management fees. These fees cover various services, from property search and negotiation to post-sale procedures such as tax processing and property registration.

Additionally, if the purchase is financed, banks usually work with agencies that assist with these procedures.

• Estimated real estate agency fees: Varies. In the Levante region and specifically in Cullera, they typically range from 2% to 5% of the purchase price.

5. Mortgage Costs (If Financing Is Required)

If the buyer needs a mortgage, additional costs must be considered, including:

• Property appraisal: Required for the bank to determine the real value of the property. Costs between €250 and €600. Some banks offer free appraisals if the mortgage is taken with them.
• Mortgage setup costs: Under the new mortgage regulations, the bank covers the main expenses (notary, registration, and agency fees). However, the buyer must pay for the appraisal and, in some cases, an opening fee, which can be between 0% and 1% of the loan amount.
• Agency fees for processing taxes, registration, and other paperwork: Estimated cost between €300 and €600.

6. Home and Life Insurance (If Required by the Mortgage)

If a mortgage is taken out, the financial institution may require home insurance and, in some cases, life insurance. These are the typical insurance requirements:

• Home insurance: Costs between €200 and €500 annually, depending on coverage.
• Life insurance (optional but sometimes mandatory for financing): The cost varies depending on the buyer's age and the insured amount.

7. Other Potential Additional Costs

• Utilities and ownership transfers: Additional minor costs related to setting up or transferring ownership of water, electricity, gas, and homeowner association fees. If a real estate agency handles the transaction, these costs may be included in their fees.

The 13% Rule

To simplify calculations for our clients, we often advise them to budget around 13% of the purchase price for additional costs. Most of this amount goes toward taxes, as property transfer taxes alone account for 10% of the property price.

The Importance of Considering These Costs

Taking these costs into account will help buyers prepare for the best opportunities within their budget. It would be unfortunate to find the perfect property only to realize that there isn’t enough budget to cover both the purchase and its associated expenses.

If financing is needed, it is also important to remember that banks usually do not finance 100% of the purchase price. A common scenario is that banks finance up to 80% of the purchase price if conditions allow. In this case, the buyer must cover the remaining 20% plus all the additional purchase costs listed above.

Summary: What Are the Main Costs When Buying a Property?

In summary, the main costs a buyer should consider are:

1. Taxes:
   • ITP (10% in the Valencian Community) for second-hand properties.
   • VAT (10%) + AJD (0.5%-1.5%) for new properties.
2. Notary Fees: Between €600 and €1,500.
3. Property Registration: Between €300 and €1,000.
4. Real Estate Agency Fees: Between 2% and 5% of the purchase price.
5. Mortgage Costs (if applicable): Appraisal (€250 - €600) and possible opening fee (0% - 1%).
6. Insurance (if applicable): Home insurance (€200 - €500 annually) and life insurance (variable).
7. Other Costs: Minor expenses such as utility transfers and additional services.

Conclusion

Buying a property is not just about the purchase price; it also involves a series of additional expenses that can amount to 10% to 15% of the property's value.

It is advisable to carefully plan for these costs before making a purchase and seek professional advice to avoid surprises while finding the perfect property within your budget.

If you have any questions or need further information, feel free to reach out to us. We handle property transactions daily and have years of experience with various situations, so we can offer guidance tailored to your specific case.