SELLING EXPENSES
GUIDE TO EXPENSES WHEN SELLING YOUR HOME
Expenses before selling a property
Before starting with the sale of a property, there are a series of expenses that you must take into account, some are obligatory and others are not, but it is important that you know them all.
The certificate of occupancy
Although it is not essential that you have it from day one, we always recommend that you start the process of obtaining it as soon as possible. You may already have it. In that case you only have to check that it is not expired. Remember that the cédula de habitabilidad must be renewed every 15 years. If you do not have it, it may take several days to process it and you will not be able to sell your house without it.
The cost of the certificate of occupancy depends, among other things, on the surface area of the dwelling.
If you wish to obtain the certificate of habitability in Malaga, in AYRE Estates we work from 90 euros plus VAT and fees (15.27 euros).
The energy certificate
The function of the energy performance certificate (EEC) is to report on the efficiency and energy consumption levels of a property. So far, I'm sure I'm not telling you anything new.
What you may not know is that since 2013, it is mandatory to have it at the time you advertise your home for sale or rent.
Obtaining the energy efficiency certificate involves a series of procedures and may take a few weeks. That is why you should process it before starting the sale.
What is the cost?
It will depend on the surface of the house and the architect's fees. In AYRE Estates we also do energy certificates. Contact us to make yours.
The Simple Note
The Nota Simple informative is one of those expenses that are not obligatory, although totally advisable. It is a public document issued by the Land Registry, which accredits the ownership, the description and the charges of a property. It is advisable for the following reasons.
In the first place, because showing this document to the people interested in your property, you generate confidence. They will be able to confirm that you are really the owner of the property you are selling, and if there are any charges or encumbrances on it.
Secondly, because you will also be able to check what state your property is in according to the registry and, if you detect any problem, you will have time to solve it.
You can order a Nota Simple online for about 10 or 20 euros, and apply online at most Land Registries.
Real estate advertising: professional photographer, home staging and anticipated real estate commission.
This section is an optional expense, we could say that it is an "investment" to be able to sell your property before and better and it consists of preparing your property for sale. It is not mandatory, but taking care of the staging (Home Staging) and using professional photographs in your ads, are ways to sell at a better price and in less time.
The price of a home staging service can range from 500 to 2,000 euros, and a professional photographic report usually costs around 120 to 150 euros.
Finally, some real estate agencies offer the possibility of paying their fees in advance.
You are probably wondering what the advantage of doing it this way is. The answer is that this formula can result in savings of up to 60% in some cases. Of course. It is only advisable to do it if you trust the real estate agency.
3 bedroom apartment in Calle Larios
Expenses during the sale of your home
Let's see now what expenses and taxes may arise from the moment you start selling your property until the signing of the title deed.
Real Estate Tax (IBI)
The IBI, Impuesto sobre los Bienes Inmuebles, is the direct tax on the ownership of a real estate property once it is registered in the land registry. It is a municipal tax managed by the municipalities, and is paid annually.
Do you have to pay IBI when selling your apartment?
The regulations are clear in this respect. The owner of a property must pay the IBI for the current year. I will give you an example.
Suppose you put your apartment up for sale on November 25, 2019, but it takes 2 months before you find a buyer.
You sign the deed of sale on January 15, 2020. What IBI do you have to pay?
As you have been the owner of the property during 2019, but also in 2020, you are entitled to the payment of the two years.
In some cases, and only if both parties agree, a different formula can be agreed with the buyers, although this is not usual.
Remember that on the day of the signing of the Public Deed, you must present the last IBI receipt as proof of being up to date with the payment of this tax.
Administrative fees for the drafting of contracts
It is possible that you have decided to sell your apartment as a private individual. In this case, it is advisable that you have the help of a specialized agency or a law firm for the drafting of documents and contracts.
If, on the other hand, you hire a real estate agency, the contract drafting service is usually included and you will not have to pay anything additional.
The reservation document, the contract of sale or the penitential deposit contract are just some examples of documents that a professional should review before signing them.
This type of document involves cash deliveries and other important commitments. If you make mistakes in the wording or include incomplete clauses, you will be jeopardizing the sale of your house.
The price for the drafting of a document or contract will depend on each agency.
Tip:
Whenever possible, collaborate with an agent or lawyer in your area. When the time comes to sign any document with the buyer, you can do it in his office, favoring an atmosphere of trust and professionalism.
seller cost simulator
Cancellation of mortgage and agency procedures
One of the most common charges when selling a home is an unpaid mortgage.
You'll say, "But I finished paying my mortgage years ago, why is it still listed as a charge in the Land Registry?"
And here we come to the heart of the matter.
Years ago, when you took out the mortgage to buy your house, you had to register it in that registry and even though you have paid every last euro, the mortgage is still registered. So in order to eliminate the charge, you will have to cancel it also in the Land Registry.
How you do it will determine the final cost. You can do it on your own, hire the services of an agency or ask your bank to take care of the process. Doing it on your own is the most economical option. However, it will take time and patience.
The first step is to request a zero balance certificate from your bank. Although according to the Bank of Spain this procedure should be free, we have seen cases in which the bank has even requested up to 100 euros for doing so.
With this document, you (or the fund manager) and a representative of the bank must sign the cancellation of the loan before a notary.
It is possible that the bank wants to charge for this displacement. You should know that according to the Bank of Spain, this "commission" does not apply either.
Subsequently, it is your obligation to apply to the Treasury for the form 600 on the Documented Legal Acts (AJD). You do not have to worry. This procedure is exempt of AJD. But you need to present the model.
Finally, with all the documentation, it is time to go to the Registry and request the registration of the cancellation.
The cost generated by all these procedures, depending on whether you do them on your own or through a management company, can reach 600 euros.
Note:
With the new reform of the Mortgage Law of 2019, the fees for cancelling a mortgage before the term agreed with the bank have been modified as follows:
In the case of withdrawal fees, the bank may choose from the following options:
During the first five years of the life of the mortgage, the limit to be applied will be 0.15%.
During the first three years, the cap will be 0.25%.
In the case of interest risk commissions, the limits will be set at:
2% during the first 10 years.
1.5% as of the eleventh year.
Remember that although both expenses are legal, they must be stated in the contract with the bank and you should have been informed at the time of signing.
Community Certificate
At this point, I am sure you understand the need to prove that all payments related to your property are up to date. That is why this document is mandatory at the time of sale and the Notary will require it on the day of the Public Deed.
The expenses of a community are important. And I am not only referring to the monthly fee you pay. The expenses can be a reason for astronomical disbursements, depending on their purpose.
The community certificate has the function of accrediting that you are up to date in the payments corresponding to the maintenance of the building. It must be signed by the Administrator of the Community or, in his absence, by the President.
Please note that it may take time for the administrator to draft it, so it is good to request it at least 10 days before the signing.
Once drafted, it is valid for about 15 days and the price will depend on your administrator's rates.
Real estate advertising
Continuing with the idea of selling as a private individual, you will need to advertise your property if you want to find a buyer. You have many options, from doing it the traditional way with posters and flyers, to using the internet and real estate portals such as Idealista or Fotocasa. If you have ever visited these portals, you will know that as a private individual you have the possibility to publish an advertisement of your property for free. But for potential buyers of your property to see it, you need to appear at least among the first 20 positions.
Real estate agencies spend thousands of euros a month to get their clients' apartments visible, so it won't be easy.
But let's be optimistic. You can try it and check the results.
Expenses and taxes after sale
Once the sale has been signed and the check has been cashed, it seems that everything is over. But our long history of payments still continues. What's next?
Expenses on sale of home
Real estate commission
If you have sold your property with a real estate agency, it is possible that you will have to pay their fees. And I say "possible" because this situation is not always the same. Some real estate agencies charge before starting, others invoice their fees once the earnest money contract is signed, and the rest charge a part (approximately 50%) in earnest money and the rest in Public Deed.
If the latter is your case, once the signing before a Notary Public is completed, the real estate representative will present you with their invoice for their fees.
The usual practice is to have the check prepared and give it to them on the same day.
I am not going to go into detail on this subject, since there is no regulation on the commission that a real estate agency must charge, although it is usually 3% of the final sale price.
State capital gains, capital gains and income tax
This is perhaps, together with the Plusvalia Municipal, one of the most relevant taxes when selling a property. So that you do not have any doubts about it, I will start by defining some important concepts.
State Capital Gains
In real estate terms, when we talk about capital gains, we refer to the increase in the value of an asset, whether it is land or real estate.
The simplest definition of the state capital gain or capital gain is the gain we have obtained by selling our home at a higher price than we bought it.
IRPF
Personal income tax is the tax on our capital gains (assuming that the owner of the property sold is a natural person).
General taxable income
We define the tax base as the amount on which the taxes we are going to pay are calculated.
For example, in any invoice, the taxable amount is the price of the contracted product or service, before VAT and other taxes.
Savings taxable income
It includes capital gains or losses derived from transfers, such as the sale of a home.
Acquisition value and transfer value
Finally, in order to calculate our gain, it is essential to know the real acquisition value, i.e. the total value for which we acquired the asset, and the transfer value or sale value.
The acquisition value can be calculated by applying a simple formula.
Acquisition value = (acquisition cost + cost of alterations and improvements + expenses and taxes) - depreciation and amortization
With all these concepts clear, it seems quite simple to know if we have to pay IRPF.
If you have owned the property for more than 1 year and you sell it for an amount higher than the acquisition value, you will undoubtedly be responsible for the gain.
And how much will you pay?
19% for gains up to 6,000 euros.
21% for earnings between 6,000 and 50,000 euros.
23% for profits over 50,000 euros.
Personal income tax exemptions
You've sold your house, you've got the money in your account and you're ready to enjoy it. Then this tax comes along and takes the smile off your face. Don't worry. Hacienda squeezes, but does not drown. And this tax seems designed to curb certain speculative interests.
Most taxpayers, at least those who do not usually do business with their properties, can take advantage of the following tax exemptions:
Reinvestment in primary residence
You will not pay income tax if the property you have sold is your habitual residence, if you use the proceeds to purchase a new habitual residence and if you do so within 2 years from the date of transfer.
Do you meet all 3 requirements? If the answer is YES, congratulations. Your income tax expense will be zero.
- Over 65 years of age
You've been working all your life, now it's time to enjoy. You decide to sell your apartment and move definitively to the town, or better yet, why not pack your bags and start that trip you have always dreamed of? The best of all is that because you are over 65 years old, Hacienda will not ask you to pay for your profits from the sale.
Of course. In order to benefit from 100% of the exemption, the property sold must be your habitual residence and all the owners must have reached 65 years of age.
Seniors over 65 years of age (sale of non-habitual home)
In the event that the property sold is not your primary residence, you can benefit from this exception provided that you reinvest the proceeds by taking out an annuity plan.
Dation in payment
An unpleasant situation, but also foreseen by the Tax Agency. The cases of dation in payment are exempt from taxation, since no gain is foreseen.
Note:
Personal income tax is also levied on donations. Both the owner and the taxpayer must pay tax on the gain obtained.
Is it possible to pay less Personal Income Tax?
If you have not been able to take advantage of any of the above exemptions, do not throw in the towel. I am going to explain you what is the abatement coefficient and if thanks to it you can pay less IRPF for the profits obtained with the sale of your home.
The abatement coefficient is a reduction coefficient that you will be able to apply to your IRPF quota, provided that you bought it before December 31, 1994 and that the transfer value does not exceed 400,000 euros.
It is calculated by subtracting 11.11 % of the capital gain for each year elapsed from December 31, 1994 to January 19, 2006.
The calculation is a bit complex. That is why I went to the Tax Agency and they provided me with an example of a real operation.
Example taken from the Tax Agency's website
"Transfer of a property on December 31, 2015 for an amount of €300,000, acquired on January 1, 1991 for an amount equivalent to €100,000. The taxpayer previously transferred, on February 1, 2015 another asset item (whose transfer value was €200,000), to whose gain the transitional regime was applied."
Tax on the sale of a home
Municipal capital gains tax or tax on the Increase in Value of Urban Land (IIVTNU)
The land on which your house is built may also have increased in value.
This increase is known as municipal capital gains tax or IIVTNU and is levied on the increase in the value of urban land. The municipal capital gains tax is managed by the city council, is only paid when the transfer of a property occurs and generates revenues of more than 2,000 million euros, only in 2018.
When is it paid?
Municipal capital gains tax is paid each time a property is transferred, whether it is due to a sale, inheritance or donation.
Where is it paid?
The municipal capital gains tax or IIVTNU is the responsibility of the city council, so it will be the administration who will designate a procedure and a place to make the payment.
In municipalities such as Madrid or Barcelona, payment is made by self-assessment.
Who pays the capital gain?
As a general rule, it will be the seller who will assume the cost of the capital gain, unless he is not a resident in Spain, in which case it will be paid by the buyer.
If the transfer is due to an inheritance or donation, the beneficiary of the transferred assets will be the one who pays the tax.
How to calculate capital gains?
The answer is not simple, since each municipality applies its own coefficients giving rise to different results depending on your place of residence.
Below, you will find the correct formula to calculate how much the municipal capital gains tax will cost you.
But for it to work, you need to know the value of the land, the full years elapsed since the acquisition of the property, the taxable base, the regulatory coefficient and the tax rate.
FORMULA
Land value: you will find this value in your property tax bill.
Full years x Regulatory coefficient = Increase per year (%)
Value of land x Increase per year = Tax base
PLUSVALUE = Taxable income x Tax rate (according to ordinance)
You can calculate the Municipal Capital Gains Tax from here
Expenses for the sale of an apartment in Malaga (real example)
A good way to summarize everything we have seen in this article is to represent each of the costs of selling a house in a real example.
For this purpose, we will use a real case:
Daniel bought his apartment in 2002 in Malaga for 120,000 euros and asked his bank for a mortgage of 100,000 euros to finance the purchase.
At the end of 2018, Daniel sold his apartment in Malaga for €180,000, with the intention of not reinvesting his gains in another home, when he still had €30,000 to pay.
Let's see what expenses the sale of your home has generated for you:
Certificate of occupancy and energy efficiency certificate: 200 €.
Nota Simple: 20 €.
IBI: 400 euros corresponding to 2019 (at the time of the sale at the end of the year it was already paid so we will include it as an expense in the final account).
Mortgage cancellation: Daniel still has 30,000 euros pending, so the bank applies the cancellation fee agreed at the time for 1% cancellation, which is 300 € (currently banks do not include this fee in the signing of mortgages). If the seller does not carry out this procedure on his own and decides to delegate it to the bank's agency, it will cost him around another 300 €.
Cancellation of the registration of the mortgage: being still in debt with the bank, as it is obvious, the cancellation of the mortgage has not taken place, which will mean around another 1000 €.
Community certificate: No community fees
Real estate commission: generally 3% of the sales price, 5400 € + VAT = 6534 €.
Personal income tax: the gain is €60,000 (€180,000 sale minus €120,000 purchase). The gain is taxed at a rate of 23%. Therefore, you will pay €13,800 in personal income tax. However, if he chooses to reinvest those €60,000 of profit in another habitual residence within two years, he will be exempt from this tax.
Municipal capital gains tax: let's assume that the cadastral value of the land is €40,000. Entering this amount in the above municipal capital gains simulator, the resulting amount is €5,568.
Total expense for sale of home: 27,722 €.
Conclusions on the cost of selling a home
As you can see, calculating the costs of selling your home is not easy. But it will help you to know in advance how much money you will really have at the end of the process.
If there is one thing that we as professionals have learned over the years, it is that it is best to avoid surprises during the sale of a home.
In AYRE Estates we know how important your property is for you. That is why we take care of every detail so that you sell at the best price, in less time and with all the guarantees.
If you are thinking of selling your house and need help, in AYRE Estates your Real Estate Agency in Malaga we can help you: call us or send us an email to: contacto@ayreestates.es for more information.
The contents of this guide are for informational purposes only; they are subject to possible errors, omissions or changes and should not be considered a substitute for the advice of a legal and/or tax professional. Accuracy is not guaranteed.