As relocation experts, we have seen many mistakes American families make when moving to Madrid. Here are the seven biggest ones and, most importantly, how to avoid them.
1- The “Budget Gap” (ignoring the 10% closing costs)
Most American buyers who are not familiar with southern European real estate markets assume they function the same as those at home. In the US, closing costs are typically based on the amount of the mortgage obtained to finance the property purchase. US closing costs are typically 1-3% of the home price. These vary by state (Washington DC has the highest, at 3%); again the biggest component tends to be mortgage origination fees.
In Madrid, there are a number of closing costs that are not associated with mortgage fees. These are:
- The property transfer tax. Known as the ITP (Impuesto de Transmisiones Patrimoniales), these taxes vary throughout Spain. Business friendly Madrid has the lowest ITP in Spain, but at 6% it is still material. NOTE: this is only for second hand properties. If you purchase a new build, you will need to pay a 10% VAT in lieu of the ITP.
- Notary fees. In the US, notaries put stamps on official documents in exchange for a $10-15 fee. Some places, such as US Bank, will notarize documents for free for their clients. In Spain, notaries perform many of the services that para-legals do in the US. Spanish notaries are highly trained public officials and civil servant who verify legal documents, authenticate identities and ensures contracts comply with Spanish law. They are neutral parties who impartially advise all sides and log the original deed in the land registry.
registration fees. Expect to pay between 0.1% and 0.5% of the purchase price in notary fees. - Land registry fees. All properties in Spain are entered into the land registry. This is a government office that maintains the official, public record of who owns specific parcels of land and property. It guarantees legal title, tracks property boundaries, and records any rights or restrictions (like mortgages or easements) attached to the land. Expect to pay 0.1% to 0.5% of the purchase price in land registry fees.
- Legal fees. Hiring an independent lawyer to perform due diligence and contract review will cost roughly 1% to 1.5% of the purchase price.
In total, expect to add roughly 10% to the final purchase price when moving to Madrid. If you are a client of Madrid Estate, we will provide you a full purchase cost breakdown before you even step on a plane. We can calculate the exact tax liability for each property you like, so there are no five-figure surprises on closing day.
2- The “Tax Trap” (missing the Beckham Law window)
High-earning expats often miss the 6-month window to apply for the Beckham Law, which could slash their tax rate from a 45% tax on earnings to a flat 24%. If you work with Madrid Estate, we won’t just help you find the ideal home for you and your family. We also coordinate with expert tax strategists to ensure your application is filed immediately upon arrival. This will potentially saving your family hundreds of thousands of euros in the long run.
3- The “School Run” logistical nightmare
Families often fall in love with an apartment in Castellana or a villa in Boadilla del Monte, only to realize the commute to their chosen international school is a 90-minute daily grind in traffic. We recommend our clients perform a school-centric property search. Madrid Estate helps our clients map out their lives based upon their children’s education. This ensures their homes are strategically located near top institutions like The Brewster Academy or The American School of Madrid, which saves hours of transit time and thousands of euros in transportation fees.
We invite you to schedule a call with our founder, Fabiana Greci, to discuss how we can help you avoid school run nightmares and other mistakes American families make moving to Madrid. You can contact her directly at fabiana@madrid-estate.com or WhatsApp +34 680 306 337.
4- “Buying Blind” (the lack of home inspections)
In Spain, “as is” means exactly that. Many Americans are not familiar with the “as is” concept, not fully grasping what can go wrong when buying an older home. Moreover, many of them purchase properties from abroad, relying on photos and short videos to see the home. We find they often skip professional surveys, only to find structural damage or outdated wiring after the keys are handed over. Madrid Estate has a network of trusted architects and surveyors to inspect any property before you sign on the dotted line. Our expertise allows up to leverage any findings in these inspections to negotiate a lower price, or counsel our clients to walk away from potential money pits.
5- The “Dual-Agent” conflict of interest
In Spain, as in the US, most traditional real estate agents represent the seller. Unlike in the US, where buyers traditionally find their own legal representation, Spanish real estate agents recommend lawyers to their clients. If you are purchasing a property from abroad, without professional assistance, it can be very tempting to use these recommendations, particularly if you don’t speak Spanish or understand the differences in common and civil law, it can be very tempting to use these lawyers. Obviously, if you use these lawyers you aren’t getting unbiased advice.
Keep in mind that Madrid Estate represents YOU, not the seller. We act as your fiduciary, providing independent legal counsel and unbiased advice. We ensure the property is free of hidden debt, such as unpaid community fees or unpaid property taxes which, in Spain, follow the house.
6- The “Neighborhood Mismatch” (the cost of moving twice)
Many families sign a long-term lease or buy an apartment in a “trendy” area (such as Malasaña), only to realize it lacks the green space, parking and quiet their family desires. This is a particularly easy trap to fall into you live in the US and can’t take a long enough trip to Madrid to walk your desired neighborhoods at different times of the day/days of the week. This is why we recommend our clients begin their property searches by first evaluating their needs and that of their families. Where do you plan on working? Do you want to live in the vibrant (but sometimes noisy) city center or in the suburbs? Do you want to live in an apartment or would you feel more comfortable in a villa with high security?
To meet the needs of our clients, Madrid Estate has devised our Lifestyle Consultation. This matches your family’s daily needs to the right neighborhood. We don’t just show you a house; we show you the nearest park, the best grocery store and give you a feel for the local community vibe. This ensures you only move once, saving you time, hassle and expense.
7. The Bureaucracy “Time Tax”
The Spanish bureaucracy can be daunting. It often causes headaches even for those familiar with it. When you move to Madrid, you will have to:
- Obtain a NIE (tax ID)
- Obtain a residency card (TIE)
- Obtain your volante de empadronamiento, which is a document issued by your local town hall to prove you live there. This is necessary for things such as hooking up your utilities, getting a Spanish driver’s license and accessing Spanish healthcare.
- Obtain a social security number
Trying to do this independently can take months of failed appointments and lost work hours.
Madrid Estate provides “White Glove Administrative Handling.” Our team manages the paperwork and appointment scheduling for your entire family. We turn a 6-month bureaucratic headache into a seamless transition so you can focus on your new life in Madrid.
