Why You Need To Open A Spanish Bank Account

One of the main questions we get asked by clients looking to buy Valencia Property is why they need to open a Spanish bank account. Spanish banks aren't known for being easy to deal with and they are certainly going to charge you commissions for just about everything you want to do, and for the mere fact of the existence of the account, so why on Earth would anyone want one? In today's post we are going to let you know why and what to expect.

Banks in Spain have consolidated massively since the financial crisis in 2008 and now there are a lot fewer to choose from. At the same time they have been reined in by the government in terms of the nasty little things they can do to part you from your money. Gone are the days when I walked into a bank branch, saw a bank manager from a different branch that I knew and asked him what he was doing there, only to be told all managers had been called in to make phone calls to their best clients and offer them "preferential shares" in the bank. Of course those preferential shares were not "preferential" they were essentially worthless and they were being told by management to leverage their personal relationships with clients to cover up the losses of the bank (The value of those preferential shares went down by 98% by the way!) I mentioned to him that this was surely illegal and he said no "they are a good product" etc... (Only following orders)

Anyway, these days con tricks like that by major trusted banks are no longer available. An example of this is that now you have to wait ten days after signing your mortgage before signing for your house to allow a cooling off period. Why is this you might ask? Well, it's because the banks had a predeliction for inserting illegal contract terms in mortgages such as floor clauses, meaning you never benefitted from reductions in interest rates, and obligatory insurance through the bank itself. Now, largely, gone.

I am not painting a rosy picture here I know but we'll get onto the meat in this article about why you should use these corrupt organisations soon enough.

There are definitely enough stories I know about banks to fill a few volumes in any investigation but we still have to use them unfortunately and here's why.

The Purchase Process Requires You To Dance with the Devil

When you go into the notary to pay for your Valencia Property how do you give the owner the money? Now a normal person would say a transfer of funds into the account of the owner from an escrow account. Hold on there, not so fast! Escrow? What's that? Escrow accounts in Spain are essentially unknown by 99% of the population and the notary will require you to show where the funds for both the final payment and any deposit left came from. The funds have to come from an account owned by the buyer. Some notaries allow you to transfer into their account from where they will pay out to the seller, a quasi-escrow account if you like. However this will cost you money as the notary will charge you for both receiving the money and emitting the payment and very few notaries do it.

The normal payment method is a bank draft to the seller or sellers (Sometimes various bank drafts are needed as in the case of inheritances) This is handed over at the notary with the drafts being emitted by the bank on the morning of the sale. The drafts are exchanged for the keys and the Notary witnesses this exchange and signs the deeds along with both buyers and sellers. Job done.

Can you then shut your bank account?

Well no, not really. You need an account for payment of your utility bills as credit/debit card or foreign accounts are not generally allowed by the utility companies. You might be able to get away with an N26 account as this online international bank supplies a Spanish IBAN number to use but generally most people find it easier to have a Spanish account to direct debit utility payments and everyday payments in Spain.

You also have 30 days from the signing to pay your 10% tax bill on the purchase of the property and that should normally come from your Spanish bank account too.

Also consider that if you are getting a mortgage from a Spanish bank then you will be able to benefit from some reductions in the interest rate on the mortgage if your bills go through the account, if your salary is paid into that account, if you have their home insurance and if you take out other products with them. Take a close look at these requirements though as they are not always beneficial on a net net basis. The bills and salary going into the bank almost always are though.

Which Bank Should I Use?

You have a pretty restricted choice since the consolidations of the 2010s. Santander, La Caixa, Sabadell, BBVA, Kutxa Bank and Bankinter and that's about it. There are a few other smaller banks and savings banks you can find in the larger towns and cities but even most of those are controlled by the larger institutions named.

For our foreign clients in Valencia we generally use two banks for opening accounts, Sabadell and La Caixa. Why is that? They both have the lowest fees and the process of opening an account can be done with just a passport as opposed to requiring the NIE already. They also have English speaking staff in the branches we use and the fees are moderate. However, the biggest use case for these two banks is when you come to buy your house. They will not charge huge amounts to emit your bank drafts. We have heard of cases of banks charging up to 1.5% to emit a bank draft for the purchase of a property. if the average sale price in Valencia is just north of 200k this means that the banks have been known to charge up to 3000 Euros just for emitting a non resident bank draft. We have written before about the agreement between La Caixa and Currencies Direct so that clients aren't charged for receiving their funds in the account and the maximum charge for the bank drafts being 200 Euros and Sabadell have a similar arrangement with no charge for receiving the funds and 300 Euros maximum for emitting bank drafts. This amounts to a hell of a saving on a property purchase compared with using a bank that charges even 0.5% for those drafts (Most will charge more if you don't point it out and they then have the gall to tell you that they can't do anything about it).

What You Shouldn't Use Your Spanish Bank Account For

Don't expect any returns or interest on your savings. You'll have to go looking for a return on any saved money elsewhere. Maybe try buying a Valencia Property to rent out for that.

When Will Spain Join The 21st Century?

Payments via direct transfer seen in the notary and taking seconds to show in the account of the seller, payments in Cryptocurrencies on the blockchain on a ledger visible to all and even payments where ownership of the funds and maybe even ownership of an account is transferred directly online are all potential future methods of completing on a property but mostly they are ignored, or even illegal, currently.

It's certainly possible at the moment to pay in Crypto for example but it requires the consent of three parties: the notary, the buyer and the seller (Who is likely to be a little old lady who is reticent to actually accept a bank draft and would prefer payment in notes or even pesetas!) If you paid in Crypto it's likely then that "Hacienda", the Spanish Tax Authorities, are certainly going to want to know where your millions in Dogecoin came from. Equally you have the issue of an agreed exchange value in Crypto as the market can move massively either way in seconds.

Smash The System

Now it might be good if the system got smashed but let's face it, it's not you or me who is going to do that. You have to work with it at the moment And when you have to work with something then the best thing to do is to make the best of it. Use a currency company to transfer your funds from your overseas account into your brand spanking new Spanish account (So the bank doesn't get the chance to rip you off), open an account at either La Caixa or Sabadell and get a bank draft from there and direct debit your utility bills into that new Spanish account. In future, when you get sick of your bank or the system is finally smashed you'll be able to pay with your watch through Apple Pay, via Paypal or in Shiba Inu (Won't happen) but currently you just roll with it.

Ghost Listings ©

My colleague David has decided to copyright the term "Ghost Listings". What are they though? We have found loads of these listings in the last week, they are generally uploaded onto portals like Idealista and the like and within a few hours disappear. Why? Because at that point they have done their job of acting as a hook for unsuspecting househunters.

Ghost listings are put up for properties that have already been sold but look good and are well priced. Why are agents doing it? Simply put, desperate house hunters contact them to see the ghost listings and voila! Suddenly they have a list of potential clients to whom they can market their other (Not so good) properties.

Does it work as a strategy? Probably not.

Is it happening more and more? Definitely.

We saw two properties we had already sold months ago at different price points and with just a few photos this week. We even contacted the buyer of one of them to ask if they had decided to sell, obviously the answer was no as they have only owned it for three months and they have a happy sitting tenant.

Funnily enough we also saw a Ghost Listing from an agent who obviously hadn't got the memo. They had stolen the photos from another agent but almost doubled the price of the property on their listing putting it at 400k. (We sold it last week to a client of ours at 208K) So we didn't quite get that. Do they just want to attract idiots with more money than sense or was this a market test to see if you can get potential clients at any price point?

Golden Visa Property of the Week

A great house and an even better description.

As I write we are on the last day of the wettest and dullest March on record here in Valencia. A reminder for some of us what it was like to grow up in a climate where grey skies were normal, and a good day was a day it didn't rain all day.

But now summer is around the corner, and the Spanish have a beautiful saying for this time of year:-

'Hasta que un inglés se tire del balcón,
no te quites el chaquetón'

I won't translate it literally, I wouldn't do it justice , but it means "be careful thinking the summer has come when there's still a couple of April showers to watch out for".

However its hard not to imagine lazy summer days and long warm evenings when you look at a property like this. In El Bosque, about 30 minutes from Valencia, similar to the beach and less to the airport.

Amazing views from the heated pool and sundeck across the countryside, inside is just as stunning. An impressive 7 bedrooms and 5 bathrooms, plenty of room no matter how many friends and family come out of the woodwork when they find out you have a Mediterranean villa now.

Bright throughout, a glass ceiling bringing the sunshine into the centre of the house, and large terraces. Can you see yourself on that upstairs balcony, looking out over the hills, and over that inviting pool. The cool, blue water calling to you. You know, I bet if you just got a small run-up you'd probably make it....

Ah yes, summer's coming.

Coming Up On Valencia Property

Over the next few weeks we are going to be introducing you to our team, looking at perspectives for the summer in Valencia, updating our Tips for Eating Out in Valencia post and posting more on our socials. Keep on coming back to the blog, we publish a blog post each week, and on Fridays each week we post on our podcast. This week’s podcast all about Orientation Days and the latest Valencia Property news can be listened to here or you could just listen on the embedded player below by clicking on the play button.

Valencia City Apartment of the Week

The majority of emails we receive through our website that want a property in Valencia city tend to lean towards the same areas, Ruzafa, Gran Via, Carmen, etc. But what if I told you there´s a really pretty leafy central neighbourhood that hardly anybody looks at? The Abastos / Juan Llorens neighbourhood tends to get overlooked when apartment hunting but it´s a gem of an area with prices lower than its more well-known neighbours.

This apartment in Calle Lorca is located on the edge of Abastos and we can clear something up straight away. Because of the constant good weather here, you can have a place bought and be living there for ages then one day you get one of those torrential downpours that occasionally happen here and you go “Hmm, would you look at that, we have damp”. Well on the day we went to take photos it had been raining for days. Not a sign of damp, leaks, puddles, nothing. Dry as a bone.

Two bedrooms, a generously sized living room and a fantastic terrace (Hammock might even come included!) make this apartment ideal for a couple or as a rental property.

So keep in mind, there´s more to this city than meets the eye and some real jewels can be found by going off the beaten track.

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