Buying a property is one of the most important financial transactions a person can make. However, attention is often focused on the price, the mortgage or the notarial signing, while one essential issue is left until the last minute: how the purchase price will actually be paid.

The payment method is not a mere formality. Choosing the wrong means of payment, failing to coordinate the banking arrangements properly or not documenting previous payments can lead to delays, issues with the deed, tax questions or even risks for both buyer and seller.

In this article, we explain clearly and practically the main ways to pay the purchase price in a property transaction in Spain, the risks of each option and what should be checked before signing.

1. What is the purchase price?

The purchase price is the amount that the buyer undertakes to pay to the seller in exchange for acquiring ownership of the property.

In a residential property purchase, the transaction is usually formalised in a public deed before a Spanish notary. At that moment, the seller transfers ownership and possession of the property, and the buyer must pay the agreed price, unless the parties have agreed otherwise.

The deed must also properly identify how the price has been paid or will be paid, including the payment methods used. This requirement derives, among other rules, from Article 24 of the Spanish Notarial Law, Article 177 of the Notarial Regulations and the specific rules on the identification of payment methods in deeds relating to real estate.

2. Main payment methods in a property purchase

In practice, the price of a property is usually paid in one of the following ways:

• Bank transfer.
• Banker’s cheque.
• Cash payment, although this is increasingly discouraged and is very limited in certain cases.
• A combination of several payment methods, for example: a deposit paid by bank transfer and the remaining price paid by banker’s cheque or urgent same-day transfer on the day of completion.

Each option has advantages, disadvantages and risks that should be understood before attending the notarial signing.

3. Payment by bank transfer

A bank transfer means that the buyer instructs their bank to send a certain amount of money to the seller’s bank account.

It is a common payment method because it leaves a clear trace of the transaction: who pays, who receives the money, the date, the amount and the destination account. However, not all transfers operate in the same way.

Ordinary bank transfer

An ordinary bank transfer may take time to reach the seller’s account, especially if it is made between different banks, on non-business days or after the bank’s cut-off time.

This can create a practical problem: the seller signs the deed and transfers ownership, but the money is not yet visible in their account.

For this reason, in significant property transactions it is not always the most convenient option, unless the transfer has been made in advance and the seller confirms receipt before signing.

Urgent transfer through the Bank of Spain system

In Spain, an urgent transfer through the Bank of Spain system is commonly used when funds need to arrive almost immediately or within a very short period of time.

It is often used in property transactions where the parties want payment to be made on the same day as the notarial signing, providing greater security for the seller and traceability for the buyer.

The downside is that this type of transfer may involve higher bank fees than an ordinary transfer, so it is advisable to check the cost and the bank’s cut-off time in advance.

4. What happens if the property has an outstanding mortgage?

It is very common for the property being sold to have an outstanding mortgage that must be cancelled.

In these cases, before completion, the seller should request from their bank a certificate confirming the outstanding debt or redemption balance, specifying the amount required to repay the loan on the expected date of completion.

In practice, the buyer does not usually pay the entire price directly to the seller. A portion of the price is normally used to repay the seller’s mortgage debt, and the remaining balance is paid directly to the seller.

For example:

• Purchase price: 250,000 euros.
• Seller’s outstanding mortgage: 90,000 euros.
• Estimated registration costs for cancellation: 800 euros.
• Final amount received by the seller: 159,200 euros.

This process must be carefully coordinated because the buyer needs to acquire the property free of charges or, at least, with the guarantee that the existing mortgage will be cancelled.

In this context, it is particularly important that, when a transfer is made to repay a mortgage loan, the purpose of the funds is correctly identified.

It is not enough simply to transfer money into an account linked to the loan. To avoid problems, there must be a clear instruction to repay the loan early using those funds. If this is not done correctly, the money may be paid into the seller’s account but not automatically applied to cancel the mortgage.

This may create a significant risk for the buyer: having paid the price but later discovering that the mortgage charge remains pending cancellation.

For this reason, before signing, it is advisable to check:

• An updated certificate of outstanding debt as of the signing date.
• The exact account to which the payment must be made.
• The payment reference or concept to be included in the transfer.
• The bank’s instructions for applying the funds to the repayment of the loan.
• The expected registration cancellation of the mortgage.
• The withholding of sufficient amounts for cancellation costs, where appropriate.

5. Payment by banker’s cheque

Another very common option is payment by banker’s cheque.

This should not be confused with an ordinary cheque. An ordinary cheque is issued by the account holder, and its payment depends on there being sufficient funds when the cheque is presented for payment.

By contrast, a banker’s cheque is issued directly by the bank. Normally, the bank only issues it once the amount has already been debited from the buyer’s account. For this reason, it offers much greater security to the seller.

In property transactions, banker’s cheques remain common because:

• They are physically delivered at the time of signing.
• They provide the seller with a reasonable guarantee of payment.
• They make it easier to record the payment method in the deed.
• They avoid the risks associated with cash.

Even so, before choosing this option it is advisable to check the applicable fees, both for issuing the cheque and for depositing it, as these may vary depending on the bank.

It is also important to ensure that the cheque has been correctly issued: exact amount, correct beneficiary and details matching the transaction.

6. Cash payment: legality, limits and risks

Although many people think that a property cannot be paid for in cash, the reality is more nuanced.

Cash payment may be possible between private individuals, but it is not always allowed and, in any event, it is generally not advisable in property transactions.

Law 11/2021 reduced the general cash payment limit when a business or professional is involved. In transactions where one of the parties acts as a business or professional, cash payments equal to or above 1,000 euros are not allowed. This limit increases to 10,000 euros where the payer is an individual who can prove that they do not have tax residence in Spain and is not acting as a business or professional.

This affects, for example, purchases from developers, construction companies, corporate sellers or professionals.

Between private individuals, the position may be different, but paying large amounts in cash is still not recommended for several reasons:

• It is difficult to clearly prove the origin of the funds.
• It may trigger tax concerns or checks.
• There is a risk of loss, theft or dispute over the amount delivered.
• It is less secure than a bank transfer or banker’s cheque.
• It may raise issues under anti-money laundering rules.

In addition, cash movements are subject to reporting obligations in certain cases. For example, movements into or out of Spain equal to or above 10,000 euros must be declared, as must certain high-value cash movements within Spanish territory using the relevant form.

For all these reasons, in a property purchase it is usually safer to avoid cash and use traceable banking methods.

7. What about deposits or previous payments?

In many property purchases, an amount is paid before the deed is signed, usually when signing a deposit agreement, reservation agreement or down payment arrangement.

These previous payments must also be capable of being proven before the notary. For this reason, it is essential to keep:

• Bank transfer receipt.
• Receipt signed by the seller.
• Deposit or reservation agreement.
• Identification of the account of origin and destination.
• Exact date and amount of the payment.

If the payment was made from a third party’s account, or by someone other than the buyer, this should be reviewed in advance, as it may raise questions with the notary, the bank or the tax authorities.

8. Practical recommendations before signing

Before attending the notarial signing, buyer and seller should have the payment structure fully agreed and organised.

At CPG Abogados, we recommend checking at least the following:

For the buyer

• Confirm the chosen payment method with the bank.
• Check fees and cut-off times.
• Ensure that sufficient funds are available.
• Review whether part of the price must be paid to the seller’s bank to cancel a mortgage.
• Check that all previous payments are properly documented.
• Avoid cash payments except in very specific cases and with proper legal advice.

For the seller

• Confirm that the payment method offers sufficient security.
• Request a certificate of outstanding debt if there is a mortgage.
• Check whether registration cancellation costs must be assumed.
• Verify that the banker’s cheque or transfer matches the agreed purchase price.
• Do not sign without being clear about the effective or guaranteed receipt of the price.

9. The importance of coordinating the lawyer, bank and notary

Payment of the purchase price should not be improvised on the day of signing.

Several parties are involved in a property transaction: buyer, seller, banks, notary, administrative agents and, where applicable, the parties’ lawyers. Without proper prior coordination, last-minute problems may arise: incorrect amounts, expired certificates, transfers that do not arrive, incorrectly issued cheques or doubts about previous payments.

For this reason, the transaction should be prepared in advance and all documentation should be reviewed before signing.

Good prior legal advice helps avoid risks and ensures that the transfer is completed correctly, with clear evidence of payment and without unexpected charges for the buyer.

Conclusion

The payment method in a residential property purchase is essential for the legal security of the transaction.

Although several options exist, the most common and recommended methods are bank transfer, especially urgent same-day transfer in certain transactions, and banker’s cheque. Cash payment, although possible in specific cases, involves significant limits, risks and practical problems.

Before signing a purchase deed, it is essential to review how the price will be paid, how previous payments will be evidenced and what happens if there is an outstanding mortgage on the property.

At CPG Abogados, we advise buyers and sellers in property transactions, reviewing documentation, coordinating completion and helping to avoid legal, tax and registration risks before attending the notarial signing.