The deal is exceeded only by Jefferson Lerma's 2018 move to Bournemouth for €30m, and Sanchez confirmed Real Madrid moved directly for the striker at the value of his release clause once their business involving Gonzalo Garcia's departure to Fulham was completed.
"Real Madrid showed their interest in early June and we spoke with them during that month. The deal was finalised in July. But it's normal for a club as important as Real Madrid to take notice of last season's best under-23 player and a natural goalscorer. I hope it goes brilliantly for him there," Sanchez said.
Espi, 21, from Tavernes de la Valldigna, had also drawn interest from Premier League clubs Hull City and Brighton before Real Madrid stepped in.
Sanchez confirmed Levante's transfer business is not finished despite feeling their squad is largely settled, with a week to go until the season starts.
"It will depend on departures. The transfer window is open and we are prepared for possible exits. We've had a very good season and we have players who are attractive to other clubs, not just in Spain but abroad too, but we are prepared to make necessary purchases," he said.
The club have made two additions at the back this summer, in Aissa Mandi and Manu Sanchez, though the president acknowledged a further defensive signing remains a priority.
"We need something at the back, in defence, especially at centre-back. There will probably be an addition to the team, but the squad is practically built," Sanchez added.
Espi's rise was a defining story of Levante's promotion-winning season, with Luis Castro handing him his first league start on 18 February and keeping faith with him from 7 March onwards, a run in which he scored 10 goals in his final 13 appearances of the campaign.
The 1.94m forward, a former Spain Under-20 international, will now compete for minutes at the Santiago Bernabeu having agreed a five-year contract, with reports suggesting he could be involved in Real Madrid's squad as early as this weekend's friendly against Fiorentina.
Espi's emergence owed much to a managerial change that indirectly shaped his career, with Luis Castro taking charge of Levante in December, ten days after being sacked by Nantes, and quickly turning to the young forward from a squad many had expected to struggle following promotion.
The Real Madrid deal represents the highest fee Levante have ever received for a graduate of their own academy, underlining the scale of the club's achievement in developing a player capable of commanding a release clause of that magnitude within little more than a season of regular first-team football.