Buying a Property
There are no legal restrictions on non-Germans buying a house in Germany, although it is recommended that you have full rights to residency before buying property. Conversely, owning property in Germany does not confer the right to stay in the country. As in all markets, a potential buyer may spend a lot of time searching for and researching properties before finding the right one. Properties for sale will most likely be advertised in the local newspapers. It is not common to see “For Sale” signs posted in front of a home so do not waste time driving around a neighbourhood in search of them. The ads will tell you if the property is represented by an agent (Immobilienmakler) or sold privately (privat). Addresses are normally not listed so you will need to contact the agent or seller to find out more and to schedule an appointment.
Property sections can be found in most daily newspapers on a weekly or bi-weekly basis as well as online and through specialist property publications. Offers may be made by private parties (von Privat), although most transactions are made through estate agents (Immobilienmakler). In Germany, there is no requirement to work exclusively with any given agent. After deciding on an area, find a property agency (Immobilienmakler), or go through a professional association. The German Real Estate Association (Immobilien Verband Deutschland, IVD) is an association of estate agents, property officials, and real estate tax advisors. The association serves as a clearing-house for information on buying and selling property in Germany. As in most countries, purchasing a property through a third party comes with a cost attached.
Most buyers cannot afford to pay cash for the purchase of their home and are therefore likely to finance a portion of the mortgage. With this in mind, many buyers are recommended to have a minimum of at least 20 percent of the total cost for a down payment. German banks and building societies will usually provide borrowers with funding of up to 70 – 80 percent of the purchase price. However, foreigners may sometimes be restricted to mortgages of 60 percent. All borrowers are expected to provide proof of a proven track record of regular monthly savings of up to six years in order to be approved for most loans. Most mortgages are for 10 or 20 years, but can be written for up to 30 years on a fixed rate of interest.
Selling a Property
Property may be sold privately or through estate agents. German estate agents do not share listings, meaning more freedom for both buyer and seller.
Understanding property taxes is important when selling property:
As a buyer, before working with any agent, be sure to find out who is responsible for paying their fee, how much that fee will be and when payment is due. Fees are negotiable and not regulated by law. However, in most cases it ranges from 1.5 – 3 percent of the purchase price plus VAT (currently 19 percent). Who will pay the fee is again negotiable depending on the situation. For instance, either the buyer or seller may pay the fee in full or decide to split it between each other. After you have settled on a property, there will also be additional expenses on top of the agent’s fee. These costs are generally between 4.3 - 5.5 percent of the purchase price and include a property transfer tax, notary fee and an additional small administrative filing expense.
The property transfer tax is 3.5 – 5 percent of the purchase price and is paid by the buyer. The notary fee is for having the property sales contract signed in the presence of a notary and is between 1.2 - 1.5 percent of the purchase price. This fee also covers preparation by the notary of the contract, the negotiations, the signing ceremony and entry into the land register. The buyer is allowed and encouraged to select the notary, who is legally bound to remain impartial during the purchase process. There is also a registration fee, equal to 0.8 – 1.2 percent of the purchase price.
In total the costs paid by the buyer will vary between 7.23 – 11.27 percent of the purchase price, while a seller will pay between 1.79 – 3.57 percent.
Surveys and regulations
By law, houses older than 25 years must have new roofing, new windows and a new heating system. A professional survey on the standard of the property in question will help avoid unforeseen costs. An official surveyor (amtlich vereidigter Sachverständiger) from the local building office (Bauamt) can be engaged for this task. The process of having a property surveyed may differ from state to state within Germany. It is also possible, and often cheaper, to hire an architect privately to survey the property.
A public notary will then check whether there are any restrictions on the sale and use of the property. If both parties agree to the terms of the contract, the notary submits the change of ownership to the government books and the transaction is noted in the land register.
Making an offer
Make an offer via your agent (Makler), who will convey your bid either through the seller’s agent or to the seller directly. You may find yourself competing in a mini-auction as your agent may be handling rival bids from other prospective buyers.
When the seller accepts your offer, ask your Notar to draw up the contract. It would be a good idea to hire the services of an English-speaking Notar. A contract must show:
Checking the property
Buyers are advised to check the property for any major defects because the notary is not responsible for this. The seller is required to disclose any hidden defects, but is not obliged to point out any defects that should have been obvious to the buyer. The Notar is responsible for the legal work and contract obligations, and checks that no liabilities exist.
The seller usually agrees to a priority notice in the land register. This priority notice protects the buyer from other, unexpected sales activities, such as trying to sell the property to other buyers for a better price, by the seller. Both parties agree on the notary public date of signing the contract. It is strongly advised that you review the contract carefully and have it translated if necessary.
At the actual signing ceremony, the Notar reads the contract aloud in German for both parties. If you are non-German speaking, it is advisable to bring a qualified translator. You can at anytime interrupt the proceedings if a clause is not completely understood. All buyers and sellers must be present at the signing of the contract. Official identification papers are also required and the property changes hands as soon as a notary submits the contract to the land register (Grundbuch) of the buyer. If a company is the purchaser of the property, it must show the relevant documentation from the Chamber of Commerce, which proves the legality of the company.
It is customary to pay the purchase price into an account maintained by the notary (Notaranderkonto). The money is transferred to the seller only when the land registry entry is complete. The real estate agent’s or broker’s commission is also paid at this stage, and so are the notary and registration fees. The purchase tax or stamp duty needs to be paid within four weeks after the contract was signed.
The rules governing the creation and execution of property contracts are covered by the federal property acquisition tax law (Grunderwerbsteuergesetzes). On the notarisation date, the seller agrees to transfer the property title and the buyer agrees to pay. All agreements concerning property must be notarised by a public notary in the land title registry (Grundbuch). The land register is found at the district courthouse, and is the central document for a piece of property. A change in ownership occurs only when an entry has been made in this land register, previous mortgages have been cleared, and the tax office has certified that the seller has no property taxes outstanding. The public notary oversees the transfer of the payments and titles so that neither party is exposed to any risk.
Between the finalisation of the contractual process and the exchange of property for payment, the public notary can secure the position of both buyer and seller by registering a notice of future property transfer in the land title registry. It is important to stipulate in the contract who exactly is responsible for any potential encumbrances (Belastungen) connected to the property. The public notary is required to send a copy of the contract to the Finance Office (Finanzamt) and as soon as this has been done the buyer will be asked to pay the property purchase tax (Grunderwerbssteuer).
It takes an average of 41 days to complete all the four procedures needed to register a property in Germany.
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