Property Purchase Costs | Mortgage Finance

In Germany there are no barriers for individuals to own freehold real estate directly.

Property purchase costs

In Germany, transaction costs are generally quite high and investors must bear the following costs when buying property.

Notary fees
– Notary fees are fixed by law and depend on the kind of agreement and the value of the property. Notary fees usually range from 0.5% to 1.5% of the purchase price. German law requires that sale and purchase agreements be notarized.
Registration fee
– The buyer must pay a registration fee to have his name entered at the local land registry office (“Grundbuchamt”) as the legal owner. The actual fee is fixed by law and depends on the value of the property, but is typically around 0.8% to 1.2% of the purchase price.
Lawyer’s fees
– If you employ a lawyer to take care of your interests during the buying process, make sure you discuss his fee before proceeding with your purchase and shop around to get an idea of what is reasonable.
Estate agent’s fee
– The agent (“Makler”) fee in Germany varies and ranges from 3% to 6% (plus 19% VAT). The actual rate is negotiable and depending on the agreement negotiated between parties, the broker's fee will normally be split between the buyer and seller.
Mortgage fees
– At present local lenders charge around 1%-2% of the value of the loan as a processing fee.
Real estate transfer tax (“Grunderwerbsteuer”)
– This is due about four weeks after the notary deed has been signed by buyer and seller, and is currently 3.5% of the purchase price, except in Berlin where the rate 4.5%.

Finding the right property

Ideally you should visit your selected area and meet with estate agents who will show you round a selection of properties which match your criteria, rather than rely solely on a brochure or website. It’s useful to go in prepared with a checklist and take notes and photos as you walk around. It’s also a good idea to talk to other British owners in the area if you can.

Organising legal representation

The services of a notary (“Notar”) are mandatory in the German property-buying process. The notary is legally bound to act as an impartial middleman between buyer and seller. He or she checks the land register to see whether the property can be sold and whether there are any restrictions on its use. He also registers the change of ownership with the municipal government and enters the property in the land register.

It isn't widely known that the buyer may choose his or her own notary – it’s certainly worth ensuring that the one you choose is bilingual in German and English so that he can explain the process to you clearly.

Also appointing an English-speaking lawyer to look after your interests, who is familiar with German and UK law and the buying process, will be invaluable – remember that the notary is impartial and is working neither for the buyer or vendor.

Organising finance

When working out how to finance your purchase, consider all the options. Paying cash, if you can afford to, is often recommended, but you may not want to tie up your funds in this way. Other options include re-mortgaging your UK home or arranging a mortgage on your German property through a local or UK lender.

It is important to note that you’ll need to present a so-called "irrevocable acceptance" of loan financing prior to signing the notary contract. If you are offering a cash deposit, you must show proof that the funds are in place.

The survey

Although a survey is not a compulsory part of the purchase process in Germany, a survey is nonetheless advisable for your own peace of mind as well as giving you an idea of what to budget for in terms of renovation and repairs. A survey is particularly advisable if you are buying a property without a builder’s warranty.

Offer and reservation agreement

Once you have found a property, you will probably be asked to sign a reservation form, which will essentially reserve the property for you, usually for a period of between one and four weeks. Note that at this stage, you have not entered into a legally binding contract. The official offer can be made through the seller’s agent or to the seller directly.

The contract

When the seller accepts your offer, your notary will draw up the sale contract. Accuracy is paramount, as even a small error might at least partially invalidate the contract. The contract must show the following:

Names and addresses of the parties.
Details of the property.
The agreed purchase price.
Terms and conditions of payment, including what happens in the event that one or other party fails to adhere to the terms of the contract.

The buyer is 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 be obvious to the buyer.

The notary is responsible for the legal work and contract obligations, and checks that no liabilities exist. Both parties need to agree with the notary the date of signing the contract. It is strongly advised that you review the contract carefully and have it translated into English if necessary.

The signing ceremony

At the signing ceremony, the notary reads the contract aloud in German for both parties. If you are not German speaking and your legal representative is not bilingual, it is advisable to employ a qualified translator. You can at anytime interrupt the proceedings if you do not completely understand a clause.

It is customary to pay the purchase monies into an account maintained by the notary (“Notaranderkonto”). The money is finally transferred to the seller only when the land registry entry is complete. The estate agent’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 of signing the contract.

Completion and registration of title

After the contract is signed the notary records the sale at the land registry office (“Grundbuchamt”), a process that usually takes four to six weeks. A change in ownership officially occurs only when: