Property Sales Process

Most of the costs associated with the transfer of property in Germany are borne

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.
Capital Gains Tax (CGT) – For private property owners (as opposed to businesses owning property), there is currently no CGT payable after a holding period of ten years, otherwise capital gains are taxed as income. If a property owner sells more than three pieces of property within five years, he must pay commercial tax.

Capital Gains Tax – future plans

Germany is set to introduce a very strict Capital Gains Tax, which will apply from 2009 onwards. Real estate will still be free of CGT if held for more than ten years. The proposed CGT figure is 25% plus Solidaritätszuschlag (a tax to finance the five eastern states that formerly made up East Germany) and Church Tax. Combined, this will effectively raise the CGT burden to approximately 28%.

Legal requirements

Sellers must ensure they possess relevant property ownership documents and make sure they have paid any outstanding tax or utility bills on their property. The seller is obliged to sell the property free from defects. The seller is liable for defects, which reduce the value of the property, or prevent the use of the property for a particular purpose. If the property lacks a particular characteristic which the vendor claimed it possessed, he is liable.

Marketing your property

If you used an agent to buy your German property, it could make sense to use the same one to sell it, as they will already know the property. Before you take on their services, you should check carefully what they will and will not do in terms of marketing and what they will charge as commission – make sure you shop around to get the best service!

Using a notary

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. Once the contract is signed, the notary registers the change of ownership with the municipal government and enters the property in the land register.

Offer and reservation agreement

Once you have found a buyer for your property, it is usual practice for the buyer to sign a reservation form, which will essentially reserve the property for a period of between one and four weeks. Note that at this stage, neither you nor the buyer has entered into a legally binding contract. If the buyer goes ahead with the sale, you should receive details of the official offer via your agent or, in some cases, from the buyer 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 for the buyer to pay the purchase monies into an account maintained by the notary (“Notaranderkonto”). Only when the land registry entry is complete does the money then get transferred from this holding account to you, the vendor.

The estate agent’s commission is also paid at this stage.

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:

An entry has been made in this land register.
Previous mortgages have been cleared.
The tax office has certified that the seller has no property taxes outstanding.

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