LEGALEde advises and represents you in the purchase of real estate in Germany, at every stage, from the contact with the real estate agent, with the seller, in the purchase offer and preliminary contract, until the final contract before the notary.
Buying a home in Germany is usually done in two stages: the offer to purchase and the final deed, which is the purchase contract drawn up by the notary.
The offer to purchase is not mandatory, but is often used when an immediate sale is not possible.
In addition to the cost of the purchase, there are other costs to consider, as we will see below.
The preliminary contract does not exist in Germany and, in fact, any private writing concerning the purchase of real estate or any other real estate disposition in Germany is null and void, as only notarial deeds are valid.
Private agreements that deviate from the notarial deed cause the absolute nullity of the transaction (e.g., if there is an agreement on a price that is different from that stated in the notarial deed), without any time limit.
Any real estate disposition made by means of a notarial deed becomes effective only upon its registration in the Real Estate Registry. In order to protect the rights of the buyer, it is necessary to request the registration of the transfer of the property ("Auflassungsvormerkung").
The buyer will pay only after the proper registration of this note, verified and confirmed by the notary.
In Germany, voluntary mortgages are rare. Instead, a land charge ("Grundschuld") is used to secure bank financing. The latter is registered in the land register in favor of the bank for the agreed amount. Separately, in a private deed, the bank and the buyer agree that the mortgage will secure the bank financing, which is set out in a loan agreement. The advantage of this system is that contractual changes between the bank and the client can be established (e.g. after the repayment of the bank loan for the purchase of the real estate itself, the client applies for another bank loan for any other purpose, which will be secured by the mortgage), without the need to record these changes in the cadastre.
To sum up the process, once the parties have reached an agreement on the terms and conditions of the purchase and sale of the property, they ask the notary, usually chosen by the buyer, to draw up a draft contract. Once the contents are agreed, the parties sign the formal deed of sale in notarial form. If the buyer has to finance part of the purchase price, the parties request the registration of the mortgage for the bank, with the condition that the bank undertakes to grant the loan exclusively to the seller, who can only use it to pay the purchase price of the property. In addition, the parties will request that the promissory note be registered in favor of the buyer. The notary will then verify the absence of third party rights on the property (e.g. banks that have given a mortgage to the seller) and if he finds the presence of previous land debts registered against the debtor, the notary will ask the buyer to pay these creditors to free the property from these registrations, after verifying the accuracy of the registration of the annotation. Once the purchase price has been paid (possibly through the financing bank), the notary will ask the Property Registry to register the buyer's ownership and cancel the annotation in his favor.
The Mortgage Contract
A mortgage loan is an earmarked loan, which means that it is usually granted by a bank or building society for the sole purpose of financing a property purchase, construction project or subsequent financing.
The property itself serves as collateral for the bank.
The bank arranges for an entry in the land register. If the borrower is unable to pay the loan, the bank can auction the financed property and then service the outstanding balance.
An interesting possibility is that after paying off the loan, the borrower can use the registered mortgage to secure additional future loans not related to the property.
The formal requirement of notarization for the sale of real estate, contained in §313b of the Civil Code, underscores the great economic importance of the contract for the sale of real estate.
The notary is obliged to be neutral towards both parties.
What should I pay special attention to in a notarized contract?
For your own protection, you should not only document your property, but also be aware of other points. The sale of a home can have tax and liability consequences.
A notarized purchase price may have tax consequences for you. If you are selling a home, you should be aware of these consequences. If the property is resold within ten years of purchase, the seller must tax any gain at his or her personal tax rate. Since a notary does not provide tax advice, you should consult a tax advisor.
Since in Germany the purchase and sale is finalized with the payment of the price, and since this payment does not take place at the same time as the signing of the notary contract, as in Italy, but after the parties have signed, the notary makes a preliminary entry of the sale in the land register. In this way, the land register is blocked for the seller and further registrations (legal changes or burdens) that would disadvantage the buyer are avoided. Once the purchase price has been paid, the notarized deed of sale is finally recorded and the purchaser is for all purposes registered as an owner in the land register.
The purchase of a house does not only involve the payment of the purchase price, but you will also have to pay all the other parties involved in the transaction, in addition to the seller.
You will also have to pay for the services of the notary, the real estate agent and, last but not least, the State, which is the custodian of your property rights through the Conservatorship.
These ancillary costs are a significant part of the cost of buying and selling.
It is not uncommon to have to add 10% to the purchase price. The cost will vary depending on the area in which you are buying, as property taxes vary from area to area.
The additional costs of buying or building a house or apartment are obviously different. However, there are some costs that are the same for all purchase options.
In any case, you will have to pay the following additional costs:
-) Notary Deed
-) Land registry fees
-) Land transfer tax
-) Market brokerage tax 3.5 - 7 % incl. VAT
In detail:
-) Notary costs
A notarized contract for the purchase of a house is required by law.
Therefore, a notarized deed is required to formalize the purchase. Notary fees are approximately 1% of the purchase price.
If the notary is hired for additional services in connection with the purchase of a house or apartment, the amount increases accordingly. For example, if you are buying with a mortgage, you will need a copy of the loan agreement you signed with the bank. Or, at the same time as the purchase, you want to grant the right of habitation or usufruct in favor of other parties.
Usually the buyer pays all the notary fees. But it can be agreed otherwise.
-) Registry costs
The actual change of ownership takes place only through registration in the land register. The notarized contract of sale is not sufficient to obtain formal ownership of the property. The notary will also charge the Land Registry fees, which are divided into registration fees for the change of ownership and execution fees for the purchase of the property.
These costs vary according to the schedule of fees and the amount of the agreed purchase price and usually amount to about 0.5 percent of the purchase price of the property.
-) Property Transfer Taxes
Property transfer tax (GrESt) is a tax levied on the purchase of a property or part of a property. It is levied on the basis of the Real Estate Transfer Tax Act and is a state tax that can be transferred to municipalities.
Depending on the federal state, the rate is between 3.5 percent (Bavaria and Saxony) and 6.5 percent (Schleswig-Holstein, North Rhine-Westphalia, Saarland, Brandenburg and Thuringia), calculated on the value of the consideration (Section 8 (1) GrEStG).
As a rule, the consideration is the purchase price.
-) Brokerage Costs
According to Section 652 of the German Civil Code (BGB), the real estate agent is entitled to charge a broker's fee for his services if he has introduced a potential buyer and a purchase or rental agreement has been concluded as a result of his mediation.
Additional fees must be paid to the broker only if previously agreed upon (even if the contract is not concluded).
Unlike notary fees, there is no table of brokerage fees that regulates the fee. The amount of the commission is therefore freely negotiable. Only in the case of the mediation of rental contracts, the legislator has limited the maximum allowable commission to 2 monthly fees.
In most regions, brokerage commissions are shared equally between the seller and the buyer - for both parties a gross commission of 3.57 percent of the purchase price - in the regions of Hamburg (6.25 percent), Bremen and Hesse (5.95 percent) as well as Berlin and Brandenburg (7.14 percent), brokerage commissions are usually borne entirely by the buyer.
Brokerage commissions are tax deductible on the sale of a property only if a taxable capital gain is realized, for example, because the property was part of the business's assets or was leased and sold within 10 years.
The formal requirement of notarization for the sale of real estate, contained in §313b of the German Civil Code, emphasizes the great economic importance of the contract for the sale of real estate.
The parties are free to choose the notary. In most cases, however, the choice of the notary is left to the buyer, since the costs of the notary are usually borne by the buyer.
The notary is required to be neutral to both parties and is responsible for informing the parties of the legal meaning and scope of the contract. However, it is not the notary's job to point out unfavorable clauses to the buyer or seller or to represent their interests. To be on the safe side, it is still advisable to consult a lawyer specialized in real estate law.
What should I pay special attention to in a notarized contract?
The most important point in a house purchase contract is the detailed description of the property. To accurately describe the house and the land, the notary uses the land registry. He will find information on the size, location and type of management. The land registry also shows easements. An example of an easement is a common driveway that must be shared with the property's neighbor. If such easements exist, it is necessary to check them carefully.
Often, in addition to the "essential components" of the developed property (§ 93 BGB), so-called accessories (§ 97 BGB, removable furnishings) are also sold. Since accessories are not subject to business tax when sold, it is advisable to list them separately in the deed (thereby lowering the purchase price, which is taxed instead).
The purchase price is the price actually paid. A false statement in the contract is punishable by law. Any amount paid by the buyer in excess of the contractually agreed purchase price is therefore not legally guaranteed.
Since in Germany the purchase and sale is completed with the payment of the price, and this payment is not made at the same time as the signing of the notary contract, as in Italy, but after the parties have signed the contract, the notary makes a preliminary entry of the sale in the land register. In this way, the land register is blocked for the seller and further registrations (legal changes or burdens) that would disadvantage the buyer are avoided. Once the purchase price has been paid, the notarized deed of sale is finally registered in the land registry and the buyer is effectively registered as the owner in the land registry.
Apart from documenting the property, buyers should be mindful of tax implications, liability consequences, and ensure the neutrality of the notary in the transaction.
Buying a home in Germany typically involves two stages: making an offer to purchase and finalizing the deed through a notary.
While not mandatory, an offer to purchase is commonly used when an immediate sale is not possible.
In addition to the purchase price, there are other costs to consider, i.e. the notary, the broker, the taxes and the mortgage, which will be outlined during the process.
Notarized contracts for real estate transactions may have tax consequences, and it is essential to be aware of these implications for both buyers and sellers.
A mortgage loan is granted for property financing, with the property itself serving as collateral for the bank. The borrower can use the registered mortgage for future loans unrelated to the property after paying off the loan.
The notary plays a crucial role in drafting and finalizing the formal deed of sale, ensuring the absence of third-party rights on the property.
