By Christopher Nye
To buy or not to buy, that has been the question in Germany in recent years. It was a country where most people rented, protected by strong pro-tenant laws, and where property price rises were slow enough that your home remained just that, not an asset.
Lately though, with rents in the big cities rising by some 10-15% per year and foreign speculators blamed for buying up the best property and forcing up prices, the phrase betongold (‘concrete gold’) has entered the language and the mood has shifted towards buying.
Foreign residents are allowed to buy property in Germany but if staying there for more than three months they will need to get a residence permit, which does not come automatically with a house purchase.
Beware taking on a property with sitting tenants as they are strongly protected and can be very hard to move out.
Buying is not made easy for international buyers. You don’t often find For Sale signs outside German properties and the biggest property portals, immobilienscout24.de and immowelt.de, operate only in German. Bellevue.de is in German and English at the luxury end of the market. Newspapers are still packed with property ads, especially the weekly Immobilien Zietung in print and IZ Aktuel online. Leading newspaper Die Sueddeutsche has property supplements on Wednesdays and Fridays.
Despite being licensed and having to undergo extensive training, estate agents are as unpopular in Germany as in most countries – a vote on strike action in late 2014 was met with national hilarity. Most agents are members of either the IVD (ivd.net) or the BVFI (praxisverband.de). Beware of being asked to sign an exclusive agreement with one agent.
Agent fees are relatively high, usually around 3-7%. This is because for most Germans, buying a property is a serious long-term commitment, a purchase for life. There is less of the ‘climbing the property ladder’ attitude. However, with fees so high it is common to see private, no-estate-agent (von privat) sales advertised.
You make the offer via your agent (makler). If accepted, as buyer you get to
choose the public notary (notar) who will ensure that the property can legally be sold and then draw up the contract. This will show all relevant details including the handover date. You will agree with the vendor the payment arrangements and buyers should insert an exit clause until you are sure of your financing.
Deposits are normally at least 20% of the purchase price and for buyers from overseas even more. Buyers will be expected to show an ‘irrevocable acceptance’ of loan financing or proof of the funds, and in return sellers will usually agree to a priority notice at the land registry to prevent gazumping.
At the signing ceremony the notary will read the contract in German, you will normally pay the purchase price to the notary for it to be transferred to the seller when the new ownership is registered, which the notary will also do. With the registry entry made, all past mortgages paid off and property taxes up to date, ownership is officially transferred.
Buyers can expect to pay between 7 and 13% on top of the purchase price. That’s made up of the real estate transfer tax (3.5-6.5%), notary fees of 1.2-1.5%, another 1% or so for registration fees and estate agent commission of 1.5-3% (plus VAT), which is half of the total agent’s commission. Estate agent commissions, notary and registry fees are paid at the time of purchase, but purchase tax or stamp duty is paid within four weeks.