BUYING PROPERTY IN GERMANY I PROCESS I STEPS

In this article, our colleague from Gurcan Partners Germany, Att. Hülya Oruc will mention Buying Property in Germany. Which steps must be taken? What are the differences in the process for foreigners? 

As a matter of fact, it has to be said that in general Germans are not in favour of buying the property. Germans rather rent their homes than buy properties.

Nevertheless, buying property in Germany is right now a great opportunity for investors to be done these days. The interest rates are very low and as said before Germans are not in favour of buying properties themselves. Germany has a very low unemployment rate (3,4 %, in 2018). As well it is exciting and good to know that there are no for sale signs in the front yards. Most houses and apartments are sold by agents. Still, it is possible to avoid paying provisions to such agents when by luck privates decide to sell their property. The most common form of ownership is the full freehold ownership and condominium ownership.

First of all, it is important to know that buying a property as a foreigner in Germany does not entitle you to get a residence permit. This means on the other hand that foreigners do not need a residence permit to buy a property in Germany.

For foreigners, the same legal rules apply to residents. There is one essential thing potential buyers have to have in mind: if they are married according to Art. 15 EGBGB the restrictions regarding the property regime of the state the married couple has been married apply for the purchase. Meaning that if this country foresees, for example, a gain compensation this applies to the purchase too. Still, the couple is free to choose which property regime shall apply to their marriage.

Buying a property is furthermore allowed for natural individuals as well as for legal entities which can have obligations. In Germany the so-called abstraction principle is common. This means that the cause (the purchase contract in this case) is not binding, therefore independent from the validity of the actual transmission of the property. A change of ownership is bound to the transmission at the land registry and not to the validity of the purchase contract.

It is quite important to proceed the buying property in Germany. Gurcan Partners International Law Firm’s professional team is ready to assist you during the all process to secure your investment.

The purchase contract has compellingly to be notarized. A non-notarized contract is not binding. The notary will make sure that the parties to the contract will understand what they are signing. If he is not sure, he will need the help of a sworn interpreter. The costs of the notary are usually paid by the buyer.

To sign a loan agreement as a mortgage, you should have signed and notarized the purchase contract in your hand. Then your mortgage broker or the bank can register the mortgage to secure the right of lien for mortgaged real estate.

The purchase will be completed in five steps:

1. Agreement of the Parties (Please ask for an offer from in[email protected] to organize your contract and all process)
2. The Parties must declare together with the transmission of the property in front of the notary (so-called conveyance of property, representation is possible)
3. Then the Transmission will be entered into the land registry, meaning that with transmission the buyer will be the owner of the property
4. The Agreement of the Parties has still to be given when the transmission will be entered
5. The seller must have the authorization to transmit

If you work with a real estate agent, all fees you have to pay as the buyer may be added to around %10 on the price of the property.

These fees for buying property in Germany:

1. Property Sale Tax (In German, grunderwerbssteue): Between 3,5 to 6,5%  up to the region
2. Registration Fees: Around 0,8% to 1,2%
3. Notary Fees: %1,2 to 1,5% (depending on the several circumstances)
4. Real Estate Agent Fees: Up to your deal between the seller. These can be 1,5% to 6% of the purchase price depends on the deal.

In each region, a communal tax is levied by the local authority. There are two types of local German Property Tax: Type A applies to agricultural properties, and Type B applies to the building land and buildings. These taxes are calculated using the unit value (in German einheitswert) as fixed by the Finance Authority.  Rates depend on the location where the property. The average rate for residential purpose properties is 3,5%.

There is another property tax, which is the German Capital Gains Tax (CGT) calculated at the same rate as the personal income tax. (To get to know more about taxation in Germany, please check our article on it.)

Property owners who have held their property for more than 10 years will be exempt from the Capital Gain Tax in Germany. In some conditions, property owners may exempt it as re-invest the funds into an alternative property in Germany.

Gurcan Consultancy provides tax advising and accounting services in Germany. 

Please check Frequently Asked Questions about Buying Property in Germany.

1. Decide how you will finance your investment such as a mortgage or cash
2. Find a Proper Property
3. Make an Offer to the Seller
4. Preparation of the Purchase Agreement (Contact Us)
5. Back to Bank to finalize the mortgage if you get it
6. Sign the Purchase Agreement in front of the Notary
7. Get the Notary to Register the Sale
8. Around a month later, the payment of the property tax was between 3,5% to 6%.

Please check Frequently Asked Questions about Company Formation in Germany.

Especially secondhand houses may have several hidden legal problems. One another point is the preparation of the purchase contract. Having a lawyer during the procedure of buying property in Germany is the safest way. Our professional team is ready to help you during all procedures of buying real estate in Germany. Please contact us.

Buying Property in Germany 

Att. Hülya Oruç 

All rights reserved. All rights of the Buying Property in Germany article belong to Gurcan Partners International Law Firm. The author has no responsibility for the information in this article. This article is prepared just to inform.

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As Gurcan Partners International Law Firm, we provide services with our office in five EU and five non-EU countries. Please find our articles below.

• Company Taxation in Germany
• Doing Business in Germany
• Establishing a Branch in Germany
• Company Formation in Bavaria
• Germany Skilled Immigration
• Buying Property in Germany
• Business Immigration in Germany
• Real Estate Investments in Germany
• ICO Regulations in Germany
• Company Formation in Europe
• Company Registration in Hungary I Step by Step
• Company Formation in Serbia
• Company Formation in Kuwait

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