Germany Property Buying Guide

We suggest you use our site to sell or buy your property privately (von privat). This saves you paying fees to an estate agent (Immobilienmakler).

By using us both buyers and sellers can avoid the agents fee representing 5-7 % of the purchase price. (This fee can be negotiated. Normally it can be split between the buyer and seller. Occasionally the buyers pays the whole fee or the seller pays.)

Using us also allows many potential buyers to approach you rather than only the buyers who have signed a search agreement with an agent.

Property Agents do not use for sale signs and property addresses are not given in the local media and press in order to restrict access to properties. They do this in order to get a fee from the buyer as well.

Buyers do not have to sign any exclusivity contract with an agent so you can peruse a wider range of offers.

Germans tend to buy houses for life. Hence there are fewer real-estate market price fluctuation. It is not unusual for would-be homeowners to take up to two years to find their home.

The percentage of Germans owning their homes is low compared with elsewhere. At about 42 percent, it is the lowest in the entire European Union. As in other countries, the ratio differs according to income levels. The more affluent the people are the more likely it is that they will own their homes.

The prospects for real estate speculation are not favourable. There is little chance for substantial increases in property values over the next few years. Furthermore any profits are taxable if the re-sale occurred within 10 years of purchase.

A potential buyer should carefully research the property when buying a house in Germany. Many of the "inexpensive" homes advertised in the local papers may require renovation or are reduced due to existing debt on the property.

There are many price variations across Germany. Frankfurt, Munich, and Hamburg are the most expensive, followed by Stuttgart, Dusseldorf and Cologne (Koeln). This is due several factors: - size of property market, number of local employers and level of unemployment. By contrast Berlin is cheap due to a surplus of properties that were built in the East of the country with tax advantages in the 1990s.

A typical one family detached house of average size with about 125 square meters living space (ca. 1,167 sq. ft), including garage would cost about €255,000. Due to regional it would cost €185,000 in the north, €235,000 in the west and €310,000 in the south. In cities of more than 500,000 population the price was about €300,000.

The city-state of Bremen is the least expensive of the larger cities. The house above would cost a mere €185,000. By contrast in Munich it would cost €635,000. The price per square meter for privately owned property was only €975 in Bremen and around €2,050 in Munich.

These are buildings with 8-20 Apartments or flats. They are very popular as investments in Germany. In Frankfurt they are very hard to obtain whilst in Düsseldorf, Hannover and Berlin they are much easier to find.

The most sought after are situated in old buildings (Altbau) that were constructed at the beginning of last century, between 80-100 years old.

After modernisation they command good rental income because of their high ceiling at about 3.20 to 4.00 meters. (Buildings since about 1950 have approximately ceiling heights at 2.50 metres.)

Overall you should budget for about 10 percent of the purchase price to cover legal costs and fees. Estate agent's commission is the biggest part - up to 7% when both buying and selling if you are unlucky

In addition there are the property transfer tax and notary fee, administrative costs as well as additional translation or solicitor fees. Notary, land register and registration fees: 0.8% to 1.5% of the purchase price.

Depends on the regional and the agent. Normally between 3.5% to 7% of the purchase price.

This is 3.5% of the purchase price and is paid by the purchaser.

Under-declaring the purchase price with the sellers’ agreement is illegal. If it's discovered, you will still be liable to the tax as well as subject to a severe penalty fee.

The notary fee is between 1% and 1.5% percent and covers preparation of the contract, negotiations, the signing ceremony and entry into the land register.

When you have found your property that you want to buy and agreed a selling price, a solicitor/lawyer or notary is required to carry out the legal work and contract obligations, checking that no liabilities exist.

These are approximately 0.25% to 0.4% of the purchase price.

You need to be fully aware of the contract contents and should have a translator present when the Notary reads the contract in German. Prices vary. Contact you local consulate for a list of approved translators.

There may also be a mortgage arrangement fee of 1% of the mortgage.

You can normally borrow up to 70% from German banks and building societies and they would normally expect a proven track record of regular monthly savings of up to six years before it is approved. Most mortgages are for 10 or 20 years although the maximum term would be up to 30 years on a fixed rate of interest.

It is possible to decrease the total amount of interest paid by paying interest up front. The greater this payment is, the less will be the interest costs in the long run.

In some situations the seller will want to transfer his mortgage to the buyer, and the buyer may find this to his advantage. The mortgage may have been obtained when rates were lower.

This is to the advantage of both parties, and particularly the buyer, since it provides assurance that the entire transaction is carried out in accordance with the law.

The notary is not responsible the correctness of the owner's property description. That is the responsibility of the buyer's solicitors.

The seller isn't obliged to point out any major defects that should have been obvious to the buyer, though he should be required to describe any hidden defects.

A copy of the most current land register entries can be obtained on application to the district court. However, only persons with a legitimate need to know, such as the owner or the notary, are eligible to make this application.

Ask for a copy of the contract before going to the notary, review it carefully and have it translated if necessary. Prepare any questions you have in advance, don't hesitate to ask them and allow sufficient time for getting full answers.

The register also spells out the rights of any third parties; those, for example, of tenants. Tenants cannot stop the sale of the property, but the new owner is bound by any lease arrangements to which the previous owner agreed. Hence, the new owner cannot evict a tenant before the lease expires.

If buying a flat in a block you need to see the annual management reports and minutes of meetings to see any planned future building expenditure that you will to share with the other owners. Also the committee will also have a set of tenant rules and regulations.

You solicitor should check the following documents for any restrictions or covenants. The Teilungserklärung cannot be altered by the Wohnungseigentümergemeinschaft.

Gemeinschaftseigentum - covers all common parts of a building such as walls, roof, stairwells, elevators and heating, pipe-work etc and common areas such as cellars, parking and playgrounds.

Teilungserklärung - legally defines the partial property of each co-owner and their relationship to each other. It also specifies the size and use of each flat and commercial premises within a building. Special rights are frequently defined for the exclusive use of a garden, a terrace on the ground floor or a parking bay in front of the house in the Teilungserklärung.

Once the buyer and seller have agreed on a purchase price, the property transfer contract must be signed in the presence of a notary. The contract should state:

Correct names and addresses of both parties and the property details. This is crucial as an error, especially in the property details, could at least partially invalidate the contract.

The agreed purchase price and terms and conditions of payment.

Stipulations as to what happens in the event either party fails to live up to the terms of the contract.

Both parties can decide on payment terms.

In most cases the buyer has to obtain financing. Therefore the seller agrees to a Priority Notice (Auflassungsvormerkung) in the land register. The Priority Notice protects the buyer from the seller offering the property for a higher price to another party.

The outstanding property taxes (grundsteur) must be paid to the tax office within 4 weeks after the buying contract is signed. The tax office will not issue a clearance certificate until the outstanding grunsteur has been paid. Without this clearance certificate, the property cannot be transferred from the seller to the buyer.

A buyer can choose his own notary.

The notary is legally bound to act as an impartial middleman between buyer and seller. The Notary checks the land register to see whether the property can be sold at all; and if it can be, whether there are any restrictions on its use. The contract spells out the obligations of each party and the measures to be taken in the event of default.

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

At the actual signing ceremony the notary reads the contract of sale verbatim and is required to be certain that both parties fully understand its content. The buyer may ask questions and interrupt the proceedings if a clause isn't completely understood.

Since the reading must be in the German language, the buyer has the right to have a professional interpreter present.

In most cases, buyers and sellers are not single persons but couples or even groups of owners. All persons involved must be present at the signing ceremony. All must bring their passports in order to identify themselves.

The purchase price is normally paid into an account maintained by the notary (Notaranderkonto) and transferred to the seller only with the land register entry is complete.

Within the same period of time the fee for the notary and registration fees have to be paid. All in all they comprise about 2.0 to 2.3 % of the buying price of the Real Estate.

On completion of the sale of the real estate, the Title Deeds (Grundbuch) are registered with local land registry enabling the title to transfer to the new owner.

The Land Register keeps records of all land and their owners. It is normally located at the district courthouse and is the central document for a piece of property, with all necessary information on its ownership.

An actual change in ownership can occur only when an entry has been made in this land register, and only when previous mortgages have been taken care of and the tax office has certified that the seller has no property taxes outstanding.

Fire insurance (Brandversicherung) is compulsory.

Property Insurance (Gebäudeversicherung) is optional.

Building and Contents Insurance (Hausratversicherung) is optional.

Premiums vary according to the value of the property or the items to be insured. For more information on insurance, please contact the German Insurance Association GDV www.gdv.de

You may also require insurance against unemployment.

Charged in Germany to cover local services and is rated usually below the current market value and would be around 1% of the rateable value.

Non-residents are subject to wealth tax on property owned in Germany of around 0.5%.

There are no legal restrictions on non-Germans owning property.

You should ensure that you have full rights to residency before buying property in Germany. However owning property in Germany provides no right to stay there on a temporary visa.

To have permanent residence status in Germany, you must be able to prove a permanent stay of at least six months in Germany within two complete tax years (Jan-Dec).

If they work more than 183 days in any tax year they are liable to German income tax and must register with the local German tax office (Finanzamt).

An individual who is considered a permanent resident in Germany will have tax calculated on his combined income from Germany and overseas.

You may be able to get tax breaks when constructing you own property or undertaking renovation. Basically, the persons most likely to benefit from these subsidies are those of modest income with minor children who are buying or building moderately priced housing.

You should check with the bank or a tax advisor (Steuerberäter).

A non-resident may choose, for tax purposes, to be considered a resident on condition that his income earned in Germany amounts to 90% of his total income, or that his non-taxable income in Germany is less than DM 12,000 a year.

UK citizens working in Germany for less than 183 days will be liable for UK income tax and must declare their German earnings to the UK's Inland Revenue. Those working on a short-term basis i.e. less than 183 days in Germany may still be subject to a withholding tax of 25% of any earnings.

An individual's income is taxed on a progressive scale.

Awaiting latest Tax rates for 2007

An individual is liable for tax on his income as an employee and on income as a self-employed person.

A self-employed person must pay their income tax in advance that will be offset on filing an annual tax return. The advance payment is assessed based on previous year's tax return. In the event of a new business, the advance will be calculated on the basis of estimates made by the owner of the business. The advance payment is made once every three months. A partnership is not a separate body for tax purposes. The income from the partnership is divided between the partners who will then each pay their tax as an individual on their share according to their share in the partnership.

Certain payments are deducted from taxable income.

You should discuss your individual tax situation with your employer or Tax Advisor. Otherwise contact your local Tax Office (Finanzamt). Their offices can be found www.finanzamt.de or www.bff-online.de

More useful information on the German taxation system can be found on the following website:

www.worldwide-tax.com/germany

Now at 15% of increase in property value less selling costs. The previous 10 year holding period to sell a property tax free no longer applies.

Buying and selling commissions are unregulated and vary from area to area. Only rental contracts have commissions regulated by law.

Buyer should refrain from signing exclusivity contract with any one agent as this limits your ability to peruse a wider range of offers from other agents.

Buyers should ask the agent at the outset who is paying his commission and what the percentage is.

Buyers should ask the seller whether he has a contract with an agent. Asking the commission from the seller seems logical, since he is the one who can judge what the agent has done to sell the house. The buyer in most cases has only seen the agent once or twice and can fairly ask what the agent has done to earn the big fee he is charging.

An agent may submit an invoice only when he has clearly arranged the contact between buyer and seller. That means that he has given the buyer the full address, the full name of the seller and a purchase price.

Since agents like to get a fee from the buyer as well, they restrict access to properties on the books to those who signed a search agreement. This is also why agents do not use for sale signs and addresses are not given in the local media and press.

If a potential buyer is introduced to a property previously introduced by another agent and makes an offer, he should tell the second agent immediately. Otherwise the buyer may end up paying commission twice.

Grosszügige Räume (large rooms or very spacious) means the property is very expensive to heat.

Für Schnellentschlossene (for quick decision-makers) means the home has been on the market for a long time.

More information can be found at www.vdm.de

VDM ONLINE – Association of German Real-Estate Agents for Property Ownership, Housing Management and Financing (VDM – Verband Deutscher Makler für Grundbesitz, Hausverwaltung und Finanzierungen e.V.). http://www.real-estate-european-union.com/english/germany.htm

http://tmsonline.info/property/browse.cfm?coast=Austria&entered_by=reeu%20Austria

http://www.howtogermany.com/pages/housebuying.html

http://www.german-embassy.org.uk/living___working_.html

http://www.allgrund.com/realestate/buying-realestate-germany.htm