1. What are the usual steps to buy real estate property?

The seller and buyer agree on the main terms of the purchase – especially the price. An estate agent may be involved, but does not have to be. After the parties have agreed to the main terms a notary necessarily has to be involved to process the purchase contract.

The notary drafts a purchase contract. He will check the land register and controls any registered mortgages. If there are no problems this contract is read out in the notary’s office and signed by the parties. The notary takes care of the further processing. He has to make sure that the seller gets his money and the buyer gets his property. In fulfilment of this the notary tells the buyer when he has to pay the purchase price. On the day of payment of the purchase price the buyer becomes the beneficial owner of the property. After payment of the purchase price the notary applies for the registration of the buyer as the new owner in the land register.

The procedure is very complicated and can take several weeks, sometimes even months. The notary is the central person who supervises and oversees the execution of the contract. Without him, a real estate purchase in Germany is not possible. You don’t need a lawyer for this, because the notary is independent and represents both parties in a balanced way.

2. What legal checks should be done before buying a property?

 No special legal checks need to take place. The notary checks what is legally relevant when drawing up the purchase contract.

3. Buying through a company.

 Regarding the purchase of real estate through a company there are no differences to a purchase by an individual.

What is advisable depends on the individual case and should then be discussed with a tax advisor and the notary.

4. Prevention of money laundering. 

In compliance with the German Anti-Money Laundering and Anti-Terrorist Financing Act, lawyers, estate agents, banks and notaries, dealing with a real estate transaction are obliged to investigate the origin of funds to be invested in the purchase of the property. Failure to do so when money laundering is involved exposes these professionals to very serious penalties.

Should the notary detect that there could be money laundering involved, he is obliged to stop proceedings and report the case to the Financial Intelligence Unit.

5. What are the purchase costs and taxes?

The fees regarding the purchase are normally charged to the buyer. They will usually include:

  • real estate transfer tax: this is between 3.5 and 6.5 percent, depending on the federal state (here in NRW it is 6.5)
  • notary and registration fees: around 2 percent
  • estate agent`s fees, normally 3.5 percent from both parties

6. What documentation must the buyer have in place before buying a property?

 In order to purchase real estate it is necessary to have proper identification, such as a valid passport or ID-card. In case a mortgage is involved, the bank will ask for further documentation regarding the financial status of the buyer. This may vary per bank.

7. What precautions have to be taken regarding off-plan purchases?

Buying a property off-plan means buying it before it’s been built. The buyer signs a combined sales and building contract with the developer. There are special laws which the notary must take into account when drafting the contract in order to provide the buyer with the best possible protection.

8. Tips for clients looking to build their own property. 

A party who is looking to build a house on their own property must always have the proper permit before starting the building works. He will first need to engage an architect who will draft a project to be submitted and approved by concerned authority, in many cases the municipality. Furthermore, it is convenient to find a reputable builder and formalize with him a proper contract in written form. There’s no notary or lawyer needed except for registration of a mortgage for the financing bank.

9. Annual running costs.

 In the annual costs to be considered when buying a property, the following taxes and duties per year can be taken into account: for example:

Property tax, fees for garbage collection, street cleaning, winter service. In addition, insurance for the property should be taken, but is not obliged. Banks normally demand an insurance otherwise the bank will not finance the loan.

10. What minimum legal checks should be done when selling a property?

 The seller must assure that he can deliver the property in the conditions agreed in the contract. The seller is obliged to deliver the property free of all special charges and restrictions, with the exception of those that the buyer has accepted in the contract.

11. Selling costs and taxes.

The fees regarding the purchase are normally charged to the buyer.

If the property is encumbered with a mortgage, this will be deleted from the land register via the notary upon execution of the contract. Only then the transfer can be executed. The costs for the cancellation of the mortgage are paid by the seller.

This publication proceeds on the assumption of a sort of typical situation. Because, however, no two situations are exactly alike, the answers can be different under specific circumstances. The notary involved in a transaction can incorporate additional arrangements between the parties into the contract and advise on a specific situation. If you have any questions regarding real estate law in Germany, please feel free to contact us.