- Secure Your FinancingThe first step in purchasing real estate in Germany is securing financing. German law requires that the buyer present an irrevocable acceptance of loan financing with a reputable bank before going to sign the notary contract. Keep in mind that many real estate developers have existing relationships with financing banks – you should contact your developer regarding potential financing options.German Real Estate financing can be done either with mortgage banks or with any usual bank or financing institute (Sparkasse, Volksbank, Insurance company, Bausparkasse). Financing usually is done for about 60-70% of the buying price by mortgage loan. Anything above that up to 100% of the buying price needs to be secured either by additional securities such like insurance (remember, it needs to be actually in that exact value) or other financial securities that must be deposited at the financing bank. Additional financing can rarely be obtained based merely on the income of the purchaser.
Financing for foreigners not residing in Germany (and not earning their money in Germany) is possible under certain circumstances but cannot be expected to exceed 60% of the buying price.
Financing should be secured before any contract of purchase is signed. Sometimes one can sign a reservation or option agreement which holds good for an agreed-upon period of time, enough time to get the financing secured. However, the only binding document is the purchase deed.
If you are making a cash deposit, you must bring proof that you actually have the funds.
2. Review the Deed of Purchase
The Deed of Purchase and any accompanying papers (like the official declaration of partition “Teilungserklärung”) should be thoroughly reviewed – make sure that you understand the agreement! If you are not fluent in German it is better to have a professional translation done first or inquire a specialized solicitor.
The terms of the contract can vary. That is why a contract needs to be checked by someone experienced in German real property law. There are many legal provisions which can be to the advantage or disadvantage of the person buying – these should be reviewed carefully! In case of doubt, the foreign investor should ask for legal assistance.
3. Set an appointment with the Notary Public for signing the Deed.
You must set an appointment with the Notary Public for signing the Deed. At this meeting, the Notary Public will read the Deed aloud for both parties, with any needed translator present. Some Notaries offer a bilingual German-English version of the Deed. After making any changes or additions the Deed is signed by both parties and the Notary Public. This contract is irrevocable upon signing; unlike the usual purchase contract it cannot be revoked within the next two weeks! The contract will include the purchase terms and all conditions thereof, like the day of payment, the day of handover to the new owner, any needed repairs or other actions to be done by the seller and any other specifications as needed.
At the meeting with the Notary Public all persons buying the property to be present (e.g. if a hunsband and wife are both purchasing the property, both must be present), and show their legal papers (e.g., valid passports). If a corporation is purchasing the propery, the person(s) signing the contract need to bring their legalization papers from the company (authorization from the corporation and an excerpt from the Chamber of Commerce entries showing the authorization status) plus passport. The contract must be personally signed after the Notary Public has read it aloud. As part of the procedure the Notary Public will read the purchase contract out loud. If the buyer does not understand German language, it will then be read in English by a qualified translator. It is the task of the Notary Public to ensure that all parties understand what they sign in the end. Any questions that come up need to be answered.
It is the Notary Public who will perform the next actions needed including any and all applications in the so-called Grundbuch – the land title register.
4. Pay the real estate commissions.
At the meeting with the Notary Public, the Real Estate agent’s or broker’s commission must be paid. This commission typically ranges between 3.5% and abt. 7 % of the buying price plus VAT. Depending on the agreement between the parties, the commission is paid by the buyer or by the vendor.
The purchase tax on Real Estate must be paid in two to four weeks after the contract is signed. The purchase tax is 3.5% in most German federal states – however in Berlin it is 4.5 %- of the buying price stated in the contract. This tax must be paid when requested as otherwise the tax office will not issue the clearance certificate – an important paper required for transferring title from the seller to the buyer. Without that paper, the title transfer is not effective!
Within the same period of time, the fee for the notary and registration fees must be paid. These fees typically comprise about 1.0 to 1. 5 % of the purchase price.
Frequently Asked Questions:
1. Do I have to be German resident in order to buy property in Germany?
No. Anybody a valid passport and sufficient purchase funds can buy property in Germany. However, owning a property in Germany does not give one a right to immigrate to the country. If you intend to buy property in Germany in order to live here, you must make sure first to get a Visa to be a permanent resident in the country.
2. What are the costs accompanying buying property in Germany?
In Germany, the buyer has to carry the following costs and fees: