Buying Property in Bavaria

Sorry, but we are unable to provide advice by phone or email on buying property in Bavaria/Germany. However, we are happy to chat to guests on the subject during their visit and can even recommend some local estate agents.

We have prepared the following information, based on our experience, which we are happy to share with you:

The right property at the right price can provide an excellent income but is unlikely to provide any significant capital growth. If you buy a modernised property, it will be expensive and probably not to your taste. If you buy a dilapidated property and do it up, the selling price is unlikely to cover the purchase cost plus the cost of work you have had done: in Germany, houses are like cars, from the moment they are 'finished' (new or renovated), they start to lose value.

Unless you plan to live here full time, it is almost certainly cheaper to rent an apartment for the time you want to spend here than to buy one.

Bear in mind not only the costs of buying but also running costs, garden maintenance, snow clearing etc. We are not able to take on managing or letting properties for other owners.

The process of buying property in Germany is very different from the UK and also much more straightforward. It is as follows:

• A price for the property is agreed between buyer and seller, usually through an estate agent.
• An appointment is made with a Notary for buyer and seller to sign the contract of sale (which is sent to you before the meeting for you to review)..
• After the contract has been signed, the Notary has to:
  - Inform the land registry that the property is reserved for the buyer. This 'blocks' the entry and ensures that the property cannot be sold to anyone else.
  - Obtain a statement from the council for the area where the property is located that the council does not wish to buy it (all properties have to be automatically offered to the council is case they are needed for a road widening scheme, for example). Also ensure that the property is free of all charges related to mortgages etc.
  - Ensure that the tax on the sale (3.5%) has been paid. Other fees which have to be paid are the Notary's own fees (approx. 1% of the property price), land registry fees (approx. 0.5%) and the estate agent's commission (3.57% including VAT).

Once all of these tasks have been done, the Notary informs the buyer that the purchase price is due for payment - unless a date for handover of the property has already been agreed, the date for payment will be about 3 weeks after the contract has been signed and the buyer has to make the payment within 10 days of the date of the notice.

The seller then confirms to the Notary that the money has been received - ownership actually passes from seller to buyer on receipt of the payment from the buyer.

The Notary then instigates the notification of change of ownership at the Land Registry. This process can take several months.

Special Notes:

Property prices can be handled on the same basis as in the UK: as many properties are sold on the death of the owner or because the owner is giving up a letting or related business, the property may be sold including contents. The price is then divided between property and contents as tax is only paid on the property price. If the heating is oil fired, the sale should be agreed on the basis of takeover of the oil in the tanks at the time of sale.

Estate Agents are commissioned to sell properties by the owner. The contract signed between estate agent and owner specifies that the agent is also acting on behalf of the buyer. The estate agent therefore takes commission from both sides and oversees the whole buying process to make sure it is completed. Fees from buyers are not negotiable. Sometimes fees from sellers can be negotiated to persuade a seller to accept a lower price to achieve a sale.

Lawyers: Notaries have a monopoly on drawing and signing of contracts for sale of property. Their role is that of an intermediary acting to achieve agreement between both parties. As ordinary lawyers have no role in the process and the notary is impartial, the buyer and seller do not have their own legal advisors.

Finance: theoretically, buyers can be asked to prove that they have the financial resources to buy the property before the contract is signed. If a loan is taken out for the purchase from a German bank, the maximum period of the loan is 10 years - it is possible that this can be renegotiated before the end of the term. The loan can be on an interest only or interest+repayment basis, and fixed or variable interest. At the moment (Spring 2008), mortgage interest rates almost identical between the UK and Germany.

Insurance: fire insurance is a legal requirement and passes from seller to buyer with the transfer of ownership. Other insurance has to be cancelled by the seller and taken out by the buyer. The fire insurance can also be cancelled by the buyer and added to the other insurance taken out with a different company.

Handover: on the day of transfer of ownership the seller, buyer and estate agent should go round the property together to make sure that everything is being handed over as agreed (especially as far as contents are concerned), meters read and the readings send to the electricity supplier and council for water. The seller will cancel dustbin arrangements with the refuse collection company and the buyer has to contact the company to set up a new arrangement. The same goes for the TV licensing authority.

Structural surveys: these are not usually done. In many cases, a valuation will have been commissioned by the seller which can provide more useful information that a British type survey. This is normally made available to a buyer. The actual valuation process is very different from the UK: it is done on the basis of the building cost per m2, depreciated by the age of the property, plus the land value, with adjustment for actual prices being achieved in the area.

Taxation: A property must be held for more than 10 years for any profit from the sale to be free of tax. If the property is held for less than 10 years any profit made on the sale is taxed according to the seller's income tax band.

Letting of property: If the owner of the property is a British national, a tax return showing income and expenditure has to be submitted in both Germany and the UK. Tax paid in Germany on profits from letting can be offset against any UK tax liability. The rules applying to calculation of expenditure are quite different. Do not forget that, for UK tax purposes, all expenses relating to inspection trips when looking for property to buy can be offset against tax. Also all trips to shops etc. to buy items for the property or relating to the letting business in any other way, can be offset against tax at the rate of 40p per mile (45p if 2 people who are partners in the business are travelling in the vehicle). VAT registration can only be avoided if income in the prevous year was less €17,500 and is not expected to be more than €50,000 in the current year. Properties for letting which have less than 8 bedrooms do not have to be registered as businesses. This also means that letting expenses cannot be offset.

Liability: this information is given on the basis of personal experience in Bayerisch Eisenstein. No liability can be accepted for any problems arising from decisions based on this information.

Timetable of a Property Purchase

We are in the process of buying our 3rd property in Bayerisch Eisenstein and this is the sequence of events:

Friday 21st March (Good Friday) - visited the property with the estate agent (from a division of our bank) and the owner.

Tuesday 25th March - confirmed to the estate agent that we were definitely interested in the property. Arranged 2nd visit to the property.

Thursday 27th March - Visit to our bank to discuss a loan for part of the purchase price to avoid bringing too much capital from the UK while the exchange rate is so poor. 2nd visit to the property with the estate agent. Offer made. Estate agent phoned to confirm that the buyer had accepted the offer. Appointment made with the Notary for Monday 7th April to sign the contract. Completion date agreed as 2nd May.

Friday 4th April - phone call from bank manager to confirm loan and interest rate. Draft contract arrives in the post from the notary (the first document we have received confirming the sale).

Monday 7th April - Apppointment with Notary, vendor and estate agent to sign the contract and mortgage on the property. As only I speak fluent German, I sign the douments on behalf of both us and Martin comes in later to a document giving me the right to sign on his behalf.

Thursday 10th April: the estate agent's invoice arrives: 3% of the sale price plus 19% VAT. Payable 30th May.

Friday 11th April: Notary's bill arrives: €965 plus VAT for the house contract €264 plus VAT for the mortgage document.

Thursday 17th April: Manager of the bank in the village brings mortgage forms for us to sign. We arrange for the loan to be credited to our account first thing Friday morning. The interest will be debited from our account monthly in arrears. We have 2 years in which to clear the loan or negotiate a new loan for a longer period.

Monday 28th April: Letter arrives from the Notary informing us that all legal prerequisites for the sale are in place and that we should proceed with paying the purchase price on 2nd May as agreed.

Bill for Grunderwerbsteuer (equivalent of UK stamp duty arrives): 3.5% of purchase price - in this case €15,000 less than the total price we are paying as that amount has been allowed in contract as the cost of the furniture, furnishings and other contents. Payable 28th May. There are actually 2 bills, each for 50%: as we are buying the house jointly, we are each liable for 50% of the tax.

Wednesday 30th April: We phone the bank to arrange for the purchase price to be transferred to the vendor's account first thing in the morning of the 2nd May. As his account is at the same bank, the transfer will be instantaneous and will then have ownership of the house.

Friday 2nd May: Chased up the bank at 9 am to make sure the transfer was done. By 9.30 the money was paid and we had access to the house.

Monday 5th May: Bill arrives from the Bavarian Justice Office for land registry fees of €363, payable within 2 weeks.

Czech Republic

Property can be even cheaper across the border in Czech Republic but it can also be much more expensive (e.g. in Zelezna Ruda). However there are currently laws restricting purchases by non Czech nationals and the infrastructure is not as good.

Contact us

Bavarian Forest Holidays
Hans-Watzlik-Strasse 8
94252 Bayerisch Eisenstein
Germany
Tel. (Germany) +49 (0)9925 90 32 04 (UK) 07976 403434
Email: