The German real estate market has always been stable despite the financial crisis, providing good investment opportunities for both local and foreign businessmen. It is also worth mentioning the fact that in the last years the prices for both sales and rentals have gone up with 23%, respectively 15%, so whoever owns now a property in Germany has made a good investment. Another advantage of purchasing a property in Germany is that a foreigner is not required to have to have a residence permit, as other countries require.
The first step when wanting to acquire real estate in Germany is to search for the suitable property. Real estate properties are subject to some minimum legal requirements and a law firm in Germany can provide you the details about these requirements. Some of them refer to the roofing, windows and heating system, which is why a thorough real estate due diligence is required. Property encumbrances or third party leases can be checked with the German Land Registry. The real estate due diligence at the Land Register is usually performed by a public notary, but for building verifications an architect is recommended.
Once all the verifications are done and the new owner and seller agree on the price, terms and conditions of concluding the transfer of property, a public notary will draft the purchase agreement. The notary will make sure all documents are correct and the contract will be signed in his or her presence. The contract will contain the obligations both seller and buyer have and the measures to be taken if any of those obligations are breached. Parties have the right to choose the way the payment for the German property is made, respectively received. However, the buyer must know that until the property is not registered with the Land Register he or she will not own the purchased real estate. The Land Register is located within the German district court where the property was bought.
There are several costs attached to the purchase of property in Germany. These include the property transfer tax (grunderwerbssteue) that in Germany ranges between 3.5% and 5% depending on the region the property is located in, and must be paid within four weeks after making the purchase. The notary fee ranges between 1.2 and 1.5% and the registration fee will be around 0.8- 1.2%. The new owner must also consider the 19% VAT rate.
Our lawyers in Germany can provide you with information about the best regions to purchase properties in. You can also contact us for details about property registration with the German Land Register.