Buying property in Germany is not really much more complicated than in any other country, however it is well worth being aware of the step by step procedure from the moment you make an offer until completion.
Every country has its own peculiarities, and we outline the legal process of buying property in Germany below.
Step 1: Agreement
The buyer and vendor agree on a price, how and when it will be paid, when to complete as well as on common meeting with a notary. This meeting will generally be scheduled around two to four weeks after the two parties have agreed on a price. If a real estate agent is involved, they are likely to attend the notary meeting as well and will help arrange the meeting and co-ordinate the paperwork. In some cases, the buyer will be asked to sign a reservation form and pay a certain percentage (generally 10-20%) of the real estate agency fee already before the notary meeting. This will make the buyer appear more committed, and the agent will, in exchange, take the property off the market.
Step 2: Preparation of notarisation (meeting with the notary)
The buyer will hire a notary of their choice or ask the real estate agent to hire a notary on their behalf. The agent or vendor will provide the notary with the necessary documents and data to prepare the common meeting with the notary (notarisation). When one of the parties is a corporation and the other party an individual, the latter will always have to be given a period of consideration (in general around 2 weeks) between the moment they receive the first draft of the purchase contract and the actual meeting with the notary, when that contract is signed. This minimum period of consideration has to be respected in order to comply with German consumer protection laws, in order to avoid pressurised or rushed decisions. This consideration period is not necessary when the transaction takes place between two individuals or two corporations.
When buying property in Germany, you will need the following documents ready for the meeting with the notary:
1. A copy of your passport; if you are representing a corporation, you will need a proof of incorporation and registration of your company (from the German Handelsregister or the register of the country where your company is incorporated). The vendor will need to provide the same documents.
2. The notary will need an extract from the Land Registry Office (Grundbuchamt) relating to the property being acquired. This will, most likely, be provided by the vendor or the estate agent.
3. Tax identification numbers of the two parties, if registered in Germany.
4. The purchase price and how it will be financed (cash or mortgage?).
5. If you are buying an apartment, the name and address of the building manager will also be needed. The notary will also need to know the monthly service charge (Wohngeld) of the building the apartment is in. The protocols of the last three residents’ meetings as well as the latest service charge accounts need to be provided as well – generally the vendor or the estate agent take care of this.
6. When and how the completion of the purchase will take place. Generally completion will occur around four to eight weeks after the notarisation meeting. This is also the period during which financing is generally arranged if a mortgage is needed. However, be sure to talk to your bank before signing any contract, don’t sign anything without having consulted your bank to make sure they can provide you with the level financing you will need.
7. There will be the possibility of setting up a notary trust account (Notaranderkonto), however this is not compulsory. A notary trust account can help facilitate the transfer of the funds between the buyer and the seller (vendor), with the notary making sure that the buyer is correctly registered in the Land Registry and that there are no outstanding issues with the property or the seller. Once the notary is confident that the transaction has been properly executed, they will be transferring the funds from the trust account to the vendor.
8. The amount of the real estate agent fee is also sometimes required by the notary ahead of the meeting. This fee is generally due just after the notarisation and signature of contracts.
Step 3 – The notarisation meeting
This is when vendor, buyer, and, sometimes, estate agent, meet at the notary’s office. The notary will read the entire contract aloud, from beginning to end, and answer any questions. The notary will also take into consideration any potential amendments which may still be needed. Any changes will be incorporated into the contract, which the buyer, the seller and the notary will then sign at the end of the meeting. A copy of the signed contract will also be sent to all parties as well as to the Grundbuchamt after the meeting.
Step 4 – Land Registry update by the notary
The notary will take care of informing the Grundbuchamt about the change in ownership of the property. Whilst the actual registration (Auflassung) of the new owner in the registry (the Grundbuch) can take several months as certain steps need to be completed first (paying stamp duty – Grunderwerbsteuer -, receiving certain authorisations, etc), the notary can request a temporary registration of the buyer (Auflassungsvormerkung) in the registry to protect them from the vendor trying, for instance, to illegally sell the property a second time. The Auflassungsvormerkung will enable anybody to see that a new owner has already been registered for the property in question.
Step 5 – Payment of purchase price and Grundbuch registration
With the Auflassungsvormerkung now providing the buyer with the reassurance that the property is theirs, they can now arrange the transfer of their funds. Needless to say, this will take longer and be a more involved process if the buyer is using mortgage finance than if the transaction is in cash only. Once the notary has obtained evidence that the funds have been transferred, the buyer becomes the property’s new owner and will be registered in the Grundbuch.