Step 1: Conclusion of a Brokerage Agreement
- Choosing the Broker: In Germany, many real estate sales and purchases are conducted through a broker. The broker helps find the suitable property and conducts negotiations between the buyer and seller.
- Brokerage Fee: The standard brokerage fee is about 3-7% of the property value and is paid by the buyer and/or seller depending on the region and contractual conditions.
- Conclusion of the Brokerage Agreement: This contract regulates the terms of cooperation, including compensation, the scope of services, and the rights of the parties.
Step 2: Selection of the Property and Document Verification
- Selecting the Property: The broker assists the buyer in selecting the appropriate property, organizes viewings, and gathers information about the property.
- Document Verification: The broker or buyer reviews the documents for the property, including the land register excerpt, which lists all rights and encumbrances related to the property.
Step 3: Signing a Preliminary Agreement (if necessary)
- Preliminary Agreement: This contract is used to record the intentions of the parties during the preparatory phase of the main contract. It contains the essential conditions of the future transaction, such as price and deadlines. This can be helpful if the buyer needs time to secure financing or clarify other matters.
Step 4: Financing (Mortgage)
- Obtaining a Mortgage Loan: If the buyer is using external capital to finance the purchase, they apply for a mortgage loan at this stage. The bank requires an appraisal of the property and reviews the buyer’s documents.
- Mortgage Agreement: After the loan approval, a mortgage agreement is signed, which will later be registered as a lien in the land register.
Step 5: Signing the Purchase Agreement
- Choosing the Notary: In Germany, all real estate transactions must be notarized. The notary checks the legality of the transaction and prepares all necessary documents.
- Preparation of the Purchase Agreement: The notary drafts the agreement based on the arrangement between the buyer and seller. The contract includes all conditions of the transaction: price, payment deadlines, date of ownership transfer, and existing encumbrances.
- Signing the Agreement: The buyer and seller sign the contract in the presence of the notary, who certifies the transaction.
Step 6: Payment for the Property
- Payment via an Escrow Account: In Germany, a notarial escrow account is typically used. This ensures the security of the transaction, as the money is transferred to the notary and only released to the seller after all contractual conditions are met.
- Payment of a Deposit: The buyer may make a partial payment (deposit) before the full payment, if agreed upon in the contract.
Step 7: Submission of Documents to the Land Register
- Registration of Ownership: The notary submits the documents to the land registry for the registration of the new owner of the property. This process can take several weeks depending on the region.
- Preliminary Registration (Right of Purchase): While ownership is not yet registered to the buyer, a note can be made in the land register reserving the property for this buyer.
Step 8: Handover of the Property to the Buyer
- Handover of the Property: After the ownership registration, the property is officially handed over to the buyer. This may involve handing over the keys as well as verifying the fulfillment of all contractual obligations (e.g., transferring documents or checking the condition of the property).
- Final Settlement: After the property has been handed over, the buyer pays the remaining amount either through the escrow account or directly to the seller (if no escrow account was used).
Step 9: Taxation and Fees
- Property Transfer Tax: The buyer is obliged to pay the property transfer tax. The tax rate varies by federal state and ranges from 3.5% to 6.5% of the purchase price.
- Additional Costs: In addition to the property transfer tax, the buyer pays notary fees, which typically amount to about 1.5-2% of the purchase price.
Step 10: Receipt of Ownership Documents
- After all formalities are completed, the buyer receives an excerpt from the land register confirming their ownership rights. From this point on, the property officially becomes theirs.
Conclusion The process of purchasing real estate in Germany is clearly structured and strictly regulated by law. The notarization of the transaction and the use of an escrow account protect both parties, while the land register system ensures the transparency of the ownership transfer.
