If a home purchase is imminent, most buyers expect the costs of the estate agent and the notary, but other items only gradually come to the buyers’ attention and prove to be pitfalls.
We explain what costs you will incur when buying a condominium and how these can be calculated individually. In addition to the official ancillary costs, we also look at the ancillary purchase costs that are relevant to you on a personal level.
Incidental purchase costs for condominiums: What additional costs can you expect when buying an apartment?
When a house or apartment changes hands, the buyer must find out about the additional costs as well as the purchase price. These can sometimes be a pitfall, as many banks will finance the purchase price but not the additional costs. The ancillary purchase costs must be paid out of your own pocket, which means that the buyer must have sufficient equity.
It is not possible to say in general terms how high the ancillary costs are. Several factors influence the amount of ancillary purchase costs. The basis for calculation is the purchase price of the property.
The direct ancillary costs are generally made up of the land transfer tax, the notary fees and the estate agent’s commission. There may be additional incidental costs, such as the cost of an expert opinion.
As the percentages of estate agent, notary and land transfer tax vary, the ancillary purchase costs must be calculated individually.
Indirect costs must be added to the direct ancillary costs. They are not necessarily based directly on the purchase contract, but must be determined by the buyer in advance in order to avoid unpleasant surprises in good time. It sometimes happens that a buyer equates the purchase price with their budget when searching for the right property. If the ancillary purchase costs are not taken into account, this can have disastrous consequences.
Why are there ancillary costs when buying a home?
When a person in Germany decides to purchase a property, there are inevitably incidental costs involved. Fixed ancillary purchase costs include land transfer tax and notary fees.
The former is a tax without which no entry can be made in the land register. Only when the land transfer tax has been paid after the purchase contract has been signed can the relevant office enter the buyer in the land register as the legal owner of the property.
Notary fees must also be paid. In Germany, the purchase contract for a property must be drawn up by a notary. The buyer and seller sign the purchase contract at the notary’s office, otherwise the contract is not legally binding and the property cannot be transferred. These two additional costs are fixed in that they are due every time a property is purchased. However, their exact amount varies and sometimes depends on the federal state. The costs for the land register entry are also included in these additional costs.
There are also variable costs that are incurred in many cases. These include the estate agent’s commission and the cost of a survey. Not all real estate purchases are completed with the help of an estate agent, even if they can relieve buyers and sellers of complex tasks and thus significantly simplify the process.
What additional costs are incurred when buying a condominium? Our comprehensive overview
In addition to the purchase price of the property, the following items must also be paid after the purchase:
Always:
- Notary fees
- Real estate transfer tax
- Costs of entry in the land register
In most cases:
- Broker commission
- Expert opinion
If applicable:
- Ancillary financing costs
- Refurbishment costs
- Moving costs
Real estate transfer tax when buying a home: how is it calculated?
When a condominium changes hands, a real estate transfer tax must be paid to the tax office. Only when the tax has been paid does the tax office issue the clearance certificate to the land registry and the new owner can be entered in the land register.
Pursuant to Section 13 (2) GrEStG, both the seller and the buyer are generally liable for the tax. The purchase contract must state that the buyer will pay the real estate transfer tax, which is the case in most cases.
The amount of the tax is determined at state level. The following tax rates apply for 2021:
| wdt_ID | Bundesland | Prozentsatz der Grunderwerbsteuer |
|---|
Source: https://www.grunderwerbsteuer-info.de/grunderwerbsteuer-2021-berechnen-nach-bundesland/
The real estate transfer tax in Germany is therefore between 3.5 percent and 6.5 percent and is calculated on the direct basis of the purchase price.
Do you have questions about real estate transfer tax and want to find out how you can reduce the amount of real estate transfer tax when buying your condominium? Then be sure to read our article with all the important information and tricks about the Real estate transfer tax!
Calculation example:
You buy a condominium with a purchase price of 350,000 euros:
- In Munich (Bavaria), the real estate transfer tax rate is 3.5 percent and the real estate transfer tax would therefore be EUR 12,250.
- In Lüneburg (Lower Saxony), on the other hand, the real estate transfer tax is EUR 17,500, as the tax rate is 5 percent.
Notary and land registry fees as ancillary purchase costs when buying a home
The purchase of a condominium is associated with a high financial burden. The notary holds a public office and is therefore not to be seen as an intermediary, but as a neutral person. He guarantees the legal security of the purchase for the buyer and the seller. In Germany, purchase contracts for real estate must be drawn up by a notary. These are complex contracts that cannot be formulated by a layperson. If an estate agent handles the purchase of the property, he contacts the notary and draws up the purchase contract with him.
The following tasks fall within the notary’s area of responsibility:
- Formulation of a draft purchase agreement: He needs all the information that goes with the purchase contract. The date of the purchase, the credit institutions handling the financing, the special features of the property, the purchase price of the apartment, the personal details of the buyer and seller, as well as other information must be sent to the notary.
- Delivery of the draft to all parties: When the draft of the purchase agreement is ready, it is sent by the notary to the buyer and the seller. They check all the details and indicate whether any changes need to be made.
- Obtain a waiver from the municipality: In many cases, the municipalities have a right of first refusal in accordance with the Building Code. The notary therefore contacts the municipality and obtains a waiver from it.
- Setting the purchase date: After both parties have read and checked the purchase contract, the date for signing the contract is agreed with the notary.
- Bureaucratic tasks at the tax office and land registry: Once the contract has been signed at the notary’s office, the purchase can be processed further. The notary will contact the tax office and the land registry so that the entry can be made in the land register.
In principle, the costs are to be paid by the buyer, as the buyer commissions the notary to handle the purchase of the property. It may be that the seller bears part of the costs; this will be set out in detail in the purchase contract.
The amount of the costs for the notary is explained in the Court and Notary Costs Act. The percentage is normally between 1 percent and 1.5 percent. The costs of the land register entry amount to around 0.5 percent of the purchase price of the property.
Incidental purchase costs: estate agent costs when buying a condominium
Hiring an estate agent saves you worries, sleepless nights and bureaucratic hassle, but of course comes at a cost. The law does not stipulate how high the estate agent’s commission should be. Normally the percentages are between 3 and 7 percent. The buyer has no influence on the amount of the agent’s commission, but must be informed of this in advance.
In some federal states, including Hesse, Hamburg, Berlin and Brandenburg, for example, it was common practice until December 2020 for the buyer to pay the estate agent’s commission in full, even if the estate agent had been commissioned by the seller. On December 23, 2020, the “Act on the Distribution of Brokerage Costs in the Mediation of Purchase Contracts for Apartments and Single-Family Houses” came into force. This revised the regulations on brokerage fees set out in the German Civil Code. Brokerage costs are now normally borne equally by the buyer and the seller. The resulting savings for the buyer can sometimes run into tens of thousands.
A standard estate agent’s commission, for example, is 7.14 percent including VAT. Until 2020, this would have meant brokerage costs of EUR 24,990 for a purchase price of EUR 350,000. Since December 23, 2020, these costs have been borne equally by the buyer and seller. The cost is therefore 12,495 euros for each party to the contract.
Calculation example:
The condominium has a purchase price of 350,000 euros:
This example shows very clearly what the direct ancillary costs normally are and what differences arise due to the varying percentages of land transfer tax.
What costs are involved in buying a home?
If the property was completed more than 20 years ago, it is advisable to hire a surveyor. The surveyor will draw up a comprehensive report that will inform you of the exact condition of the property. The surveyor can determine whether the apartment is worth the purchase price and what renovation work you will need to carry out in the near future. The cost of the appraisal depends on the region of the apartment and the scope of the appraisal. You can expect to pay at least 450 euros.
Refurbishment costs as part of the ancillary purchase costs when buying a home
Refurbishment costs can be an advantage or a disadvantage. What they ultimately turn out to be depends on your intentions and expectations. It is extremely important that you have an idea of what refurbishment work needs to be carried out on the property before you buy it. The costs involved must match your budget and be compatible with your strategy.
For example, it is possible to purchase an affordable property that is well below the budget limit. The low purchase price reduces the direct ancillary costs and leaves more money that can be invested in renovating the condominium.
It becomes dangerous if the buyer does not plan for the renovations that will be required. For this reason, as a buyer, you should definitely draw up a comprehensive list of the ancillary costs associated with the purchase of the property.
Ancillary financing costs when buying a condominium
Depending on the type of apartment and the financing, additional ancillary costs may be incurred. The amount of ancillary financing costs is very individual, which is why it is not possible to make a blanket statement.
If the property is still an unfinished apartment, you will have to pay commitment interest, for example. You will only receive the condominium from the developer in the future. The ancillary financing costs can be found in the financing agreement. The APR is particularly important, as it also includes any fees and additional costs.
Incidental purchase costs when buying a home: moving costs also play a role
Removal costs are not an item that you will find in the contract or on any other official document as the buyer of a property. Nevertheless, it is a cost item that you must include in your budget. After all, if you are planning to move into the condominium yourself, you will be faced with a financial outlay that should not be underestimated. The costs are very individual and depend, among other things, on the size of your household and the distance of the move.
