Purchase Contract – German Real Estate Explained, Guide

Buying a House in Germany – What are the details to look out for in your ‘Kaufvertrag’ when buying a house or property in Germany? Buying a house is complicated anywhere, especially when considering the contract, but coming from abroad, it’s even more important to know how to go about your purchasing contract. When you are about to sign your first purchase contract, you have, like so many, many questions: Who draws up the purchase contract for a property? How long does a notarized contract of sale take? When is the purchase price for a property due? Let’s start with the definition: A real estate purchase contract is a binding agreement, usually between two parties, for the transfer of a house or other property. Such a contract of sale for a plot of land, a house, also holiday home or an apartment is always and exclusively drawn up by the notary and also notarized by him. Back to German Real Estate Overview.

Additionally, in the following there may be slight grammatical errors, as this article was written by a German tax expert. This does not detract from the quality of information.

Purchase Contract: Definition and Procedure

A purchase contract regulates the transfer of ownership. Legally speaking, one always buys a property, no matter whether it is developed or undeveloped. It contains basic conditions and terms to which both parties must adhere in the purchase process. The parties must both have legal capacity to make the purchase of a property. Note that this does not include the additional taxes which you will pay for the real estate transfer tax in Germany.

Important contract contents are:

• Information on buyer and seller
• Purchase object
• Description of the property
• Purchase price and terms of payment (date, partial amounts, etc.)
• Real estate transfer tax
• Economic transition and transfer of the real estate (date)
• Warranty regulations such as the buyer’s right of withdrawal in case of hidden defects
• Rental and leasing relationships
• Conveyance
• Preliminary remark
• Power of attorney for encumbrance
• Interest on arrears
• Special agreements, such as interior design or renovations
• Other

Legal basis: BGB

The contract is based on a legal consideration, i.e. what is given for the property. This can be money, but also any other economic good that is exchanged for the property. Of course, it will almost always be a certain amount of money, but the consideration could also be another property or the mere promise to pay later.

§ 433 Typical contractual obligations in the purchase contract

(1) The contract of sale obliges the seller of an item to hand over the item to the buyer and to obtain ownership of the item. The salesman has to provide the buyer the thing freely from material defects and lack of title.

(2) The buyer is obligated to pay the agreed upon purchase price to the salesman and to accept the purchased thing.

Extract: §433 German Civil Code (BGB; link in German)

Unlike the contract of sale of movable property, the purchase of real estate (and land or part of land) is not form-free. The regulation on this arises from § 311b of the German Civil Code (short: BGB).

The law requires that such type of contracts must be in writing in order to be valid. Accordingly, you need a notary to make the contract official. Shaking hands and verbal promises are not enough. This is to prevent fraud, a useful documentation process for both parties.

What are the Tasks of the Notary?

In general, the main focus or tasks of a notary are first of all

• Notarization of legal transactions
• Certification of signatures

This results in the following areas of law in particular for notaries:

• Real estate law, such as the notarization of property transfers
• Erbrecht, like the notarization of wills
• Family law, such as powers of attorney or marriage contracts
• Corporate law, such as the notarization of AGs or registration in the commercial register

Usually the notary is chosen by the buyer. At the first notary appointment you will need all important documents ready. The notary will prepare the purchase contract according to the specifications and templates of the buyer and seller.

Approximately one week after the notarization, buyer and seller will receive the notarized purchase contract.

Costs for the Purchase Contract at the Notary Public

The individual items include many individual items, such as the notarization of the purchase contract, which amounts to about 1,070 euros. In addition, there is the registration of the land charge with 435 Euro for the land registry and another 535 Euro for the change of ownership. In addition, there is a maintenance fee, signature certification, etc. In the end you will get out with about 3.700 Euro.

Costs for notary public / land register: ~ 3.700 Euro net

Transfer of Ownership after Full Payment

I want to emphasize this point once again:
Regarding cost allocation: Who pays what? You should make clear provisions on this in the purchase contract. As a rule, the buyer pays the costs for:

1. Fees for notary and land registry
2. Fees for necessary official permits
3. Commission of the real estate agent

As soon as the Purchaser has paid the land transfer tax to the tax office and the purchase price has been transferred in full, the notary public should also have received permission to cancel the “old” land charge.

Then the property is handed over and the land registry confirms the registration of the buyer as new owner and owner.

Make sure to take into account the many hidden and unknown costs when buying real estate in Germany

• Additional Costs with Real Estate Purchases in Germany

Special Features Apartment: Excursus

In the case of purchase of an apartment, the purchase contract contains additional elements:

• Basics as in the sales contract (above)
• Apartment number
• Community regulations, costs of maintenance of common property, elevators, etc.
• Co-ownership share, maintenance reserves for common property or investments for renovation
• Special property, further rooms like cellar, attic, garage, balcony, etc.
• Rights of use for common property
• Special rights of use, privileged use such as parking spaces
• Down payments, at New construction (not yet completed)

Our full guide to saving money on the German real estate market with tax optimization can be found here:

• Saving Money – Tax Optimization on German Property Investment