With the conclusion of a purchase contract, the financing is already under the umbrella. The bills from the broker, notary, land registry and tax office come as soon as the loan is fixed. Because of this, the credit is often underestimated. 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.

What Percentage are Incidental Purchase Costs?

20% ancillary building costs should be included in the loan at least, in addition to the purchase price, and are quite realistic.

~ 20% of the purchase price

The 4 Biggest Additional Costs when Buying Real Estate

The overview shows the 4 largest additional costs you expect when buying a house. But what other costs are involved in building a house? Find out more here: House construction & the costs that come up.

Fees: Notarization of the Purchase Contract by Notary

The fees for the notary appointment are probably one of the largest items in the additional costs of the house purchase. The notary fees are fixed and may not deviate from these in any direction, but even these are quite high.

~ 1,5% of the purchase price

As a rule of thumb, about 1.5% of the purchase price has been set – and this only for the signature of the purchase contract. So if you purchase a property with a purchase price of 100,000 Euros, the notary’s fee is 1500 Euros, which, in Germany, is usually paid for by the buyer.

The exact fees for notaries in Germany are laid down in the notarial fee schedule, but can also be calculated online.

• Read more here: Notary and Purchase Agreement

Taxes: Real Estate Transfer Tax

As soon as the contract has been signed at the notary and the purchase agreement has been notarized, the buyer will receive mail from the tax office. Next, the purchase tax is demanded from the buyer.

This is incurred somewhat differently. Normally it amounts in Germany round about 3% – 6% of the purchase price of the real estate. Since the land transfer tax is a state tax, meaning each state determines their individual rates land transfer tax rate.

In some federal states, however, such as Hamburg, Berlin and Saxony-Anhalt, it is 4.5% of the property purchase price. For a purchase price of 100,000 euros, for example, you therefore pay another 3500 / 4500 euros for the land transfer tax.

Reading tip: Get to know tax planning options, from cooperatives to family foundations: Save taxes with real estate

Purchase price 100.000 Euro

This debt should be paid immediately, because only when the amount has been received by the tax office will the latter issue the so-called clearance certificate. This certificate is mandatory for the transfer of the new owner to the land register. This is arranged by the land registry office and costs again fees, which are comparatively low.

3.5 – 6.5% of the purchase price

Commission: Brokers Calculate their Share

Whoever buys a property or a plot of land through a real estate agent must of course include the commission to the agent in the overall calculation. You will usually receive the invoice from the real estate agent directly after the notarization.

How high the commission is varies and depends on various factors, such as the region. In most cases it varies between four and six percent of the purchase price of the property.

With a property purchase price of 100,000 euros, you pay between 4,000 and 6,000 euros only for the real estate agent. However, it is important to know that it is definitely worthwhile to negotiate with the real estate agent’s commission, as it is known that this is associated with a large amount of leeway.

A recommendable, total commission of 3.48 percent including VAT is a recommendable and realistic value.

~ 3.48 % of the purchase price

Supplements: Credit Interest and Installment Surcharges

The banks would like to take part in a house sale, of course, and not only through the loan interest rates. In addition to the negotiated loan interest rates, you are charged costs that are additional and usually not expected by the buyer.

These costs are not clearly visible at first glance and therefore banks are deceiving their customers. Such hidden costs can occur in the form of monthly provision interest on the unpaid portion of the total loan.

There, for example, 0.25% is charged, which the customer does not expect and which adds up to the mass. For a loan amount of 100,000 euros, this is about 250 euros per month, which you do not expect.

Additional, Hidden Costs

But there are other hidden costs that you don’t expect. These include account management, which some banks charge as a fee, but also installment surcharges if you get part of the loan paid out, depending on the progress of the construction.

With your loan, pay special attention to exactly what is written in the small print, ask about all unclear points and only sign if you are certain about all obligations.

To be on the safe side, have your bank calculate the so-called total effective interest rate or the actual effective interest rate. There, all service charges are listed in detail and clearly arranged.

Assessor & Renovation – Potential Additional Costs

Another factor that does not apply to all properties is the cost of appraisers and renovators.

Particularly with older real estate it is meaningful to hire an appraiser before the purchase, who examines the real estate down to the lattices. This includes, for example, checks on moisture and pollutants (especially for properties dating from the 1970s). Such appraisals are carried out by independent experts such as architects or civil engineers but also real estate experts.

The costs here are very different, as it depends on the type of expertise and the time required. Depending on how good the report is, possible renovation work in the future may be necessary, which should be incldued in the purchasing price as a reduction. For this reason, these assessments are critical.

Whether it is a new heating, new windows or the restoration of the roof, the costs for this case also vary greatly. Here you should note that there are usually costs for general renovation before moving in. New floors, different wall colors, a new kitchen or even tearing down a wall.

All these things again cost money, which should not be underestimated. Often there are more costs than planned, because something goes wrong, but was more expensive than calculated or small things are missing. Also note that many renovation works cannot be done by yourself. So you need craftsmen and experts to help you and they will of course calculate their working time. Before you decide on a house, think about which work would still have to be done, what you would like to renew and how much the costs for such renovation work will be.

Conclusion: Calculate additional purchase costs

In Germany, for a property with a purchase price of 100,000 euros and a loan of the same amount, expect additional costs of 9,000 to 12,000 euros.

If you do not include them in your loan amount, they must be deducted from your own capital. Such unexpected service charges should not be underestimated and can vary enormously from property to property. The higher the price of the property, the higher the service charges you expect.

• Back to our full guide on Real estate Taxes in Germany.

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

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.

Grundwerbsteuer Explained: Purchase of Land or Property

As described in the introduction: Whenever a property or part of a property is purchased, land transfer tax is incurred in Germany. The tax is levied on the basis of the Land Transfer Tax Act (GrEStG). The amount of the real estate transfer tax is determined by the federal states. It is therefore a state tax. The respective federal state can therefore decide for itself whether it passes on the tax levied to its local authorities. But first we look at what a Grunderwerbsteuer really even is.

Are you looking at investing in German real estate? Don’t miss our article

• How to Save on Real Estate Taxes in Germany

Grunderwerbsteuer Meaning

Grunderwerbsteuer is a tax on the purchase of real estate. The translation of Grunderwerbsteuer is real estate transfer tax or land transfer tax. Note, in the USA, this concept has different meanings depending on the state (more on that in our article on Real Estate Transfer Tax in the US). How the Grunderwerbsteuer works is explained further below.

Who pays the Real Estate Transfer Tax?

After you have bought your property, the purchase must still be notarized. The purchase contract states who has to pay the land transfer tax: buyer or seller. Without this additional agreement, the law (§13 No. 2 GrEStG) states that first of all the previous owner and the purchaser are tax debtors, i.e. both together, buyer and seller.

After notarization, the notary sends the signed purchase contract to the responsible tax office, which then writes to the party to be charged with the real estate transfer tax assessment. The tax is due one month after notification of the tax assessment. However, the tax office may set a longer payment deadline if necessary (see Grunderwerbsteuergesetz (GrEStG) §15 Due date of the tax).

Grundwerbsteuergesetz (GrEStG): § 13 Tax debtor

Here is a short look at the legal text on real esate purchases according to §13 No. 2 GrEStG. This is our best attempt at a translation, these terms are as similar as possible to the original meaning.

Tax debtors are:

• By Default: the persons involved in a purchase transaction as contractual parties;
• In case of acquisition by operation of law: the previous owner and the acquirer;
• In the case of acquisition in expropriation proceedings: the acquirer;
• In the case of the highest bid in compulsory auction proceedings: the highest bidder;
• In the case of the merger of at least 95 per cent of the shares in a company in the hands of the acquirer: the acquirer;
• In case of acquisition by several companies or persons: these parties;
• In the event of a change in the membership of a partnership: the partnership;
• In the case of an economic interest of at least 95 per cent in a company: the legal entity which holds the economic interest.

Source: Federal Ministry of Justice (as of 09/2020).

Cost table: Tax According to Purchase Price

Status: 09/2020

Tax Rate by State: Amount

• Bavaria – 3,50%
• Berlin – 6,0%
• Bremen – 5.0%
• Hessen – 6.0%
• Lower Saxony – 5.0%
• Rhineland-Palatinate – 5.0%
• Saarland – 6.50% li>
• Saxony – 3,50%
• Saxony-Anhalt – 5.0%

Property Tax Compared to Trade Tax, Income Tax and Sales Tax

Real estate tax is levied on land, but also on hereditary building rights to land, the so-called substance tax. The assessment basis for the land tax is usually the value of the land plot. The tax rate is usually set at the municipal level.

This infographic below shows the tax revenue of German municipalities according to tax types (in billions of Euros). Please note that an English translation was not available. Blue denotes income tax, green is trade tax, purple is property tax, and orange is goods-and-services tax.

Purchase Price – 1.000.000 Euro

Below a graph for the amount of taxes you will pay based on what state you are buying the property in. The basis is a purchase price of 1 million Euro.

Purchase Price – 1.200.000 Euro

Below a graph for the amount of taxes you will pay based on what state you are buying the property in. The basis is a purchase price of 1.2 million euros.

Purchase Price – 1.500.000 Euro

Below a graph for the amount of taxes you will pay based on what state you are buying the property in. The basis is a purchase price of 1.5 million euros.

Purchase Price – 2.000.000 Euro

Below a graph for the amount of taxes you will pay based on what state you are buying the property in. The basis is a purchase price of 2 million euros.

Purchase Price – 2.500.000 Euro

Below a graph for the amount of taxes you will pay based on what state you are buying the property in. The basis is a purchase price of 2.5 million euros.

Purchase Price – 5.000.000 Euro

Below a graph for the amount of taxes you will pay based on what state you are buying the property in. The basis is a purchase price of 5 million euros.

Plots, apartments & house in Germany. Classical or exotic: Which property is suitable as an investment? The interview: Real estate as a capital investment. In our city analysis you will find clues as well (see below).

Tip from the real estate agent: You want a purchase price for comparison? Before you evaluate your real estate , use apps from real estate portals. Here you can simply track your location with GPS and the app will show you purchase prices and comparison offers in your area. The fast way to a first, rough evaluation of your property.

Price: Rent, buy, living

Renting, buying, living. Here you will find more information about the population, rental prices and purchase prices in the individual cities:

• Buy and rent: Berlin
• Buy and rent: Düsseldorf
• Buy and rent: Frankfurt
• Buy and rent: Cologne
• Buy and rent: Hamburg
• Buy and rent: Hanover
• Buy and rent: Munich
• Buy and rent: Stuttgart

Tax optimization: Procedure and Knowledge Build-Up

Topic Taxes. This brings us directly to the topic of optimizing taxes. Knowledge about finances and taxes is absolutely essential when buying your first property. Understanding taxes is important, because this is how you can convert taxes into private assets.

How does it Work? An Example for Real Estate Investors

In the case of real estate, for example, this involves lifting platforms for duplex parking spaces. So lifting platforms, where you get e.g. two cars on one parking space. They have a shorter depreciation period. Here, depreciation for wear and tear applies, distributed over the actual useful life, deductible according to the official lists of the Ministry of Finance. Exception expenses up to 800 Euro – without VAT – can be deducted immediately in the year of purchase.

You will of course no longer get such knowledge from your tax consultant. Why should he or she, if he or she knew about it, your tax advisor* would be a millionaire* himself.

Details

More details on optimizing your tax sheet for your real estate can be found in our article on the matter

• German Real Estate Taxes – Saving on your Property Investment