Costs for the realtor: New regulation in the BGB

As just described, the realtor commission in Germany is not clearly regulated. In recent decades, it has become common practice that the buyer bears the commission of the realtor when buying real estate. This meant that 100% of the costs were passed on to the buyer.

The new law, effective December 23, 2020, now decides that the seller must bear at least half of the realtor’s commission.

Private purchase, non-commercial real estate trade

However, the new rule only applies to private purchases. So if you commercially buy a property, you are not subject to this innovation in the BGB. Sections 656c and 656d only apply if the buyer is a consumer. Read more here, including BGB innovations, on the realtor commission: new law (external [German]).

For private real estate buyers, this changes quite a bit; after all, the realtor fee makes up a large part of the buying incidentals. When buying a house but also when buying an apartment and buying land, up to 7.14% will thus be due for the buyer.

Broker’s commission usually at 7.14%

Example calculation: 3,570 euros saved

Already with a property with purchase price of 3,570 euros, you have effectively lowered your incidental costs when buying real estate, with this new law.

• Purchase price: 100,000 euros
• Provision of the realtor: 7.14 %
• Cost of realtor: 7,140 euros

For a condominium at the purchase price of 100,000 euros, you pay so far a whole 7,140 euros realtor commission, out of your pocket.

With the new law, the seller must now pay at least half of these costs, when buying a property privately.

With this, your ancillary purchase costs are reduced directly by a whole 3570 euros.

Take for example the Berliner Testament, what is it? How do you use it to your advantage? This is why knowign the details of German real estate laws is so advantageous.

What you Have to Know Buying a House in Germany!

If you’re looking into buying real estate in Germany, there’s some details you have to know about. Germany has substantially different laws relating to real estate than other countries. Therefore, to know where to save, what to look for, and the nitty gritty details, you have to get specific information. If you’re looking to invest, but don’t know where, our piece on the most expensive cities in Germany gives a run-down on the cities where you’re bound to lose the least, and win the most.

Saving Money

If you want to save money on real estate in Germany, you’ll need to optimize your taxes. There are many ways to do this of course, but we’ve taken a closer look at two important ones.

They are all summarized in an article outlining everything you need to know

• Saving Money on German Real Estate

How to Pay Less with an Immobilien GmbH

An Immobilien GmbH is, translated, a company created for the purpose of organizing or managing real estate. This is a handy tool to use in the case that you would typically pay a considerable amount when you own property privately. Private leasing translates to a tax rate of 42 percent, meaning you can quickly pay 4-digit sums a year in taxes.

Immobilien GmbH – Tax Optimization in Germany

Saving Taxes with a Foundation

Another way to save money on German real estate is by founding what is called a ‘Familienstiftung’. This allows the owner of a property to reduce the amount of taxes which they are required to pay on the income they make from renters.

Familienstiftung – German Real Estate Tax Tricks

Grunderwerbsteuer

Buying property in any country means paying taxes on the purchase. In Germany, the tax on buying real estate is called Grunderwerbsteuer. Consisting of the words Grund (land or property), Erwerb (purchase), and Steuer (tax), this would be the equivalent to the American transfer tax. Who pays this tax, how much it is where, etc. is all in our article

Grunderwerbsteuer – Real Estate Transfer Tax in Germany

Additional Costs

In Germany, as would be expected, the additional costs are different from the additional costs in the USA. Property investment therefore means different calculations and different things to watch out for. Notarization, commission, renovations, etc. all need to be taken account.

Additional Costs & Hidden Fees – Real Estate Germany

Contract Details

Buying a house means drawing up and signing a contract. A purchase contract regulates the transfer of ownership. This, as with everything else has different ins and outs in Germany than in other places. We took a look at the BGB (the German Civil Code) so you don’t have to.

Purchase Contract – Details for German Real Estate

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

Joint Ventures in Real Estate: Owning and Selling, Co-Ownership

Several owners and one wants to sell – what now? For various reasons, people buy real estate together. When selling real estate from collaboration or inheritance and estate, before private sale or through a real estate agency, many questions arise. From simple topics to the selling price up to more complex tax questions, like:

• What is a joint venture?
• What is fractional ownership?
• Is it possible to sell co-ownership?
• What is the co-ownership share?
• Who is the owner of the house?
• What does ideal co-ownership share mean?

The possession of several persons on a thing defines itself briefly in such a way:

• Classic examples: Single-family house or shared condominium

Joint Venture in BGB § 741

§ 741 Community by fractions – If a right is jointly entitled to several persons, the provisions of §§ 742 to 758 shall apply unless the law provides otherwise (community by fractions).
The most important keywords in the joint venture are for you:

• Land
• Voting
• Land Register
• Right of First Refusal
• Voting Right
• Declaration of Division
• Administration Agreement

Back to the Wiki: Real Estate

Build an Apartment House: Building Interest and Construction Financing

Construction interest rates have been at rock bottom for several years. A building interest comparison is worthwhile, because: How long will it remain like this? Many of our customers approach us with the question whether it is worth waiting or whether the interest rates will rise again in the future. Building interest rates do not just stand on their own, but also have a significant influence on mortgage interest rates. In our consultation you will find out quickly and reliably when and how you can best finance and secure the favourable building interest rates.

The current building interest rates form the foundation of every real estate financing, including the development of building interest rates. This is because the building interest rates are responsible for the additional costs of your building loan as a net amount. The more expensive the building interest is at the time of your financing, the more money you have to pay back to the bank. Conversely, you can save money by choosing the right time and financing when the interest rates are at a low point. Mortgage interest is not a static figure. The interest rate can change at any time and either rise or fall.

Time for financing

You choose the right time for a mortgage loan primarily based on your personal preferences and focus on when you want to buy a home. However, your personal circumstances are not the only factor that should underpin your decision. It is just as important that you keep an eye on the external conditions and finance at the moment when building interest rates follow a downward trend. As a potential owner, you do not need to know the market or delve deeper into the interest rate policy.

Factors that influence the building interest rates

One of the main factors influencing building interest rates is the economic situation of a country. Germany’s economy is booming, which is naturally reflected in the building interest rates. The better the economic situation, the cheaper you can finance construction. Since construction financing is largely handled via mortgage bond transactions, low interest rates for government bonds are the best basis for your real estate financing. If you finance now, you will benefit from amazingly low construction and mortgage interest rates. The performance of government bonds in combination with low interest rates for mortgage bonds results in a chain reaction that results in the most favorable construction interest rates. Many of our customers assume that the construction interest rates are related to the key interest rate of the ECB. Although this is currently also more favorable than ever, the key interest rate does not directly influence the construction interest rates. On the other hand, your personal requirements such as the equity capital you bring with you, the term and the repayment amount have a great influence on the individually calculated building interest.

You should pay the greatest attention to the debit interest when calculating your construction financing. Because the debit interest influences the entire interest commitment for your building loan and is therefore a fundamental factor if you want to finance cheaply and advantageously. We will be happy to advise you on your individual options and support you in finding the optimum repayment for you and calculating your monthly installments based on your own ideas. The lower the debit interest rate, the cheaper your construction financing will be.

Development of the interest rate

For some years now, building interest rates have been stable and low. But which trend will the building interest development follow and is it worthwhile to fix a long debit interest commitment now and to protect against a possible rise in interest rates? Or will the building interest rates continue to fall and you are financing too expensively if you decide now for a fixed interest rate with a term of 10 or even 20 years? If you understand the type of interest rate and apply the interest barometer correctly, you will get a transparent overview of the current and future development of building interest rates.

Mortgage interest rates: effects & possibilities of influence

The term mortgage interest is now replaced by the term construction interest. The building interest, or mortgage interest, determines whether a construction loan is cheap or expensive. Due to the current historically low building interest rates, you can finance your real estate at a very favourable rate and secure an advantage that has a lasting effect on the overall financing costs.

Effective interest rate for mortgage loans

From 1994 to 2018 (last survey), the effective interest rate for mortgage loans (construction interest) fell by -6.4% to just 1.4%. Effective interest rate for mortgage loans in Germany over time:

• 1994: 8.8%
• 1998: 5.3%
• 2004: 4.4%
• 2008: 4.8%
• 2014: 2.2%
• 2018: 1.4%

Heating System: Energy & Saving Money

The topic of heating is not only interesting for building owners, but also for property owners. Heaters are not only necessary in a real estate, but also legally required. What types of heating are there, how do they have to be maintained and are there legal subsidies for the construction of certain types of heating or do the costs have to be paid completely by the owner?

• The whole guide: Heating system

Solar heat: solar energy

Solar thermal is the process by which solar energy is converted into usable heat. In residential properties, the heat produced is usually used to heat water or for heating. Depending on the location and conditions of the property, this system can completely replace the previously used heating system.

State subsidy of 2,000 euros

Gas heating: heating with natural gas, liquid gas or biogas

Gas heating is probably the most widespread type of heating in Germany and rightly so, because the system offers many advantages. Modern technology, efficiency and inexpensive offers characterize the gas heating. In addition, they are easy to combine with renewable energies, save space and can be easily installed during modernization and renovation.

Oil heating: heating with fuel oil or bio fuel oil

Oil heatings are after gas heatings the probably most frequently occurring systems in Germany. The function mode is simple and works for decades in the same way. The fuel fuel oil is pumped over an oil pipe to the heating system where it is sprayed and burned. The heat generated during this process is used to warm up the heating water and thus to heat the house. Most of these components can be found in the boiler, which now takes up little more than one square meter of space and can even be hung on the wall, depending on the model.

Pellet heating: ovens with pressed wood residues

A modern pellet heating system is known for low fuel costs as well as for environmentally friendly heating and is therefore one step ahead of conventional gas and oil heating systems. Also the function mode is relatively simple. The wood pellets are periodically delivered to the combustion chamber by means of a feeder, so the correct filling is fully automatic. The heat generated by burning the pellets is used in a separate boiler to heat the water. Thus, both the heating can be operated and the hot water can be produced.

Heat pump: heating with the heat of the environment

Technically speaking, a heat pump is a system that can extract thermal energy from a medium with low temperatures through technical work and supplied working energy. That sounds first once quite complicated, the principle of the heat pump is however actually quite simple. The heat pump extracts heat from the different energy sources air, earth and water and uses it to heat water for heating purposes. For this purpose external electricity must be supplied, but not as much as would be necessary for a normal heating system.

• The whole guide: Heating system

Extra: infrared heating

Even if the conventional heating systems have proven themselves, infrared heating is definitely an alternative that should be considered. Although heating with electricity is generally considered expensive, there are other factors that make heating with electricity economical. Our detailed guide will tell you which points are important and when heating with electricity is worthwhile.

• Infrared heating

Extra: fireplace & stove

A fireplace provides relaxation, well-being and warmth. Therefore it is also not surprising that fire-places and other furnaces stand right at the top of the desire list of owners. Particularly on cold days there is nothing more beautiful, than to kuscheln itself before a cozy fire-place brimming with warmth and to enjoy the time. There are many different types of fireplaces. From open and closed up to tiled or pellet stoves which all have advantages and disadvantages.

• Chimney & stove

Rental: Laws, taxes & tenants

Renting a property can be a great extra income, but it can also become your main job. Landlords have many duties towards the tenant and have to take care of the property. However, if this is successful, a lot of profit can result. We will explain how you can best let your property and how to find the right tenant for you.

There is so much to learn!

The right tenants, suitable lease & Co.

How do I set the rental price correctly? How does my advertisement appear attractive? And how do I draw up a suitable and fair rental contract? A future landlord asks himself all these questions, because in order to successfuly rent out a property, a lot of knowledge and experience is required. But if you follow a few simple steps, you will make the leap to a successful landlord and profit from the earnings.

In addition come: Landlords have many duties and tasks, among these are for example the organization when changing tenants or the annual preparation of a service charge statement for the tenant. The rent can be set with the help of the local rent index, but it must always be considered whether the region concerned has a rent brake or not. The rental agreement should be fair for both tenant and landlord and should regulate all important points. When choosing the right tenant, it is not only the sympathy effect that counts, but also other important factors, such as creditworthiness – learn everything you need to know about renting your property in our article.

The correct tenants, suitable lease & Co. read on here:

• Renting out a house or apartment