Buying property in Europe

Buying property in Europe

Inspired by a trip to Europe to buy a retirement or vacation property across the pond? When you get your plane ticket for the house hunting trip, you might also want to get an English-speaking lawyer overseas. Real estate transactions in Europe — and the laws that govern them — can be a bit daunting for the neophyte buyer from the States, and it’s important to protect your interests.

Along with home prices, transaction costs vary from country to country in the amount and the types of fees that apply. They can include registration taxes, property transfer taxes, legal fees, notary fees and agents’ commissions. Prices also vary based on currency conversions. (The calculations for this story are accurate as of July 22, 2010.)

Buyers may be able to benefit from housing markets that are still struggling in many parts of Europe. In its March 2010 review, the Royal Institution of Chartered Surveyors pegged Ireland, Spain, Greece, and central and Eastern Europe as having the most depressed markets in 2009. But in Germany, Italy, the Netherlands and France, the markets showed signs of stabilizing as prices edged upward.

Read on for more tips to add to your buyer’s notebook if you’re thinking about acquiring property in France, Germany, Ireland, Italy or Spain. Be aware that certain U.S. tax laws apply to U.S. citizens who purchase foreign properties. Consult a CPA who is familiar with these tax reporting requirements before making a purchase.

France

France

Prices: Average home costs about $800/square foot (about 2,033 euros/square meter) for a detached house in the second quarter of 2009, according to Global Property Guide.

Transaction costs: 8.67 percent to 13.37 percent of purchase price (Global Property Guide)

Restrictions on foreign property ownership: No.

Buying process: 10 percent security deposit due at signing of purchase agreement. Buyer must provide a copy of birth certificate and marriage certificate, if applicable, translated into French.

Tip: U.S. buyers shouldn’t expect French real estate agents to have multiple listing services, says Barbara Schmerzler, president’s liaison from the National Association of Realtors to the French National Federation of Real Estate Agents.

“They are going to have to go from office to office to office and meet with many different real estate professionals in order to get what they want, if it’s available,” Schmerzler says. “This is very frustrating for Americans who are used to going in and having the entire ball of wax spread out in front of them.”

Germany

Germany

Prices: Average home costs $295,256 (about 230,000 euros) for a newly built detached house in 2008 (Hypoport).

Transaction costs: 6.09 percent to 9.07 percent of purchase price (Global Property Guide).

Restrictions on foreign property ownership: No.

Buying process: All buyers and sellers must be present at signing of contract. Contract is read aloud in German; bring a translator if you don’t speak the language.

Tip: Expect to make a substantial down payment, says Frank Kowalski, president’s liaison from the National Association of Realtors to its German counterpart, Immobilienverband Deutschland. “You’re not going to find the same mortgage products or ease of purchasing,” he says.

According to Global Property Guide, financing for foreign buyers is usually limited to 60 percent of the purchase price, and Berlin real estate agent Dirk Wohltorf says 10 percent to 20 percent of German residential property is bought with cash.

Ireland

Ireland

Prices: Average home costs $257,350 (about 200,000 euros) in the first quarter of 2010 (Finfacts).

Transaction costs: 3.19 percent to 10.11 percent of purchase price (Global Property Guide).

Restrictions on foreign property ownership: No.

Buying process: Refundable booking deposit, up to 3 percent of purchase price, paid to agent after loan approval. At contract signing, you pay a nonrefundable deposit equal to 10 percent of the purchase price minus the booking deposit.

Tip: A stamp duty of up to 9 percent of the purchase price is payable once the conveyance of the property is complete, which can take six to eight weeks from the contract signing. First-time homebuyers with properties purchased at $398,909 (310,000 euros) or below are exempt from the stamp duty (Global Property Guide).

Italy

Italy

Prices: Average home purchased by a U.S. buyer costs $372,922 to $628,204 (about 289,000 to 487,000 euros) (The Property Finders).

Transaction costs: 7.6 percent to 18.5 percent of purchase price (Global Property Guide). Includes cadastral tax, which is typically 1 percent or a fixed fee of $211 (168 euros) for new property.

Restrictions on foreign property ownership: No.

Buying process: Typically, a 5 percent deposit is due when you make a purchase offer, plus another 20 percent at the signing of the preliminary sales contract, according to real estate agent Valerio Valle of Studio Immobiliare Valle in Bergamo, Italy.

Tip: To purchase property, open a bank account and do other financial transactions you’ll need to obtain a fiscal code through the local tax office in Italy. But getting this credential is a simple process, according to Valle. “You can have it in five minutes with your passport,” he says.

Spain

Spain

Prices: Average home costs $295,256 (or about 229,000 euros) in the first quarter of 2010 (Kyero).

Transaction costs: 8.16 percent to 11.24 percent of purchase price (Global Property Guide).

Restrictions on foreign property ownership: No.

Buying process: 5 percent to 15 percent deposit due at signing of preliminary sales contract; balance due at signing of completion contract.

Tip: If you’re looking for bargains, this might be the place to shop. Spain was one of Europe’s most depressed housing markets last year, according to a March 2010 report of the Royal Institution of Chartered Surveyors, and the decline is expected to continue over the next few years. In the popular Costa Blanca region, for example, you’ll find listings of three- and four-bedroom villas with pools, terraces and landscaped gardens for well under 200,000 euros (about $258,000).

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