Hidden costs when buying and selling real estate
If you managed to raise money for the purchase of an apartment, these are hidden costs that you have to count on;
One can surprise
Source Jutarnji list; Home and Design, reports Slobodna Dalmacija and Dubrovnik List
BY JELENA CVETKO/ JL
December 18, 2023 — 12:39 PM
Signing a sales contract and picking up the keys is not the end in buying an apartment.
Buying a property is a very complex and sometimes very stressful process, especially for those buyers who enter it unprepared and insufficiently informed, convinced that they only have to settle the agreed price of the property. However, potentially there are still a whole host of additional costs that they did not count on. Because of this, says Diana Perger from the Euro-Interiors agency, unpleasant situations also occurred.
- For example, customers offer a caper in a certain amount, so during the conversation we come to the conclusion that the caper is not the only expense, and if it is their only cash, they will not be able to pay other expenses such as solemnization and tax - points out Diana Perger, writes Jutarnji list.
He adds that the costs vary depending on whether the property is purchased in new construction or used and whether it is paid with own funds or a loan is taken out in a bank.
The least additional costs will be incurred by buyers who purchase an apartment in a new building directly from the investor who is in the VAT system, while paying with their own funds.
— The least additional costs will be incurred by buyers who buy an apartment in a new building directly from the investor who is in the VAT system, and who pay with their own funds. Namely, these buyers can also get by with zero euros of additional benefits, provided that the investor, ie the seller, assumes' small 'costs such as the certification of the signature on the contract and/or the registration of ownership rights in the name of the new buyer. Although, if the investor does not take these costs on himself, they should not be higher than 50 to 60 euros, again depending on how many signatures are certified and how many certified copies the buyer needs - says Diana Perger.
And what can buyers who buy a used apartment and take out a bank loan expect? For them, the additional costs are the highest, ranging between five and eight percent of the value of the property itself.
REAL ESTATE TAX
Most buyers still do not know that the legal privilege of exemption from paying real estate sales tax has been abolished if the first real estate is purchased.
The real estate sales tax in Croatia is three percent. In doing so, the buyer does not have to report the purchase to the tax office as it used to be, but it is done by a notary at the time of certification of the purchase contract. The tax authority then sends by mail a provisional decision on the determination of the tax on the basis of the contract of sale, but if it considers that the purchase price is too low in relation to its assessment of the value of the same property, it will subsequently send a new decision on the determination of the sales tax.
Filip Brkan from the Imperium Immobiliare agency points out that customers were shocked by the subsequent decision because they would have already paid the tax, and the difference knew to be in the five-digit amounts. Customers in such situations can supplement the difference or try to refute the assessment of the Tax by hiring a forensic expert, which will entail additional costs.
For those properties sold by companies under the VAT system, there is no real estate tax, since VAT in the amount of 25 percent is already included in the purchase price. If the buyer will use the purchased property for commercial purposes, for example, to engage in tourist rental, it is possible to make a VAT refund.
For a buyer who raises a loan of 150,000 euros, the solemnization with a notary could cost an average of 600 to 1000 euros.
FORENSIC EXPERT
The amounts for the services of a forensic expert, who carries out an appraisal of the property on behalf of the bank for the purpose of securing the loan, range from zero euros, in the case of a bank action when the customers are exempt from paying the assessment, to the 200 euros that the assessment costs in the regular lending conditions.
INSURANCE POLICY
The insurance policy linked in favor of the lending bank, the amount of which depends on the type of insurance, the amount of the loan and the conditions of the particular insurance company, ranges from 80 euros per year for property insurance (the average is about 100 euros) to as much as 600 euros per year for life insurance (the calculation was made for the loan amount of 150,000 euros and the repayment period is 30 years).
SOLEMNIZATION OF THE CONTRACT
The cost of a notary for the solemnization of a loan agreement depends on the loan amount, the number of pledged debtors and the number of promissory notes. Only a rough example can be given here where for a customer who takes out a loan in the amount of 150,000 euros, the solemnization could cost an average of 600 to 1000 euros.
Good real estate agencies successfully guide and advise customers through the entire buying and selling process.
PETTY EXPENSES
The costs of certifying signatures on documents such as a preliminary contract, contract, tabular declaration and possible annexes to these documents are classified as “small” costs because on average they cost up to 20 euros, but, depending on the number of certified copies, they can go up to 50 euros.
REGISTRATION OF PROPERTY RIGHTS
The registration of the right of ownership submitted by the buyer through a notary will cost 30 euros, but if he does it through an authorized law office, the service is approximately one percent of the value of the property. The lawyer will also check the overall status of the property and the documentation related to it. If a real estate agency has a lawyer on its team, they will take this cost on themselves.
And when the key to the apartment is in hand, there are still things to settle!
AGENCY COMMISSION
Contrary to some announcements, Real Estate Business Association HGK does not have a price list with prescribed minimum and highest agency commissions. The usual price for the services of a real estate agency ranges from two to three percent of the purchase price of the property, but it can be as much as one percent if the agency is hired only to guide the buyer through the purchase (for verification and preparation of documentation).
- From practice we see that buyers are well informed by the fact that when buying an apartment they will have additional costs, but what they do not know is how much it will cost and their biggest surprise is the price of solemnization and insurance. For the purpose of buying and selling and saving on costs, I consider that the amount of paid agency service is justified because each professional agent, among other things, will transparently inform the buyer about the costs and advise the client where, how and how much he can save if there is a free valuation in a bank, what and what kind of insurance certain banks require, what is the best time to pay a loan in order to save on intercalary interest... — lists Diana Perger, writes Jutarnji list.
Example of calculation of additional costs
The total amount of additional costs is difficult to calculate in general, since it depends on a number of items: the purchase price, the loan amount, the repayment term, the number of participants (if the property being sold is owned by two, three or five people, the same as if the buyer wants to buy real estate in his own and someone else's name), then whether banks offer certain actions at the time of realization of the loan...
But if we simplify and, for example, in the process of buying and selling a used apartment involves one buyer and one seller, who have agreed a price of 150,000 euros, whereby a loan worth 135,000 euros is taken out and the caper of 15,000 is paid with their own funds, the additional costs could look like this:
150,000 euros x 3% tax = about 4500 euros
Agency service of 2% + VAT = about 3750 euros
Estimate = about 200 euros
Solemnization + notarization of signatures + certified copies = approx. 1000 euros
Registration of property rights = about 30 euros
TOTAL ADDITIONAL COSTS = about 9400 euros (or about 6% of the total value of the apartment)
* There is no insurance in this calculation because it is not applicable given that it is paid all the time until the final payment of the loan.
- The percentage may increase due to more participants in the loan, more agency service, larger loan amount..., but it should not exceed eight percent of the value of the property - concludes Diana Perger, writes Jutarnji list.
Article transmitted by Slobodna Dalmacija and Dubrovački list