How to purchase a real estate in Italy: a brief guide
The process of buying a real estate in Italy can be a little overwhelming and sometimes it is easy to get wrong information. Let’s see how it works and about what you should be careful.
Real Estate choice
Generally, you will get in touch with the vendor through a Real Estate agency. In Italy, they are called “mediatori immobiliari” and their job is to connect vendors with potential purchasers in order to reach the deal.
The Real Estate agent must be registered in the mediator register. If s/he is not, then s/he is not entitled to operate and get a fee. In Italy, there are plenty of Real Estate agents and agencies. It could be a single professional or a big franchising chain. In any case, the agent you appoint must be registered in the mediator register.
The mediator fee varies depending on the real estate value, its location, how hard the negotiation is, and so on. But in general, each party will pay the mediator between 2% plus VAT and 5% plus VAT of the real estate selling price.
If you reach the deal directly with the vendor, you and the seller won’t pay any mediation fee, unless the seller already has an exclusive selling agreement with a Real Estate agency. In this case, the mediator will be entitled to get his/her fee even if you reach a deal directly with the vendor.
The preliminary agreement
Once you have chosen the real estate you want to buy, it’s time to make an offer.
The offer is delivered to the seller directly by you or through the mediator in written form along with a deposit. This deposit, called “caparra confirmatoria”, is an amount of money equivalent to the 5-20% of the real estate selling price that the vendor will retain until the final deed of sale. At this point, it’ll become a down payment.
The offer normally binds the buyer for at least 10-15 days (or a different period, if established) and, if accepted by the vendor’s signature, it’ll become automatically a preliminary agreement. Eventually, you can revoke your offer without consequences before the vendor’s acceptance.
Sometimes real estate agencies prefer letting you go through three steps: proposal and acceptance, preliminary agreement, final deed of sale. This is not a good practice and it often creates avoidable problems.
If you enter into a preliminary agreement (sometimes inappropriately called “compromesso”), there is no sale of property yet, but only the mutual obligation to set a date where to sign the final deed of sale at the Notary’s.
However, the preliminary agreement is a “point of no return”. It must be in written form and, when required in particular circumstances, it is better to sign it at the Notary’s and to record the agreement in a public register (thus letting everybody know that the real estate in question will be sold to you and nobody else).
If the preliminary agreement is mutually signed, the mediator is entitled to receive his/her fee. If you need a loan to complete the purchase, the effects of the preliminary agreement will be suspended until the loan request is approved, and only at this point will the mediator be entitled to ask his/her fee.
The phase between the signing of the preliminary agreement and the signing of the final deed of sale is the most delicate. In this phase, each party makes sure that the real estate is in the best condition for a smooth transaction. This includes, for example, checking any possible building abuse, any problem with the rights of the seller, any defects in the building or ownership titles, and many other things. This can be tough sometimes, but it ensures you won’t have any kind of problem after the purchase of your house.
If something wrong is found during this phase, it could be either fixed or be the vendor’s liability. It basically depends on the preliminary agreement conditions.
In general, the party that doesn’t comply with the preliminary agreement’s terms and conditions will be in breach and s/he’ll lose the deposit (if s/he’s the purchaser) or s/he’ll have to pay the double of the deposit (if s/he’s the seller) with the possibility to be sued for damages.
The signing of the preliminary agreement is not mandatory, so you could directly set an appointment to the Notary’s with the seller and sign the final deed of sale. This could make the purchase faster and cheaper but it increases exponentially the risks that something may go wrong.
The final deed of sale
If everything is in order, as it happens most of the times, you’ll agree a date where to sign the final deed of sale with the Notary Public who is in charge to draft the deed, to verify the documents related to the real estate property and to register the deed.
With the mutual signing of the final deed, the ownership of the real property will be transferred, the agreement will be registered in the public real estate register, and the keys of the real estate will be given to you. If you need, you can appoint someone that will purchase the real estate in your name and on your behalf. In this case, a notarised power of attorney will be needed.
If you don’t know the Italian language, the final deed shall be necessarily translated into English or in another language you declare to understand.
With the final deed of sale, you’ll have to pay the balance and the deed shall indicate both the mediator and seller’s means of payment. On the same day, if requested, the loan will be released and the money will be transferred to the seller.
Mediator: if you signed the preliminary agreement through a mediator, you’ll pay him/her an amount between 2% plus VAT and 5% plus VAT of the price agreed.
Register Tax: an amount equivalent to 9% of the real estate value, which can be calculated either on the value established by the revenue agency or on the price that you agreed.
Let’s say you are going to buy a real estate for residential use. The revenue agency sets a market value for every real estate in order to calculate its tax cost. This value may be equal or may differ from the price that you agreed. In this last case, we suggest that you opt for paying taxes in relation to the amount settled by the revenue agency, to avoid paying more taxes in the future.
You can pay 2% instead of 9% of the register tax if you decide to ask for the “prima casa” (first house) tax relief. If you do so, you have to establish your residing address at the real estate you purchased within 18 months from the purchase.
Mortgage Tax: you’ll also have to pay the mortgage tax and the cadastral tax respectively for € 50,00 each.
If you are buying the real estate from a construction company within 5 years from the building’s completion, you’ll pay 22% VAT if you are buying a luxury estate, or 10% VAT in any other case. You’ll pay 4% VAT if you buy a non-luxury estate and you ask for the “prima casa” tax relief. If it’s a luxury estate, you’ll pay the register tax, the mortgage tax and the cadastral tax for € 200,00 each. In any other case, they’ll be € 50,00 each.
You’ll also have to pay the Notary Public’s fees and, eventually, the translation fees.
The entire purchasing process can take from 2 to 10 months depending on the complexity of the negotiation and the amount of interventions needed.
It’s better to decide in advance if you want to buy a real estate for investment purposes or for living, because in this case the selection process shall be driven by other criteria besides your liking. Properties that are part of huge condominiums shall be avoided in any case, due to their uncomfortable living conditions (on average) and high maintenance and administration costs.
As a general rule, it is better to know beforehand any possible issues (i.e. the real estate compliance with the law) from the beginning, since this is possibly the heaviest task.
It is fundamental to be assisted by a professional throughout the entire process, so you won’t have any nasty surprises and you will get through this high bureaucracy process easily.
The main advantage of this high bureaucracy process lies in the fact that after the purchase, it’s pretty sure you won’t have any trouble of any kind related to the property ownership and to the purchase taxation. Also, consider that once the preliminary agreement is signed, there’ll be fewer possibilities that the deal won’t take place.