How to Proceed When Buying Real Estate in Germany

Basic Legal Framework for Buying Real Estate in Germany

The notary checks the contents of the Land Register, informs you about the legal consequences of the contract, and handles the technical execution of the transfer. Unlike a lawyer, who represents the interests of one party, the notary must ensure legal certainty for both parties and make sure the transaction complies with the law.

In Germany, ownership of real estate is not transferred at the moment the contract is signed, nor upon payment of the purchase price. You become the owner only when your name is registered in the Land Register (Grundbuch). Between the signing of the contract and the final registration, you are protected by an instrument known as a priority notice (Auflassungsvormerkung).

The Purchase Process: A Step-by-Step Guide

The purchase process has a fixed structure. The first step comes after you have agreed with the seller on the purchase price and the basic terms of the deal.

Preparing the Purchase Agreement and Reviewing Documents

Once the notary receives the basic information from both parties, they will prepare a draft purchase agreement (Kaufvertragsentwurf). If you are buying a property as a consumer from a business, this draft must be delivered to you at least 14 days before the signing date. For transactions between two private individuals, this period is not strictly required by law, but notaries generally recommend adhering to it.

At this stage, it is crucial to have the contract reviewed by a lawyer who understands German law to avoid unfavorable provisions. The draft will contain all the details about the property, the parties, the purchase price, payment deadlines, and the condition of the property. You can read more about the importance of contract review in our article on the risks of real estate transfer agreements.

The buyer must generally prove their identity to the notary and state whether they are married and under what marital property regime. The seller and the notary will provide an up-to-date extract from the Land Register (Grundbuchauszug) to clarify whether the property is encumbered by any debts or easements.

Notarization (Beurkundung)

The actual signing of the contract takes place at the notary's office. Both parties must be present, or they can be represented by a person with an officially certified power of attorney. If you do not speak German, the presence of a sworn interpreter is required, or the contract must be drawn up in a bilingual format.

The notary reads the entire purchase agreement aloud. This reading is mandatory and serves to ensure that both parties understand and agree to its content. Minor adjustments can still be made at this point. Once the text is approved, the notary and the parties sign the contract.

Priority Notice and the Path to Ownership

Immediately after the contract is signed, the notary files an application to register a priority notice (Auflassungsvormerkung) in the Land Register. This registration is crucial for you—it "blocks" the property in your favor. This prevents the seller from selling the property to someone else or further encumbering it without your consent.

The registration in the Land Register takes a variable amount of time, depending on the workload of the specific office (Grundbuchamt). In large cities, this can take 8 to 16 weeks.

Maturity of the Purchase Price

The purchase price is not due immediately after signing. The notary will send you a payment notice (Fälligkeitsmitteilung) only when all conditions have been met. The priority notice must be registered in your favor, old encumbrances must be resolved, and all necessary permits must be secured.

The money is usually sent directly to the seller's account. A notary escrow account (Notaranderkonto) is used in Germany only in specific, justified cases (e.g., complex financing or a quick handover), as it involves additional fees and notaries are reluctant to use it.

Taxes and Costs Associated with the Purchase

Acquiring property in Germany involves ancillary costs, which typically range from 10% to 15% on top of the purchase price.

Real Estate Transfer Tax (Grunderwerbsteuer)

This is the most significant cost, governed by the Real Estate Transfer Tax Act. The tax rate varies by federal state. For example, in Bavaria it is 3.5%, while in Berlin it is 6% and in Brandenburg 6.5%.

The tax is assessed by the tax office (Finanzamt) after the contract is signed. Payment of this tax is a prerequisite for the final transfer of ownership. After payment, the tax office issues a certificate of non-objection (Unbedenklichkeitsbescheinigung), without which the notary cannot perform the final registration of the owner.

Notary and Court Fees

Fees for the notary and registration in the Land Register are set by law. In total, expect an amount of approximately 2% of the purchase price (approx. 1.5% for the notary + 0.5% for the Land Register). These fees cannot be contractually reduced.

Real Estate Agent's Commission (Maklercourtage)

Since 2020, a rule on commission sharing has applied to the sale of single-family homes and apartments to consumers. If the seller hired the agent, they cannot demand more than 50% of the total commission from the buyer. The usual total commission is approx. 6% to 7.14% (including VAT).

Property Tax (Grundsteuer)

As an owner, you will pay an annual property tax. Its amount depends on the value of the property and the municipal coefficient (Hebesatz). A reform of this tax calculation will come into effect in 2025, which may mean a change in the amount of payments in some locations.

Mortgages and Purchase Financing

Most buyers use a mortgage loan. In Germany, a land charge (Grundschuld) is most commonly used to secure a loan, rather than a classic mortgage in the Czech sense (Hypothek). The Grundschuld is more flexible and remains registered in the Land Register even after the loan is repaid, unless you have it removed.

Foreigners can obtain a mortgage in Germany, but the conditions may be somewhat stricter, for example, in the form of a requirement for higher personal funds. Banks require proof of income, equity, and a property appraisal. The approval process with German banks can take several weeks.

The registration of the land charge (Grundschuld) in the Land Register is carried out by the notary and is subject to a fee. The bank will not release the funds to pay the purchase price until this security is registered or at least guaranteed by the notary.

Liability for Defects and Insurance

For older (second-hand) properties in Germany, a clause excluding liability for material defects is standard, often phrased as "bought as is" ("gekauft wie es steht und liegt").

What does this mean for you?

It means the seller is not liable for hidden defects, such as moisture or old wiring, unless they demonstrably knew about them. If a defect appears after the purchase, the repair costs are your responsibility. The exception is if the seller intentionally concealed the defect, in which case you can demand a discount or withdraw from the contract. In such a case, however, the burden of proof lies with you.

For this reason, it is absolutely essential to have the property inspected by a building expert (Bausachverständiger) before signing the contract. An investment in an inspection can save you significant funds. For new buildings from a developer, a statutory 5-year warranty applies under the German Civil Code. In this case, your position as a buyer is stronger.

Insurance

To obtain a mortgage, property insurance (Wohngebäudeversicherung) is essential, covering risks such as fire, water, and storms. Property owner's liability insurance and household insurance are recommended, but not mandatory.

How to Avoid the Most Common Mistakes

The first mistake is relying on online translators. Legal German is very specific, and words have precise meanings that a translator cannot capture. Always insist on a professional legal translation or the assistance of a Czech-speaking lawyer.

Always prepare an additional 10–12% of the purchase price in cash, as banks generally do not finance these ancillary costs with a mortgage. Underestimating the total costs, especially the transfer tax and notary fees, is a common complication.

The third mistake is not conducting a technical inspection. Given the exclusion of warranties for older properties, buying without a technical expert is a gamble. An investment of a few hundred euros in an inspection can save you tens of thousands.

Executive Summary for Management

Buying property in Germany is a safe process if managed professionally. Key points for decision-making:

• Mandatory form: Without a notarial deed, the contract is void.

• Cash flow: Expect ancillary costs of approx. 10–12% (tax, notary, agent), which must be paid from your own funds.

• Time frame: The entire process usually takes 2 to 4 months until the final registration of the owner.

• Risk of defects: For used properties, the risk of defects passes to the buyer at the moment of handover. Legal and technical due diligence is a must.

• Expert support: The ARROWS law firm provides comprehensive legal services for Czech investors in Germany, including tax and financial aspects.

Conclusion

Buying property in Germany is an interesting opportunity for a Czech investor, but it requires respect for a different legal environment. The system is more formal and places great emphasis on the role of the notary and registration in the Land Register. Neglecting preparation, especially in the areas of technical inspection and review of the purchase agreement, can lead to costly complications.

The ARROWS law firm team has extensive experience with transactions in Germany, as evidenced by our references in real estate transactions. We can guide you through the entire process in Czech, review German contracts, and handle communication with authorities. If you are considering a purchase, write to us at consultation@arws.cz for a no-obligation consultation.