When you are buying your First Property you are embarking on an exciting journey. This will be your first home and your first real taste of independence, you will be buzzing with joy and happiness.
From every direction close friends and family will be throwing good willed advice to you and especially where costs are concerned. This can suddenly make the whole process seem discouraging, confusing and fill you with unnecessary doubt.
This article sets out to clarify many of these doubts and help you move forward on this exhilarating journey.
It's important to undrestand that there are additional costs attached to buying a property and what these costs are. To prevent you from getting your fingers burnt or not being able to afford the property it would be better for you if you roughly estimate these costs in the very beginning , and take them into consideration with your overall budget. This will allow you to remain excited and thrilled about your new venture and not filled with regret.
The following parties will be due payment when you buy and sell property;
Real Estate Agent Fees (buyer chooses their own Real Estate Agent)
Notary Fees (buyer chooses their own Notary)
Inland Revenue Fees / Capital Gains Tax (which are collected through the Notary)
The Fee structure is split into two categories i.e. are you the;
Buyer ? or the
Real Estate Agents & Their Fees
You will seek the services of an Estate Agent to find you the property that best suits you. This takes a lot of time and research. They will have the contacts, market knowledge and experience. With this they will be able to show you appropriate properties whilst offering you sound advice thus making the whole process so much smoother. This saves you an incredible amount of time and takes the headache away from looking for property independently. When it comes to services outside of their scope they will be able to direct you to professionals who can help you.
As the buyer of the property you don't have to pay the Estate Agents Fees. These are the costs for the seller and are very often included in the selling price. The Agents Fees are split into two:
1, Open Agency which is when the property has also been advertised with other agents. However if you have seen a property with one agent you cannot go and view the same property with a different agent.
This fee is a standard 5% + Government VAT (currently standing at 18%), and
2, Sole Agency which is when the property cannot be sold by or through anyone else. This fee is also set at a standard rate of 3.5% + Government VAT (currently 18%)
Notary Services & Their Fees
You will need to use the services of the Notary to ensure that all the legalities are covered . They will draw up the Sale of Contract (convenue) with the complete and full information whilst safe guarding all parties involved. They know the ins and outs of the legal structure, are experienced in this field and can also offer
you sound financial advice when selling and buying.
The Stages are:
1, Signing of the sale of contract (convenue).
The Convenue is typically for three months, it will state everything that's included with the sale plus the financial payments, terms and conditions. Make sure that you have been to your bank and enquired about mortgages and mortgage payments should you need one.
a, buyer pays 10% deposit of full price of property which is to be held with the notary
2, The Notary will carry out the relevant Searches during the term of the convenue.
The Searches involve identifying the legal owner of property , official ground rent status, go through all legal ground work to ensure the smooth completion of the convenue. During this time if anything comes up that could prevent the sale from happening then both parties are informed and are able to clarify the situation.
a, buyer pays approximately 0.10% - 0.50% of the property price to the Notary for the searches carried out
b, buyer pays 1 % Stamp Duty for Commissioner of Inland Revenue - the Notary deposits this money on account with the Commissioner of Inland Revenue and on behalf of the buyer
c, seller pays 7% Stamp Duty for Commissioner of Inland Revenue - Notary deposits this as well
3, The Notary will draw up the final contract or amend the existing one.
The searches have been carried out, financing is in place and everything's in order. All parties will meet together and the signing of the contract will take place. During this meeting the final payments will also be made:
a, buyer pays remaining part of the stamp duty for the Commissioner of Inland Revenue. This is 4% (5% - 1% already paid on account)
If this property is the buyers main residential property then they would be charged 3.5% Stamp Duty on the first €116,468 (Lm50,000) and then 5% on the remaining amount.
b, buyer pays remaining price of property which is the total value minus the 10% deposit paid
c, buyer pays Notary Fees which are approximately 1% total value of the property
d, seller pays Real Estate Agent their fee depending on if it's Sole or Open Agency.
Capital Gains Tax is a Tax for the seller and only if the property is sold less than 5 years of owning it. This is due to the property being perceived as an investment/business transaction rather than a residential home. Capital Gains Tax can be charged in one of the two following ways:
1, Flat Rate of 12% of total market value of property, or
2, At a progressive rate of 35% .
These are general guidelines so please use the information for rough estimate purposes only. They may somewhat vary depending on the company and their individual services they offer.
We hope that you have found this article to be useful and that it shed some light on the financial and legal side of buying and selling property.
In the next article we will discuss 'THREE MOST COMMON CONDITIONS YOU CAN BUY A PROPERTY IN'.
Article exclusively prepared for BrideMalta.com by CNWPropertyMalta