Most Common Mistakes When Buying a Property in Italy.
Buying a house is a process that is similar around the world but especially for a foreigner, it can be tricky.
In most cases, purchasing a property is one of the most important decisions and probably one of the biggest investments in most people’s lives, and yet the same errors are often made over and over.
In this article, we try to highlight some of the most common and fatal mistakes in buying a property in Italy.
The Italian housing market is recovering, the latest figures speak of a recovery in sales. Last year data shows that the transactions in some cities like Bologna and Milan are growing 2 figures, and the banks have also started to provide funds again.
The main issues and mistakes are connected to the following key points (some points are mainly for foreigners and non-residents):
- Calculate wrongly the buying costs. Often people (especially non-residents) don’t know all the expenses and the fees that need to be paid connected to a property purchase, such as notary fees, legal assistance, previous condominium fees, buying taxes, transcription and registration costs;
- Unsureness on which tax needs to be calculated. Some transactions depending on the seller status are subject to VAT, in Italian “IVA” (for example when buying from developers) or to the registration duty, in Italian “Imposta di Registro” and this can change depending on the buyer status and if for him is the first house purchase or not;
- Not consulting a property lawyer before signing important documents. Such as offers or preliminary contracts or agreements. For example, not everyone knows that donated assets are subject to revocation by any heir and this legal action has long legal terms. For this reason, many banks do not grant mortgage loans for the purchase of a property from a donation. In this case, as in many others, expert advice can avoid unpleasant surprises;
- Trying to avoid consultants. People can save often more money by going through a buying process with a professional such as property lawyers by his/her side. The purchase can be negotiated, especially if some hidden costs come out from the legal due diligence or condominium check shows up debts that by law have to be requested from the buyer, these elements can work in the negotiation and lower the price and convince the seller to give a substantial discount, or simply leave that property cause is getting too complicated and consider another more smooth purchase;
- Real Estate Agent is not a Lawyer! Many people don’t hire a lawyer only because in the transaction there is an intermediary such as the real estate agent but don’t know that in the Italian legislation the real estate agent doesn’t have the legal obligation to make a legal check, he has to link the buyer and the seller, the legal side is delicate and crucial and should be taken in big consideration, can save big headaches, future costs, and fatal surprises;
- Mortgage Costs, Requirements, and Timing. Buying with a mortgage can take a long process and the percentage of the amount to lend can change if the individual is Italian or non-resident. This has costs and sometimes people don’t even know how much must be ready to pay and be ready to pay in the notary deed date. For the foreigners, can be lent a sum between 50-60% of the property value, but it changes from bank to bank and from the solvency and guarantees of the individual;
- Property Tax Report. People who buy a house do not know or find out in advance what taxes and maintaining costs are due for that property, and this can lead to unpleasant surprises;
- Not considering the Euribor. It could be at a high or low point, taking a look to Euribor current situation could help to know if a better idea is to maybe wait or is a good moment to just make the purchase right now because prices are raising;
- Borrowing too much and risking default. The Bank of Italy recommends that the portion of the mortgage, added to the rest of the debts (credit card, personal loans, etc.), should not exceed 35-40% of the income of the mortgage holder;
- Signing a self-made or standard template offer or contracts. Often people don’t understand that the terms, economic agreements, and clauses of the preliminary contracts can be strongly dependents to what has been subscribed in the proposal offer, this issue can be even bigger if it regards the preliminary contracts and some legal guarantees can be lost, is always better to have a legal check before signing anything, but a property lawyer can find something to do even after, hire a professional pays off;
- Not having the sense of what is expensive or cheap for a nonresident. You have to look for statistical information and compare market prices. The information can be found in many ways, from local real estate agencies to reports from the Bank of Italy, and also through many top real estate websites (such as Immobiliare.it Casa.it, etc.) that use their data from daily transactions and, finally, the Borsino Immobiliare that has official Italian transactional data;
- Thinking that the prices will for sure go up and won’t fall. There is still no clear evidence of a generalized recovery in the housing market. Just because prices in the main cities and center of Milan or Rome have risen, that doesn’t necessarily mean they will do so in the other cities or suburbs.