Buying Real Estate in Germany: What International Investors Need to Know

Foreigners may purchase real estate in Germany without restriction - regardless of whether they live in Germany or not. The purchase can be made by private individuals as well as legal entities or companies. A residence permit is not required for this, which makes access to the market comparatively uncomplicated.

The process of buying a property in Germany is clearly structured. It starts with the selection of the property - often via estate agents or online platforms. This is followed by “due diligence”, i.e. the legal, commercial and structural inspection of the property. The support of a specialist lawyer is recommended, especially if there are language barriers or if you are not familiar with German real estate law.

Notarization is a key element of the purchase process. In Germany, a property purchase is only legally valid if it has been notarized by a notary. The notary takes on a neutral role:

• He draws up the purchase agreement,
• reads it to both parties and
• ensures that all legal requirements are met.

The purchase price only becomes due after notarization - often via a so-called notary trust account. The purchase price is not paid directly to the seller, but to the notary in trust. The notary only releases the money when all contractually agreed due date requirements have been met. The buyer is only officially registered as the owner once the purchase price has been entered in the land register.

Various incidental costs are associated with the purchase of real estate. These include

• land transfer tax (between 3.5 percent and 6.5 percent depending on the federal state),
• notary and land registry fees (around 1.5 percent) and
• possibly an estate agent's commission, which can be up to 7.14 percent. 

International buyers should definitely include these additional costs in their calculations. Additional costs should always be critically scrutinized - foreign investors in particular run the risk of being offered unnecessary or excessive additional services.

Typical pitfalls often arise from an inadequate inspection of the property - for example with regard to

• existing building permits,
• contaminated sites,
• current tenancies or
• building law restrictions.

Financing can also be challenging, as German banks often impose stricter requirements on foreign buyers in terms of creditworthiness and collateral. Tax aspects should also be taken into account - such as speculation tax, which is payable on a sale within ten years.

Buyers from abroad have the option of completing the property purchase without being personally present in Germany - for example by means of a notarized power of attorney via the consulate or a notary in their home country. Nevertheless, close cooperation with local experts - notaries, lawyers and tax advisors - is strongly recommended in order to minimize legal and financial risks.