Real estate purchase agreements
Putting your name on the dotted line
Purchase agreement: buying real estate
with ease and safety
Signing your name on the dotted line of a real estate purchase agreement doesn't automatically make you the new owner of an apartment or house, but it does bring you a heck of a lot closer to your goal. The purchase agreement, which is one of the most important documents in the entire buying process, obliges the seller to hand the property over to you and obliges you to pay the agreed purchase price.
To ensure that everything runs smoothly up to the actual signing, there are a few things you need to keep in mind: Make sure that the purchase agreement contains correct and up-to-date information about the contractual parties and includes all of the information about the real estate property. It should also specify who is responsible for paying for what and when. Making sure that everything is where it's supposed to be is the notary's job. But you do need to verify that the information included by the notary is complete and accurate.
The real estate purchase agreement is a significant milestone, so be sure to do your homework beforehand and learn about all the dos and don'ts. Of course, you can also exchange views on this topic in the Urbyo community. The German Urbyo podcast, "Immobilien einfach machen" ("Real Estate Made Easy"), hosted by Urbyo real estate experts Oliver and Nina, also features a compact and easy-to-follow episode on purchase agreements. If you're interested, check it out! And of course, you can find everything you need to know right here in this article as well.
What needs to be included in the purchase agreement
So you've reserved the real estate property you want to buy, you've negotiated with the seller a bit over the asking price, and you've got your financing squared away. Awesome! All that's missing now is your and the seller's signatures at the bottom of the purchase agreement.
But if you think that you and the seller can simply draw up an agreement, sign it and conclude the deal all by yourselves, you'd be mistaken. Because real estate purchases are a very serious matter, the purchase agreement has to be notarized. It serves to protect both you and the seller. If you need a purchase agreement template, you can get one from your notary.
The agreement is pretty long, but you should read all of it very carefully because it tells you what your rights and obligations are as the new owner. If you don't understand something or have questions, there's always a shortcut: just ask us. We'll translate the legalese for you.
Here's a little preview of the information you can expect to find in your real estate purchase agreement:
Personal information about the contractual parties: names and addresses
General information about the apartment or house: including potential mortgages, easements, and included objects, floor space, location, etc.
The current state of the property and any known defects or damage
Purchase price and payment due dates
Sharing of ancillary costs
Good to know
If you are buying real estate from someone whose job it is to sell real estate, then as a private buyer, you are entitled to receive a copy of the purchase agreement 14 days before the notary appointment — either from the seller, from the notary or us. You can use that time to get questions answered, settle any outstanding issues and familiarize yourself with what you are buying. If something in the agreement doesn't sit well with you, you can — and should — make use of your right of withdrawal. Because once the deal is signed, there's technically no easy way to get out of it.
Preliminary real estate agreements:
how to know if you need one
Apart from the purchase agreement itself, you may have also heard of something called a preliminary real estate agreement. It's important to understand up front that a preliminary real estate agreement is not a reservation confirmation. It might seem like this at first, but in reality, these are two very different things.
A reservation confirmation isn't legally binding. It basically means that the seller agrees not to list the property you are interested in for a specified period to allow you to secure financing for the purchase.
The preliminary real estate agreement, on the other hand, is concluded before the purchase agreement itself and is notarized in most cases. It states that the buyer and seller have agreed on the terms of sale and that the transfer of ownership will take place at a later point in time for some specific reason. Such reasons may be the bank needing extra time to approve you for financing or the seller still waiting on a building permit for the plot.
If either one of you can't sign the purchase agreement right now, but you and the seller already see eye to eye on the terms of sale and are set on going through with it, you should conclude a preliminary real estate agreement and get it notarized. Then the official purchase of the property is just a formality. Other than that, there really isn't any reason you should need a preliminary real estate agreement.
Drawing up a purchase agreement
without a notary: not a good idea
So you've had a look over your purchase agreement and everything checks out? Perfect. Now it's time to make things official and get everything notarized. Without a notarized purchase agreement, the sale of an apartment or house isn't legally binding. Or, to put it another way, it's against the law: Section 311b of the German Civil Code states that real estate purchase agreements must be recorded by a notary.
The notary serves as a sort of neutral party in the arrangement and is there to protect you and provide you with legal advice. To learn more about what the notary's job is in the purchase process, check out our podcast episode (in german) "Kein:e Notar:in – keine Immobilie" ("No notary - no real estate"). So if you have any questions about your purchase agreement in the lead-up to your signing meeting, the notary is the person to ask. And if you don't have a notary yet, we can arrange an appointment for you in no time at all.
Are you itching to learn even more about real estate purchase agreements? Head on over to the Urbyo Community and talk to members who've already tackled this step of the process.
In any case, the purchase agreement is not valid unless and until the notary signs it. There's no getting around it. Once the deal has been signed, both you and the seller will be sent notarized copies.
What happens after the
purchase agreement has been signed?
Congratulations! Now that your purchase agreement has been notarized, you're the proud new owner of a piece of real estate. Well, almost. Before you can have the keys, there are a few more things the notary needs to do. They need to have a priority notice of conveyance entered into the land register, issue a notice that payment of the purchase price is due, and request necessary changes to the land register once the seller has received payment. All of this can take several weeks.
In the meantime, you'll have invoices coming your way you need to pay. Once the purchase agreement has been notarized, payment will become due on the ancillary costs related to the purchase of the property, the real estate agent's commission, the land registry fees and notary fees, and the real estate transfer tax. And of course, there's the purchase price itself as well. To learn more about what payments you'll have to make, who needs to be paid and when payment is due, check out our Payment Due Dates article.
When you get the final "okay" from the notary saying that all preconditions have been met, it's time to collect the keys and start earning money on your investment.
Rescission of the purchase agreement
Withdrawing from a notarized real estate purchase agreement is very difficult because you have no legal right of rescission unless you find significant defects or damage that you were not made aware of at the time of purchase (e.g., dry rot). Or if it turns out that contractually assured repairs haven't been performed. Before you can rescind the agreement, you first have to allow the other party to fix the issues. If they fail to complete repairs in time, you can withdraw from the contract.
The rescission of a purchase agreement is always a time-consuming, bureaucratic procedure, and it involves the help of a notary. Part of this procedure, for example, includes re-writing the land register. If it turns out that the seller deliberately kept you in the dark about significant defects or damage, then they are responsible for paying the rescission fees. Apart from the land registry fees, this includes reimbursing you for financing costs and any potential appraisal and renovation costs, etc.
Should you and the seller agree on a specific arrangement in the event of rescission, which is included in your purchase agreement, then this arrangement takes precedence over the legal provisions. We highly recommend including something like this in your contract, especially if the seller wants you to sign even though you haven't been approved for financing yet.
By the way: the seller can rescind the agreement as well – if you fail to pay the agreed purchase price. In this case, you would be the one responsible for covering all of the fees mentioned above.
Dealing with a similar situation and don't know what to do? No worries – ask the members of our Community for advice.