Real Estate Buying Process in Italy
Today we esplain how the real estate buying process works in Italy, from the buying proposal to the final contract, costs and taxes included.
Buying Proposal (Proposta d’acquisto)
Once you have found the property you are interested in, the buying proposal, will take it off the market normally for two to four weeks. You usually have to pay a five per cent deposit at this time. At this stage you can withdraw without losing your deposit if there are any legal issues. Next, you move on to the preliminary contract.
Preliminary contract (Contratto preliminare o Compromesso)
Once seller and buyer agree on the buying proposal, they can proceed with the Preliminary Contract. This is a legally binding contract, where both parties have the obligation to complete the purchase. The Preliminary Contract includes a description of the property and sets out conditions such as rights of way, payments and timing of the buying process. On signing it, the buyers pays a further deposit ranging between 10%-30% on the sale price, either to the vendor, as well as the agency fees. This deposit is called Caparra Confirmatoria. The Preliminary contract virtually guarantees the purchase will proceed, as the buyer will lose their deposit if they pull out, but the seller will have to pay double the deposit if they pull out.
From Preliminary to Final contract it takes some months (normally one to three ), during which time a Notary is appointed. Notaries are members of an independent legal body who work for both the buyer and seller, conducting searches, checking planning permission, investigating in seller legal title, checking that no other mortgage or charge exist over the property etc…and preparing deeds.
The final contract (Atto or Rogito)
This is signed at the Notary’s office, either in person or by giving someone power of attorney on your behalf. The contract will be read out, so non-Italian speakers will need a qualified translator.
In this moment the buyer will pay the remaining price of the purchase, along with taxes and notary fees. The Notary will send the purchase deed to the land registry and the buyer receives it approximately two months later.
Tax code (Codice fiscale)
You need an Italian tax code before you can buy property in Italy. Usually your estate agent will help you get the tax code.
It can be possible to borrow up to 70 per cent loan-to- value (LTV) for a property at time of writing although this is obviously subject to individual circumstances.
The main costs when purchasing a property in Italy are taxes, notary fees and estate agents commission.
Each property has a sale price that the buyer pays and a “book value” (or cadastral value or valore catastale) which is the value according to the land registry office and it is usually lower than the purchase price.
If the seller is a private person, taxes are paid on this “book value”.
If the property is sold by a Company taxes will be paid on the sale price.
If this property is your main Italian home and you take Italian residency within 18 months of signing the final contract, you will pay the “Imposta di Registro”, a tax of three per cent of the book value of the property (or four per cent VAT if you are buying from a company rather than from a private seller).
If your Italian house is a holiday home or you already own property in Italy, you will pay ten per cent of the book value of the property (in case of privat seller) or ten per cent on the sale price (in case of the purchase is from a Company ).
There are also land registry taxes, the “cadastral” tax, plus 22 per cent VAT on the legal fees which will already have added one or two per cent to the purchase costs.
The fees are usually between 2.5 and 3 per cent, depending on the area, the value of the property and the rates charged by the individual notary. Non- Italian speakers will also have to pay for a certified translator when it comes to the final contract. Buyers using an Italian loan or mortgage must pay for the “atto di mutuo” (mortgage contract) to be registered by a notary.
Estate agent commission
Both buyer and seller pay estate agent commission, usually two to three per cent percentage of the real value, plus VAT (IVA) of 22 per cent.
Tax and Residency
Ater buying an Italian property, notify the purchase to the local police authorities within 48 hours of signing the final deed of sale. Next you must organise contracts for gas, water, electricity and telephone. Property owners must pay several taxes, including IMU, the municipal tax on all property owners, and TARI, a tax for rubbish collection.