The Costs of Buying or Selling a House in the Czech Republic
Koutris Efstratios, Monday, 27 January 2014
This article is part of a series of 8 articles about buying property in the Czech Republic. The other articles in the series cover the following topics:
Introduction
A real estate purchase is widely considered to be a very secure and financially correct investment. However, prospective buyers and sellers need to know beforehand that the actual purchase price of the real estate is only part of the final cost. There is a large number of additional fees, some of which can turn out to be a great deal of money, that contribute to the initial purchase value regardless whether you are buying or selling the property. The rule of thumb in Czech Republic is that you need to add 6 – 8 % to the purchase price in order to cover all potential fees and costs. Most of these fees are minor and include matters such as purchasing stamps for the ownership deed or other documents from the Land Registry or opening an escrow account via notary or bank. However, there are additional fees including taxes, insurance, lawyers, bank interests, mortgages etc, the role of which needs to be emphasized and described in a sufficient way. In principle, the purchase costs can be categorized into four large groups: legal fees, registration fees, real estate agent commission, and transfer tax. Furthermore, there is an additional group which encompasses all other costs, existing or potential, in order to cover the fees related to real estates in a more spherical manner. Therefore, the following lines will list and unfold all relevant transaction costs that arise with respect to buying or selling a real estate.
Real Estate Agency’s and Legal fees
The large majority of real estate purchases occurs through a real estate agency, especially when the buyer or seller is a foreigner. In general, most real estate agencies in Czech Republic will ask for about 4 – 7 % (most typically 5 %) of the purchased price. In Prague, this commission fee can be paid by either the buyer or jointly by the buyer and the seller. In other cities such as Brno the commission is always paid by the buyer.
Furthermore, an unavoidable cost revolves around the legal fees. In principle, legal fees are generally negotiable; however it is extremely important to define a fixed price and the scope of work beforehand. Legal fees include agreements regarding reservation and future purchase of the real estate. Additionally, these fees embody the full purchase agreements such as the proposal to register the real estate to the Land Registry, the inspection of the legal quality of the property, escrow accounts etc. Each real estate agency has their own group of lawyers whom the individual may choose to select in order to finalize the potential purchase/selling of the real estate. However, the individual needs to be aware that these lawyers will not be fully working for the client but instead for the profit of the respective agency. Alternatively, there are many legal firms across the Czech Republic, and most specifically in Prague, that exclusively specialize in such matters. The hourly fee is on average 2,500 CZK excluding VAT (approximately 100 euros per hour). However, the hourly fees may reach 8,000 CZK excluding VAT (around 350 euros) or even more, in case the buyer/seller seeks the aid of prestigious Czech legal offices. A fee which can be also associated with lawyers, involves the opening and keeping of an Escrow account. Alternatively, this procedure can be accomplished by a bank or via a notary.
Registration fees
A sufficient amount of costs is attributed to the registration fees. For instance, the buyer or seller must get stamps from the respected cadastral office regarding the ownership deed or any other documents that need to be submitted to the Land Registry (such as previous purchase contracts, building permit, cadastral map etc). Moreover, the individual needs to obtain additional stamps in order to present the proposal to register the ownership or bank pledge (mortgage) in the Land Registry. Finally, registration fees include the verification of two signatures (on the purchase agreement) by notary, a process which will cost the buyer or seller around 2,000 CZK (80 euros). Bear in mind that all documents obtained should be duplicated.
Transfer Tax
Transfer tax is only paid by the seller. This tax is based on either the market value of the real estate or on the sales price (typically whichever is higher) and can be deducted for income tax purposes. In general, the fees range from 3,500 – 7,000 CZK (150 – 300 euros) plus VAT per property.
Additional Costs
There are several other fees and costs which contribute to the final value when purchasing a real estate in Czech Republic. For instance, the property valuation can itself amount to 3,000 – 6,000 CZK (150 – 250 euros). Furthermore, fees include a mortgage account and its subsequent administration, which depends on the property or on % of the mortgage, a commitment fee that is calculated during the mortgage availability period, mortgage interest, and mortgage broker provisions. There are severe penalties imposed by Czech banks in case the individual does not pay the mortgage instalments in time. The respective penalties can range from 10 up to 25 % of the remaining amount that the client needs to settle. Moreover, there are fees related to the property’s insurance, and in case of a development project for a new real estate, the installation of e.g. an electric meter can cost up to 12,000 CZK (500 euros). Finally, always remember that will be additional costs in case the buyer or seller is not physically present for e.g. signing the sale of a real estate, transfer of utilities etc.
This article is part of a series of 8 articles about buying property in the Czech Republic. The other articles in the series cover the following topics:
Introduction
A real estate purchase is widely considered to be a very secure and financially correct investment. However, prospective buyers and sellers need to know beforehand that the actual purchase price of the real estate is only part of the final cost. There is a large number of additional fees, some of which can turn out to be a great deal of money, that contribute to the initial purchase value regardless whether you are buying or selling the property. The rule of thumb in Czech Republic is that you need to add 6 – 8 % to the purchase price in order to cover all potential fees and costs. Most of these fees are minor and include matters such as purchasing stamps for the ownership deed or other documents from the Land Registry or opening an escrow account via notary or bank. However, there are additional fees including taxes, insurance, lawyers, bank interests, mortgages etc, the role of which needs to be emphasized and described in a sufficient way. In principle, the purchase costs can be categorized into four large groups: legal fees, registration fees, real estate agent commission, and transfer tax. Furthermore, there is an additional group which encompasses all other costs, existing or potential, in order to cover the fees related to real estates in a more spherical manner. Therefore, the following lines will list and unfold all relevant transaction costs that arise with respect to buying or selling a real estate.
Real Estate Agency’s and Legal fees
The large majority of real estate purchases occurs through a real estate agency, especially when the buyer or seller is a foreigner. In general, most real estate agencies in Czech Republic will ask for about 4 – 7 % (most typically 5 %) of the purchased price. In Prague, this commission fee can be paid by either the buyer or jointly by the buyer and the seller. In other cities such as Brno the commission is always paid by the buyer.
Furthermore, an unavoidable cost revolves around the legal fees. In principle, legal fees are generally negotiable; however it is extremely important to define a fixed price and the scope of work beforehand. Legal fees include agreements regarding reservation and future purchase of the real estate. Additionally, these fees embody the full purchase agreements such as the proposal to register the real estate to the Land Registry, the inspection of the legal quality of the property, escrow accounts etc. Each real estate agency has their own group of lawyers whom the individual may choose to select in order to finalize the potential purchase/selling of the real estate. However, the individual needs to be aware that these lawyers will not be fully working for the client but instead for the profit of the respective agency. Alternatively, there are many legal firms across the Czech Republic, and most specifically in Prague, that exclusively specialize in such matters. The hourly fee is on average 2,500 CZK excluding VAT (approximately 100 euros per hour). However, the hourly fees may reach 8,000 CZK excluding VAT (around 350 euros) or even more, in case the buyer/seller seeks the aid of prestigious Czech legal offices. A fee which can be also associated with lawyers, involves the opening and keeping of an Escrow account. Alternatively, this procedure can be accomplished by a bank or via a notary.
Registration fees
A sufficient amount of costs is attributed to the registration fees. For instance, the buyer or seller must get stamps from the respected cadastral office regarding the ownership deed or any other documents that need to be submitted to the Land Registry (such as previous purchase contracts, building permit, cadastral map etc). Moreover, the individual needs to obtain additional stamps in order to present the proposal to register the ownership or bank pledge (mortgage) in the Land Registry. Finally, registration fees include the verification of two signatures (on the purchase agreement) by notary, a process which will cost the buyer or seller around 2,000 CZK (80 euros). Bear in mind that all documents obtained should be duplicated.
Transfer Tax
Transfer tax is only paid by the seller. This tax is based on either the market value of the real estate or on the sales price (typically whichever is higher) and can be deducted for income tax purposes. In general, the fees range from 3,500 – 7,000 CZK (150 – 300 euros) plus VAT per property.
Additional Costs
There are several other fees and costs which contribute to the final value when purchasing a real estate in Czech Republic. For instance, the property valuation can itself amount to 3,000 – 6,000 CZK (150 – 250 euros). Furthermore, fees include a mortgage account and its subsequent administration, which depends on the property or on % of the mortgage, a commitment fee that is calculated during the mortgage availability period, mortgage interest, and mortgage broker provisions. There are severe penalties imposed by Czech banks in case the individual does not pay the mortgage instalments in time. The respective penalties can range from 10 up to 25 % of the remaining amount that the client needs to settle. Moreover, there are fees related to the property’s insurance, and in case of a development project for a new real estate, the installation of e.g. an electric meter can cost up to 12,000 CZK (500 euros). Finally, always remember that will be additional costs in case the buyer or seller is not physically present for e.g. signing the sale of a real estate, transfer of utilities etc.
All types of property for sale in the Czech Republic by private sellers and estate agents. Find your perfect house or apartment in Bohemia, Moravia, Prague, Hradec Kralove, Ostrava or Plzen.
Commencing all necessary steps for the acquisition of a property in a country other than yours can be a very tedious, time-consuming, or even
horrifying experience. Therefore, this article intends to provide a brief, yet punctual overview of the appropriate procedure that foreign prospective
investors need to follow in order to successfully accomplish their real estate transaction.
More articles