Costs of Buying and Selling Real Estate in Hungary
Peter, Saturday, 9 November 2013
This article is part of a series of 8 articles about buying property in Hungary. The other articles in the series cover the following topics:
Costs of purchasing property in Hungary are relatively low, compared to other EU states. Non-EU citizens are required to apply for a proper permit issued by Hungarian administrative authorities when buying real estate as a private person. This procedure from applying to granting could last up to two to three months, and costs about $200. Therefore non-EU citizens are usually advised to register a company in Hungary and not to apply as a private person, which makes the procedure faster and easier. Registering a company takes only 1-2 days and no permit will be needed. Moreover, all expenses regarding to registering the company can be later written off in form of tax deductions. All buyers, Hungarians and foreign citizens are about to face the following expenses when purchasing real estate: transfer tax, registration fees and legal fees, plus 27% Value Added Taxes. Selling a property in Hungary not necessarily means facing realtor’s fees, real estate agencies can be excluded from the transaction. The first sales are also subjects to a 27% VAT for all residential properties.
Every new owner has to register its real estate, causing a minor registration fee about 0.01% ranging to 0.05% of the price. The land registry procedural is typically taken care of by a legal representative.
The transfer tax (also called stamp duty) of a residential property is really progressive in Hungary, using a two-rate system, differing from 2% to 4%. The rate depends on the price of the house: up to 4 million Hungarian Forints (HUF) the rate is 2%, above that (the value over 4 million) the rate is 4%. (HUF 294.5 = €1). For non-residential properties, the rates are 4% up to the value of HUF 1 billion and 2% to the value over HUF 1 billion, but maximum HUF 200 million per property.
Be advised that the National Tax and Customs Administration of Hungary (NAV) can cause and most likely to cause some legal trouble if the agreed price is below the property’s current estimated market value. Most Hungarians are in habit of evading taxes and it is a common method between them to write the sales contract of a smaller purchase price, and paying the rest of the really negotiated money off the books, in order to lessen the transfer tax. Ever since the real estate market is down in Hungary, most properties are could only be sold far below the real market value, and the NAV suspects these transactions are form of the widespread misdemeanor. Lately the NAV started to demand the buyers to pay the “full” transfer tax according to the estimated market price. Legal assistance could be the way out of the NAV’s chokehold.
As the previous example proves, legal aid is essential in Hungary when purchasing a property. Legal fees are negotiable, generally differing between 0.5% up to 1.5% of property value (plus 27% VAT). It is strongly advised to choose the lawyer carefully, only if he or she comes highly recommended. There is an oversupply of solicitors in Hungary and many would not meet the European standards and criteria of competence and efficiency. The real estate agencies always guarantee their own lawyers who can be trusted but still have to be paid by the buying party. However neither a realtor nor a lawyer is required by Hungarian law to be involved. The buyer and the seller can make the contract themselves, but their signatures must be verified by a public notary, which commonly costs 0.25% - 1% of property value. Note that if the parties decide to commission a lawyer for preparing the contract and handling the administrative matters, the advocate will represent both the buyer and the seller.
As stated above, Hungarians are not particularly fond of paying for something if it’s not completely necessary. That includes the real estate agencies as well. Their fees range between 3% and 5% (plus 27% VAT) but most Hungarian sellers are reluctant to use any mediator service in order to avoid paying the brokerage.
During the process of purchasing a property, the buyer is expected to make down payment to the seller. The deposit is usually between 10% and 20% of the negotiated price, and it naturally comes off the amount finally paid.
Surveys about the technical state of the properties are also not mandatory in Hungary to include in a contract, but a rising number of buyers and sellers expect it nowadays. A survey costs about $100 – $200. It depends on the area of the estate. If the transaction is financed by a bank, the bank will demand another survey about the estate’s mortgage situation. It is strongly encouraged to carry out the surveys anyway, due to the generally unreliable Hungarian sellers. The better, trustworthy real estate agencies will make the surveys automatically and include the costs in to their brokerage.
Adding it all up, the extra costs of buying a property in Hungary can vary between 2% and 6% of the price agreed. On the seller’s side, costs depend on whether a real estate agent is involved or not.
This article is part of a series of 8 articles about buying property in Hungary. The other articles in the series cover the following topics:
Costs of purchasing property in Hungary are relatively low, compared to other EU states. Non-EU citizens are required to apply for a proper permit issued by Hungarian administrative authorities when buying real estate as a private person. This procedure from applying to granting could last up to two to three months, and costs about $200. Therefore non-EU citizens are usually advised to register a company in Hungary and not to apply as a private person, which makes the procedure faster and easier. Registering a company takes only 1-2 days and no permit will be needed. Moreover, all expenses regarding to registering the company can be later written off in form of tax deductions. All buyers, Hungarians and foreign citizens are about to face the following expenses when purchasing real estate: transfer tax, registration fees and legal fees, plus 27% Value Added Taxes. Selling a property in Hungary not necessarily means facing realtor’s fees, real estate agencies can be excluded from the transaction. The first sales are also subjects to a 27% VAT for all residential properties.
Every new owner has to register its real estate, causing a minor registration fee about 0.01% ranging to 0.05% of the price. The land registry procedural is typically taken care of by a legal representative.
The transfer tax (also called stamp duty) of a residential property is really progressive in Hungary, using a two-rate system, differing from 2% to 4%. The rate depends on the price of the house: up to 4 million Hungarian Forints (HUF) the rate is 2%, above that (the value over 4 million) the rate is 4%. (HUF 294.5 = €1). For non-residential properties, the rates are 4% up to the value of HUF 1 billion and 2% to the value over HUF 1 billion, but maximum HUF 200 million per property.
Be advised that the National Tax and Customs Administration of Hungary (NAV) can cause and most likely to cause some legal trouble if the agreed price is below the property’s current estimated market value. Most Hungarians are in habit of evading taxes and it is a common method between them to write the sales contract of a smaller purchase price, and paying the rest of the really negotiated money off the books, in order to lessen the transfer tax. Ever since the real estate market is down in Hungary, most properties are could only be sold far below the real market value, and the NAV suspects these transactions are form of the widespread misdemeanor. Lately the NAV started to demand the buyers to pay the “full” transfer tax according to the estimated market price. Legal assistance could be the way out of the NAV’s chokehold.
As the previous example proves, legal aid is essential in Hungary when purchasing a property. Legal fees are negotiable, generally differing between 0.5% up to 1.5% of property value (plus 27% VAT). It is strongly advised to choose the lawyer carefully, only if he or she comes highly recommended. There is an oversupply of solicitors in Hungary and many would not meet the European standards and criteria of competence and efficiency. The real estate agencies always guarantee their own lawyers who can be trusted but still have to be paid by the buying party. However neither a realtor nor a lawyer is required by Hungarian law to be involved. The buyer and the seller can make the contract themselves, but their signatures must be verified by a public notary, which commonly costs 0.25% - 1% of property value. Note that if the parties decide to commission a lawyer for preparing the contract and handling the administrative matters, the advocate will represent both the buyer and the seller.
As stated above, Hungarians are not particularly fond of paying for something if it’s not completely necessary. That includes the real estate agencies as well. Their fees range between 3% and 5% (plus 27% VAT) but most Hungarian sellers are reluctant to use any mediator service in order to avoid paying the brokerage.
During the process of purchasing a property, the buyer is expected to make down payment to the seller. The deposit is usually between 10% and 20% of the negotiated price, and it naturally comes off the amount finally paid.
Surveys about the technical state of the properties are also not mandatory in Hungary to include in a contract, but a rising number of buyers and sellers expect it nowadays. A survey costs about $100 – $200. It depends on the area of the estate. If the transaction is financed by a bank, the bank will demand another survey about the estate’s mortgage situation. It is strongly encouraged to carry out the surveys anyway, due to the generally unreliable Hungarian sellers. The better, trustworthy real estate agencies will make the surveys automatically and include the costs in to their brokerage.
Adding it all up, the extra costs of buying a property in Hungary can vary between 2% and 6% of the price agreed. On the seller’s side, costs depend on whether a real estate agent is involved or not.
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