This page describes how the real estate market in Germany works.
Find property and understand the market
The first step into buying a house or an apartment is locating potential objects in the area you are interested in. We’ve assembled a list of websites that list properties for sale (and rent). The biggest site is called ImmobilienScout24.de.
There is currently no English version of the site available, but the mobile app is translated into English as well. Even without an English version, you’ll probably find your way around with our real estate dictionary, listing the most common German terms related to real estate.
ImmobilienScout and the other websites allow you to explore current offers, based on criteria like location, number of rooms and square meters. In Germany, apartments are not compared by the number of “bedrooms”, but just by the number of rooms, not counting bathroom(s) and the kitchen.
Just by browsing on the real estate websites, you’ll quickly understand how the price is affected by the property location and other features.
Once you’ve found some interesting objects, we recommend to ask for an appointment to visit the apartment or house. In most cases, apartments are sold using real estate agents (or realtors). Just visiting the apartment is usually free. Sometimes, the agents ask you to sign a contract that you’ve visited the apartment with them.
This secures the agent’s right to ask you for a commission once the object is being sold through them. The commission is usually between 3-7% of the total object’s price. Depending on the market situation, the commission is negotiable.
Also, some property owners have multiple agents trying to sell their property. So if you find the object through one agent, you are obliged to close the deal through them.
When visiting the apartment, make sure to pay attention to the following:
- Quality of the building (entrance area, staircase, roof, walls)
- Quality of the apartment (windows, heating radiators, kitchen, bathroom(s))
- Neighbors and Neighborhood (which shops are around, what kind of people walk around, social status of the people walking around)
- Information about the other owners: When buying an apartment in a larger house, you’ll buy the apartment and all the common areas. All the owners are responsible together for the common areas, hence it is important to understand the structure of ownership in the building. Are you joining one big investor who owns all the other apartments (in that case, he can effectively overrule you and make all the decisions)? Are the owners living in their apartments themselves, or are they renting their apartments out? (This will have an impact on the kind of renovation they want to do)
Finding “secret deals” on the market: When a property is listed in the big real estate websites, the floodgates to hundreds of interested buyers (at least in the major cities) are open, and good offers go away immediately. Therefore, it is essential for smart buyers who want to close a good deal to get into some alternative channels as well. Of course, trying to get something cheaper requires more effort and time.
- Set up an automated email notification on new listings: Portals like ImmobilienScout offer to “save a search” and send daily email notifications on new search results. This gives you an important time-advantage to other buyers to find good deals. The faster an apartment or house disappears from the website, the better the deal was.
- Tell the real estate agent what you are looking for: Some real estate agents have newsletters for their customers to notify them about the latest properties they put onto the market. This means that you might get the offer before its put out in the public.
- Get in touch with sellers / houseowners: Sometimes people are thinking about selling some of their property, but they don’t get around actually doing it. Therefore, try to talk to the seller of an offer if he has any “inside tips” from friends or neighbors. Also, the companies managing properties for the owners (“Hausverwaltung”) sometimes know beforehand when something will get into the market.
- Check free websites (but be careful!): In particular for people who are selling their property themselves (not using an agent), the costs for using the big real estate websites are too high. That’s why they often choose to use cheaper or even free websites. Some of the best deals are probably on these sites, however, its also attractive for scammers to use the sites, so be extremely careful when you see the perfect deal there.
Get a mortgage loan
Unless you intend to buy property with cash, you’ll need to borrow money from a bank. This guide only explains how to borrow money for people with a job in Germany. Please get in touch with banks or mortgage brokers if you want to see if they borrow you money in your particular situation.
Before we get into some practical advice on getting money from a bank, lets first look into the transaction costs in Germany, based on an example for a 400,000€ property:
|Buying tax (6% (Berlin))||24,000€|
|Notary costs (1.5%)||6,000€|
|Land register entry (0.5%)||2,000€|
|Real estate agent (7.14%)||28,560€|
|Total transaction costs||60,560 €|
As you can see, there are quite some additional costs that you need to consider when buying in Germany. In particular the real estate agent is adding a lot of costs to the whole transaction (usually, the buyer pays all those fees).
The more you are able to pay yourself from the overall buying costs, the cheaper the loan gets. To get an offer that is somewhat good, you’ll need to able to pay at least all the transaction costs.
When talking to a bank, they’ll consider the ratio you are borrowing from the total property price. So if the property is 400,000€, and you are borrowing 300,000€, you have a borrowing rate of 75%. The lower the rate is, the better interest rate you’ll be getting. The ideal rate is 60% (below that, there’s no real benefit), but everything up to 80% is usually a really good deal (unless you are paying any additional “penalty” for some risks).
The interest on the loan is not set “dynamically” but goes up in 5% (or for some banks 10%) steps. So 90%, 85%, 80% are the numbers you should try be able to pay down yourself. If you want to check this out yourself, the German term for the ratio is “Beleihungswert”.
Another important factor for the interest rate is the number of years you fix the rate. Banks (and insurances) offer anything from 0 – 30 years, but 5, 10, 15 are the most common ones (recently 20 years is getting more popular). You can find up to date interest rates for 5 – 30 years and different borrowing ratios on the linked (German) website.
Get things going
Since banks want your money (you pay as interest), they are generally helpful in giving you all the information you need to get a mortgage loan in Germany. But still, you need to make a first contact, and you’ll probably want the best deal.
We recommend to first talk to a local bank in the town you intend to buy. In a personal meeting, they’ll have time to explain you in detail how the process works and what they can offer. Most likely, the local bank will not offer you the best deals available. There is currently no website available in Germany that allows you to compare actual, personalized interest rates. The only thing that is available are approximations based on some input data. Usually there are some spammers among the offers, making those numbers quite useless.
We recommend getting in touch with credit brokers such as Interhyp or Dr. Klein. These companies have access to a large number of partner banks to compare their offered interest rates.
Closing the deal
In the previous sections, we’ve covered how you find properties and how to get the money to actually buy something. In this section, we’ll list all the steps involved to legally transfer ownership.
- Agree on a price with the seller: It really depends on the market situation whether you can negotiate the price or not.
- (Get your mortgage loan pre-approved): If you are relying on money from a bank, you should have a confirmation that they are willing to finance your property plans. The bank will usually send you a pre-signed mortgage contract with the approval that you can sign once the buying contract is signed.
- Request the contract: Real estate transactions in Germany have to go through a notary. The buyer and seller need to agree on a notary beforehand. The notary will create a contract listing all the property details, names and other transaction details. Usually, notaries in Germany are able to speak English and set up contracts in English as well.
- Make a notary appointment: By law, there is a waiting period of 14 days between getting the buying contract and the actual signing. Therefore, plan ahead in advance how you want to schedule this important meeting. You can use this time to let your own lawyers check the documents. The notary is also available to answer all questions you have regarding the contract and the transaction (for no additional costs)
- Sign the contract at the notary (2 weeks): In Germany, the notary has to read the entire contract to you. You can interrupt them at any time and ask questions.
- [The notary will now start the transaction processing]: There are several steps involved to transfer the ownership from the seller to the new owner. What happens is that the notary first “locks” the property documents at the government register from any other changes. Then, the money is transferred. Once the notary has confirmed that the seller got their money, they will update the property documents and unlock them. All this usually happens automatically (with the exception that you have to pay some money in between for the government)
- Sign your mortgage loan contract: The buying contract will contain the time until when the seller expects to get the price transferred. Therefore, you should make sure you get the money from the bank quickly. Usually, it is recommended to sign the loan contract after you’ve bought the apartment. If you first sign the loan, you are exposed to the risk of the seller dropping out.
- (Sign the land charge): If you are using a loan, you’ll have to sign the land charge (“Grundschuld”) from the bank. Sometimes, you’ll be able to sign this contract together with the main buying contract.
- Transfer the money (2-4 weeks): The notary will let you know when you have to pay the price for the property to the seller. If you are financing using a bank, you have to fill a form for the bank to let them know that they can now transfer the money.
- Pay the transaction costs (1-3 months): The government wants some money from the land register entry. Also, the notary only transfers ownership, once the tax office confirmed that you’ve payed the taxes for the transaction.
- Get the final confirmation from the notary: Once everything has been processed, the notary will send you a copy of the land register, stating that you now the new owner of the property.
- Get mail from the tax office: The tax office will ask you to pay some taxes for owning land in Germany.
We’ve put the usual waiting times in parentheses. The longest waiting time comes from the interaction with government agencies to confirm updates to the land register or process the property taxes.