Buying Real Estate In Italy? Ten Rules You Must Know
Italian tax changes have reduced house purchasing costs by 10-15%.
Combined with the country's ceaseless attraction it means there has rarely been a more opportune time to invest in Italian property. Yet as with any real estate transaction, there are commonsense guidelines to adhere to to ensure buying your dream home doesn't become a nightmare. Here are the 10 that should top your list:
1) THINK ABOUT DIFFERENT AREAS
Tuscany is Italy's best-known region, attracting one in three visitors who comes to the country. It's also its most expensive. Yet other areas such as Abruzzo, Calabria and Sicily are far cheaper and also have the same heady mix of stupendous vistas and beaches.Spend a few days at a time to see what areas you like best. Ensure you are not too far from local amenities, unless you deliberately want to be in splendid isolation. And when it comes to viewing potential properties, there is such a thing as too many. Trying to cram 50 into a weekend simply turns into a feat of endurance. By your 25th viewing, chances are you will remember little of the first two dozen.
2) BUDGET REALISTICALLY
One can pick up a stunning property for US$300,000. But not if it is advertised at US$600,000. Italian prices have not had the freefall of some other countries, so expect discounts of around 10%.
3) FIND A GOOD REALTOR
This is one occasion to be grateful for Italian red tape. All realtors must be professionally licensed and qualified, insured and registered at a Chambers of Commerce. Check their website and letterheads to ensure they belong to one of the following respected organisations: FIAIP (Federation of Professional Estate Agents), FIMAA (Federation of Mediators and Agents) or AICI (Italian Association of Estate Agents).
4) DON'T TAKE ON TOO MUCH
Don't over-commit yourself. The idea of renovating a rustic ruin may sound romantic but are you prepared for the work and expense? Complete restorations can cost up to Euro 1,500 per sq m. Other common errors include buying property far bigger than you strictly need. A large farmhouse with pool and 5 hectares sounds fantastic, but don't ignore the maintenance involved.
5) USE AN AVVOCATO
For most buyers the Italian process will be unfamiliar, so hire an independent bilingual lawyer (avvocato) with expertise in Italian real estate. Avoid signing documents on your own without knowing what you are committing to. Another consideration: any unpaid mortgages and loans on the house? Plans for a new highway 400 yards away? Was the property built with planning permission? All are vital checks your lawyer will perform.
6) KNOW THE PROCEDURE
Once a price is fixed the purchaser makes a proposta irrevocabile with a downpayment of around 5% to reserve for a fortnight. If his surveyor and/or lawyer give the OK both sides sign a preliminary sales contract, in which they both decide on a completion schedule. A second deposit is paid, taking the buyer's total downpayment to about a third of total purchase price. Either side risks financial penalties for defaulting at this step. The next procedure is to sign the final deed of sale in a notary's office, who examines all papers and sends them with the Land Registry.
7) KNOW YOUR ADDITIONAL COSTS
Fees and taxes usually add 7%-10% to a resale property and 12-15% for a new-build. Typical add-on costs: 3% to the realtor, US$700-2100 to a surveyor, US$210-280 per hour for a lawyer and up to US$7,000 for a notary. For new-builds, 4% VAT is levied if within a year and a half the buyer registers for Italian residency. Otherwise VAT is 10%. For previously inhabited properties, the buyer pays 3% the cadastral value if residency is registered for within a year and a half, otherwise 10%. Cadastral value is decided by the Land Registry based on factors such as number of rooms, location, floor area, etc. It is usually less than 50% of purchase price.
8) DON'T BUY CURRENCY FROM A BANK
Over 2009, Pound-Euro values plunged to 1/Euro 1.059 at their trough and hit 1/Euro 1.185 at their peak. So a UK buyer weighing up a Euro 400,000 villa could have faced shelling out up to 41,250 more just for taking the plunge at the wrong moment. Hence the importance of using a specialist currency exchange company, who can fix rates for future deals to safeguard against currency fluctuations. They have far better rates than other financial institutions and could in comparison mean a 30,000 difference on a 750,000 transaction.
9) CONSIDER RENTAL
Do you plan to let out your property? If so, it is advisable to be close to transport hubs. Aim for a maximum 1.5 hours from an international airport. In cities, bear in mind how close your property is to public transport as not all holidaymakers will have a car. Properties near a beach rent better and keep their investment value over time because of restrictions on additional construction in areas near the coast.
10 TAKE A CRACK AT THE LANGUAGE
Make the effort to learn some Italian phrases. Be aware that unlike North-West Europe, more than 7 in 10 Italians speak no English, among the lowest percentages in Europe. Don't be afraid to make mistakes as your attempts, no matter how ham-fisted, will be warmly received by locals.
Combined with the country's ceaseless attraction it means there has rarely been a more opportune time to invest in Italian property. Yet as with any real estate transaction, there are commonsense guidelines to adhere to to ensure buying your dream home doesn't become a nightmare. Here are the 10 that should top your list:
1) THINK ABOUT DIFFERENT AREAS
Tuscany is Italy's best-known region, attracting one in three visitors who comes to the country. It's also its most expensive. Yet other areas such as Abruzzo, Calabria and Sicily are far cheaper and also have the same heady mix of stupendous vistas and beaches.Spend a few days at a time to see what areas you like best. Ensure you are not too far from local amenities, unless you deliberately want to be in splendid isolation. And when it comes to viewing potential properties, there is such a thing as too many. Trying to cram 50 into a weekend simply turns into a feat of endurance. By your 25th viewing, chances are you will remember little of the first two dozen.
2) BUDGET REALISTICALLY
One can pick up a stunning property for US$300,000. But not if it is advertised at US$600,000. Italian prices have not had the freefall of some other countries, so expect discounts of around 10%.
3) FIND A GOOD REALTOR
This is one occasion to be grateful for Italian red tape. All realtors must be professionally licensed and qualified, insured and registered at a Chambers of Commerce. Check their website and letterheads to ensure they belong to one of the following respected organisations: FIAIP (Federation of Professional Estate Agents), FIMAA (Federation of Mediators and Agents) or AICI (Italian Association of Estate Agents).
4) DON'T TAKE ON TOO MUCH
Don't over-commit yourself. The idea of renovating a rustic ruin may sound romantic but are you prepared for the work and expense? Complete restorations can cost up to Euro 1,500 per sq m. Other common errors include buying property far bigger than you strictly need. A large farmhouse with pool and 5 hectares sounds fantastic, but don't ignore the maintenance involved.
5) USE AN AVVOCATO
For most buyers the Italian process will be unfamiliar, so hire an independent bilingual lawyer (avvocato) with expertise in Italian real estate. Avoid signing documents on your own without knowing what you are committing to. Another consideration: any unpaid mortgages and loans on the house? Plans for a new highway 400 yards away? Was the property built with planning permission? All are vital checks your lawyer will perform.
6) KNOW THE PROCEDURE
Once a price is fixed the purchaser makes a proposta irrevocabile with a downpayment of around 5% to reserve for a fortnight. If his surveyor and/or lawyer give the OK both sides sign a preliminary sales contract, in which they both decide on a completion schedule. A second deposit is paid, taking the buyer's total downpayment to about a third of total purchase price. Either side risks financial penalties for defaulting at this step. The next procedure is to sign the final deed of sale in a notary's office, who examines all papers and sends them with the Land Registry.
7) KNOW YOUR ADDITIONAL COSTS
Fees and taxes usually add 7%-10% to a resale property and 12-15% for a new-build. Typical add-on costs: 3% to the realtor, US$700-2100 to a surveyor, US$210-280 per hour for a lawyer and up to US$7,000 for a notary. For new-builds, 4% VAT is levied if within a year and a half the buyer registers for Italian residency. Otherwise VAT is 10%. For previously inhabited properties, the buyer pays 3% the cadastral value if residency is registered for within a year and a half, otherwise 10%. Cadastral value is decided by the Land Registry based on factors such as number of rooms, location, floor area, etc. It is usually less than 50% of purchase price.
8) DON'T BUY CURRENCY FROM A BANK
Over 2009, Pound-Euro values plunged to 1/Euro 1.059 at their trough and hit 1/Euro 1.185 at their peak. So a UK buyer weighing up a Euro 400,000 villa could have faced shelling out up to 41,250 more just for taking the plunge at the wrong moment. Hence the importance of using a specialist currency exchange company, who can fix rates for future deals to safeguard against currency fluctuations. They have far better rates than other financial institutions and could in comparison mean a 30,000 difference on a 750,000 transaction.
9) CONSIDER RENTAL
Do you plan to let out your property? If so, it is advisable to be close to transport hubs. Aim for a maximum 1.5 hours from an international airport. In cities, bear in mind how close your property is to public transport as not all holidaymakers will have a car. Properties near a beach rent better and keep their investment value over time because of restrictions on additional construction in areas near the coast.
10 TAKE A CRACK AT THE LANGUAGE
Make the effort to learn some Italian phrases. Be aware that unlike North-West Europe, more than 7 in 10 Italians speak no English, among the lowest percentages in Europe. Don't be afraid to make mistakes as your attempts, no matter how ham-fisted, will be warmly received by locals.
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