Expensive, expensive, real estate purchase: What some builders like to underestimate when buying land are the additional costs. They can make up a large block of costs.

As if the high prices for land, apartments and houses weren’t enough of a burden: real estate buyers also have to face various ancillary costs such as real estate transfer tax, notary and brokerage costs and entry in the land register.

These costs can total more than ten percent of the purchase price. Buyers should therefore under no circumstances neglect this item in their calculation.

Basically, the higher the purchase price, the higher the ancillary costs. According to surveys by the mortgage lending specialist Interhyp, the ancillary purchase costs in 2011 still averaged EUR 14,000.

They currently average around 32,000 euros. “Buyers simply have to calculate these costs, they have little scope to save on them,” says Mirjam Mohr from Interhyp.

The biggest cost factor in the ancillary costs is the real estate transfer tax. “Depending on the federal state, it is between 3.5 and 6.5 percent of the purchase price,” says Julia Wagner from the House Owners’ Association

“The real estate transfer tax is levied on the purchased property,” says Florian Becker, managing director of the builders’ protection association in Berlin. An individually built house is not burdened with it. “But if you buy a used house or buy a house and property together from a developer, you have to pay real estate transfer tax on the entire purchase price.” With a purchase price of 500,000 euros and a tax rate of 6.5 percent, 32,500 euros are due for the real estate transfer tax alone.

Other ancillary costs are also dependent on the purchase price of the property as a percentage. The notary fees are set out in the Law on Courts and Notaries Fees. They amount to around 1.5 percent of the purchase price of the property. There are also fees for entry in the land register. They are also uniformly regulated by law in Germany, they amount to 0.5 percent of the purchase price.

“All in all, you have to calculate around two percent of the purchase price for the notary and land register entry,” says Julia Wagner. At a purchase price of 400,000 euros, that would be a total of 8,000 euros. “Anyone who also wants to have a land charge entered in the land register must plan for another 0.5 percent of the loan amount,” says Florian Becker.

There is now some relief for buyers with the brokerage fee. The following has applied here since the end of 2020: If the seller has commissioned the broker, he must pay at least half of the broker’s commission. With an agreed brokerage fee of 7 percent, this means at least 3.5 percent. He should transfer the other 3.5 percent to the buyer. However, the law only regulates the distribution of brokerage costs, not the amount of the brokerage fee. “So there is a certain amount of leeway here to save on additional costs,” says Mirjam Mohr.

In addition to these classic ancillary purchase costs, real estate buyers should keep an eye on various other costs that may arise in the run-up to building a house. “Demolition work, building site reports, tree felling, surveying, construction site equipment, development work – all of this adds up quickly and is becoming more and more expensive in view of the ever-increasing construction costs,” says Florian Becker.

Very few people have these additional purchase costs of many thousands of euros in their accounts. “Anyone who wants to create their own home should save up their own capital beforehand in order to be able to at least pay these additional costs,” advises Mirjam Mohr. “It would be better to have an additional 20 percent of the purchase price as a reserve.”

However, there is also the possibility of including the additional purchase costs in the overall real estate financing. “In the past few years, when interest rates were very low, banks have sometimes helped finance the ancillary costs against interest premiums,” says Florian Becker. But now that interest rates are rising, the calculation doesn’t add up for many.

“In any case, financing without equity is only an option for people who are sure to earn a lot today and in the years to come, but have not been able to put anything aside.” Everyone else will have to save the equity for the additional costs.

(This article was first published on Wednesday, October 05, 2022.)