Anyone who buys a condominium - no matter if it is a new building from the real estate developer or if it is an already existing or used condominium - needs to know that he is not “the king of the castle” there. The owner of an apartment is always integrated in a community with other owners who basically have the same rights, thus imposing special duties on the new owner. He or she has to come to terms with equal co-owners. Here, certain rules have to be observed.
The legal basis for the regulation of interaction is the condominium act (in German: WEG). This only provides a relatively large framework, however, which must be filled individually. The declaration of division and the collective regularity (briefly described as “declaration of division” in general) in the first instance serve to put this into more concrete terms and effectively are the “statute” of the “association” of all apartment owners, laying down the general rules for that concrete condominium complex.
This declaration of division should be necessarily known by each owner of an apartment and therefore by any prospective buyer, as well. There you can find the things that can depart from legal regulations of the WEG within wide limits. The distribution of the community costs is regulated there, for example, as well as the question of the right to vote at the owner’s meeting (which may be economically very significant), etc.
What is finally important with regard to already existing owner communities are the owner resolutions which have been adopted in the past. These are binding for all apartment owners, if they have not been legally refuted after a challenge, even for those who voted against it at that time and also (that is particularly important for a buyer) for new apartment owners who have entered the community later. Owner resolutions which get legally valid have so to say “eternity effect”.
Purchase from the real estate developer
Anyone who buys a planned condominium from the real estate developer has first of all only a few problems regarding the condominium act. The apartment has no "history" in such a case. However, he should still read the declaration of division very carefully, so that he knows how the rules (of the game) will be in the future.
However, it is important that in this case the buyer cannot have a look at the apartment in reality and cannot investigate it on its particular characters. Frequently changes appear during the construction phase which can have serious consequences: walls are relocated, the ground plan is changed, a planned balcony is suddenly left out, etc. The main problem is to observe the development of the apartment and constantly compare it with the construction specification (which is part of the notarized contract of purchase). If variations are shown between the actual and the contractually agreed situation, you have to react quickly.
Purchase of an already existing (old) apartment
If an already existing apartment is bought, the situation is slightly different. Here, the purchaser has the option to inspect the property in detail and check whether it is really worth its asked price. The prospective purchaser should absolutely perform this inspection and he should do so in detail and without any pressure of time. To buy an apartment only according to the information of the seller’s exposé without one’s own checking is completely irresponsible and grossly negligent. It is certainly sensible to use the help of an expert, for example of an architect, an experienced builder, an expert of the house and land association, etc.
But you should not only care about the condition of the apartment alone. As the purchaser never only buys the condominium as such, but in this context also acquires a co-ownership share in the collective property, he should also keep an eye on the condition of the whole house. To the amount of the buyer’s co-ownership share (usually calculated by thousandths), he is also involved in the maintenance and repair of the collective property. This expands the range of the inspection, for example: is the roof in good order? Is the central heating on its last leg? Does the external plaster disintegrate? Do the undersides of the balconies - also those the other apartments - show color flaking and efflorescence? In what condition is the whole property? All these points are important because on purchase of the apartment, the purchaser also buys co-ownership in these parts of the collective property and therefore contributes to the costs of maintenance to the amount of his co-ownership share. In this context, large sums of money may definitely be involved which of course reduce the value of the apartment!
This issue may become less dramatic, however, if the community association in which the purchaser buys into has saved up a high maintenance reserve over the years. This reserve or the calculated part that is allotted to the apartment will be bought, as well, and plays a role in the calculation of the purchase price, because the purchaser does not only buy the apartment alone, but, on the one hand, a part of the collective property, as well (including all the risks and obligations) and on the other hand, also an equal part of the assets of the community (here in particular the maintenance reserve). It thus makes a difference to the value of the apartment whether there is not any reserve at all or a large one.
From the legal point of view, it should be kept in mind that the purchaser buys into an already existing community association. He will become a new member of the community association instead of the seller - with all the latter’s rights and obligations. He is first of all subject to the existing declaration of division, which he should reasonably have read before the purchase.
What many purchasers do not know, however, is the fact that the purchaser is bound by earlier decisions of the joint ownership. If the community association has decided before the sale, that next year for example the roof of the house will be repaired and that a special assessment should be charged for the financing, the purchaser is bound to it. Nobody cares about the argument that he has not been involved in this decision and that this is not his business - he will have to pay.
Because of this binding effect of previous decisions (which are not documented in the land register) the purchaser of a condominium should necessarily check the decision protocols of the last owners meetings before the purchase, at least those of the last five years. Assuming that - at least by current legislation - even the declaration of division can be changed by the owners’ decisions, the purchaser can thus gain an insight of what he might expect.
In financial terms, it is also useful to ask for the current economic plan of the community association. From this you can gather the obligation to pay the so-called "common charge”. The figures of this arithmetic unit which is similar to an "estimate of cost" show the cost burden which is to be expected and which is also important for the value of the apartment. In addition, the prospective purchaser should also check the common charge accounts of the last years, which can be different to the economic plans and can close with back payments or additional payments, so that he knows the actual cost situation.
Hints for financing
Because there are many different ways of financing the purchase of an apartment, you should invite multiple offers and make use of various consultations.
The most common ways of financing are:
- Bank loan
- Building loan contract
- Life insurance
- Foreign currency loan
The key data of financing are:
- Your required capital
- Your equity or collaterals which you can use for financing
- Credit period
- Fixed interest rate (variable, or fixed at 5 years or fixed at 10 years, etc.)
- Your monthly repayment
- Options of unscheduled repayment and options of change at the fixed interest rate
The combination of these key data, tailored to your personal requirements results in your tailor-made financing.
Inform yourself, for example, about the financing offers of online banks. At the same time, you can invite an offer of your local bank because they know your situation best. Several offers for comparison can help you to negotiate your optimal offer with your bank consultant. Also check whether you can apply for subsidies!
Which subsidies are available?
Under certain conditions, you can, for example, make use of the following sponsorships/funding:
- Owner occupied home allowance (for owner occupation) more info >> >>
- KfW loans (for owner occupation) www.kfw-foerderbank.de >> >> >>
- Sponsorship scheme for the modernization of old buildings, installation of solar panels, and purchase of passive houses /www.bauherr-profi.de/modernisierung >> >>
If a rented apartment should be purchased for retirement planning, you should also look at fiscal aspects for financing:
- Depreciation allowances for the building
- Special depreciation allowances for protected historic buildings
- Fiscal treatment of modernization and maintenance costs
Which loan is right for me?
As different as real estates may be, just as individual are the purchasers of these real estates. Everyone has different equity, collaterals and earnings. Accordingly, there are different types of credit:
The annuity loan - simple and effective
The conventional annuity loan is suitable for credit users who want to use their real estate for themselves and don’t want to take any interest rate risk with its financing. Because: an annuity loan is subject to a fixed monthly rate - just like buying a car. You only have to decide how high the monthly rate should be and how long the fixed interest rate should last.
The constant loan - interest rate security over the entire term
The constant loan is perfect for credit users who want to have a high calculation security. The interest rate guarantee completely eliminates the risk of rising interest rates during the period of the loan. You pay a fixed monthly rate during the entire term.
The combination loan- flexible repayment with interest advantage
The combination loan provides big flexibility with the special repayment option if you want to have the opportunity to pay back larger amounts during the term.
The flex plus loan- flexible repayment with interest advantage
This loan is available for civil servants and employees under certain conditions and combines particularly favorable conditions with a 100% special repayment option without prepayment penalty.
Is it enough for your own four walls?
For the financing of an apartment you don’t have to be a financial expert. Whether one’s equity and monthly income are enough for a credit can be quickly and easily calculated in two steps:
Step 1: Calculate your current solvency
For this, the Interhyp AG online provides its solvency calculator for you. This calculator helps you to quickly get a complete idea of your earnings and expenses situation. The calculator evaluates this balance according to the strict standards of most banks. In a few minutes you find out how much space you have for your real estate investment.
-> Solvency calculator
Step 2: Raise your personal credit line
For this purpose, you can use the maximization calculator of the Interhyp AG. Everyone who has ascertained how much equity is available for financing can ascertain with this calculator, how much credit he can raise.
-> Maximization calculator
An ancient proverb says "for the one who has - more will be given ". This especially applies to the application for a credit. If you have only little savings available and your employment is in the probation period, your chances are small to get a credit. The bank classes the applicants into different risk categories. The higher the risk the bank assigns to your credit commitment, generally the worse are the conditions that are offered to you for the desired credit. However, if you have capital, you should check if you really should put all equity in your real estate. “Keep something in the cupboard”.
If you want to buy a real estate:
- You receive regular information about current offers
- We make appointments to view properties with you
- You get detailed exposés
- We guarantee correct and timely key delivery
You have decided to purchase and need financing? Derag real estate service provides you a financing made to measure.
Important to know:
You buy your real estate free of commission!
Purchase for the purpose of capital investment
Anyone who buys an apartment for the purpose of capital investment wants to generate a certain income return for the money he spent. Disregarding fiscal aspects, he wants to make profit (although this is often a quite modest one) by renting the apartment, taking account of the costs which have to be spent.
As profit –apart from speculative transactions with low purchase price and high sales price - in the longer term may only come from rental income, the purchaser needs to know what rent he can realistically generate. As the experience of the recent years has shown he should not assume that rents will permanently rise or that the annual increases are of great dimensions.
Anyone who buys a newly built apartment or a subleased apartment in an old building for a capital investment will not have to worry about the past. But he needs to know what rent he can generate in the future, if he rents this apartment. Because of this, he should not count on nebulous information from the seller, but ask his house and land association what the local rent for comparable accommodation amounts to before concluding the notarized contract of purchase. Based on an existing rent index, the comparable rent collection of the association as well as on the basis of experience values, he will be provided with realistic prices.
Attention if the seller gives a rental guarantee or acts as interim tenant and wants to pay a high rent. The duration of such high payments of rent is often quite short and afterwards the question arises whether this lease can still be achieved in future. It is also possible that in such a contract construction, the seller has to pay to the purchaser more than he himself earns which often ends in his insolvency (nobody can live from throwing money around in the long-term).
If the apartment that has been bought for capital investment is rented, the situation for the purchaser is different! The purchaser does not only buy the apartment, but also adopts the tenancy agreement and the tenant (" purchase does not break rent"). This means that the purchaser has to read the tenancy agreement thoroughly before purchasing. It makes a significant difference whether the rent is divided into basic rent and utility costs, whether the so-called basic rent includes a part of the utility costs (partly inclusive rent) or whether the utility costs are paid as a flat rate, etc. All utility costs that are included in the “basic rent” reduce the real income of the purchaser and are therefore important for the calculation of return on investment.
Purchase for the purpose of self –interest/owner occupation
Everyone who does not buy a condominium as capital investment generally wants to use it for himself, or leave it to close relatives for use. It is about the term of personal use- either for the purchaser himself or for close relatives.
As far as the apartment is vacant and not rented, there are no particular problems. The fundamental questions that have already been mentioned above, such as declaration of division, owner resolutions, technical condition of the apartment and the collective property, economics, maintenance reserve, etc. are also important here of course, the readiness for occupancy will not be a problem, however.
The situation is different, if the purchaser buys a rented apartment and does not enter into an agreement at the same time according to which the tenant commits himself to moving out by an agreed date. In this case, he buys into the existing tenancy agreement (see above: purchase doesn’t break rent) and now has the problem to terminate the tenancy because of personal use.
Contrary to rumors, a termination due to personal use is not that easy. The purchaser who enters into the existing tenancy agreement with the conveyance of the property in the land register has to comply with all the requirements which are established by law for the termination due to personal use. These have to be comprehensively presented.
This means first of all that the prospective purchaser has to know the tenancy agreement. If, for example, a temporary tenancy agreement exists which still continues for a longer period, the purchaser can forgot about his desire of personal use until the end of term- a temporary lease can only be terminated extraordinarily by the landlord, but personal use is not sufficient in such case. It gets even worse, if the purchaser has to adopt a tenancy agreement that was concluded for lifetime of the tenant (what is legally allowed and happens occasionally). It is therefore essential for the purchaser who buys for the purpose of personal use to know the tenancy agreement which has to be adopted.
A very nasty trap which even the seller does not know very often opens up if the apartment is a so-called transformed condominium. This situation exists when the tenant has originally moved in an apartment building and this original tenement was divided into condominiums during the tenancy and the relevant apartment was sold as a condominium afterwards. In such a case, which can be ascertained by comparing the date of the tenancy agreement with the date of the declaration of division, the tenant is subject to special protection against a termination due to personal use: The purchaser has to comply with a notice lock period of up to ten years. This means in plain text: everyone who buys such a transformed condominium can perhaps only give notice of termination due to personal use ten years after purchase and then even needs to comply with a termination period of one year. The result is that he can only move in the apartment which has been bought for the purpose of personal use 11 years after the purchase at the earliest.
Welcome to the information pool for buyers
There are good reasons for purchasing a property from our company:
- Real estate is the most solid type of investment!
- Real estate is inflation-proof!
- Real estate is the ideal “second pension”!
- Property (building land) always gets more rare and expensive!
Last but not least:
Real estate is the only retirement benefit that you can establish with debt capital and appreciation of value and which is largely paid by third parties (tenants, state)!
If you are searching for your desired real estate, attach great importance to service and consulting! We guarantee competent support on the way to your own real estate!
The Derag real estate service is the right place for you.
office: Derag Immobilienservice