Buying a property can be one of the most important moments in your life however the process is fraught with pitfalls which you should avoid at all costs!
Many of the mistakes that people make are extremely common and are repeated over and over but with some good research in advance and some helpful guidance you can avoid them entirely and ensure that the process of buying a new property goes as smoothly as it can.
Buying a new property in Italy is a great long term investment and whether you choose to live there throughout the year or only on a part time basis, there are few parts of the world which offer a higher quality of life.
The Italy housing market is currently in a slump and so prices are low and the numbers of new properties coming onto the market is at an all time high. This makes it an ideal time to purchase a property in Italy but as you do take the leap and get ready to buy a new property there are some things you should never forget!
Understand Your Financial Situation.
Before you rush into buying a new property one of the most useful things you can do is to take the time to sit down and thoroughly calculate your finances. How much money do you have coming in, how much do you have in savings and other liquid assets and how much can you afford to put down as a deposit?
It’s usually better to buy a property outright however if you are going to be needing a mortgage you have to be sure that you can pay the installments, including any interest rates that are associated with the repayments. With interest rates being low you might want to try to find a fixed rate mortgage so you can keep those repayments down in the future.
If you’re not comfortable with math and calculating interest rates and the other details of your financial situation you can hire a consultant to help you go through the numbers. This may cost you in the short term but it could save you a serious headache down the road.
Value Added Tax, Mortgage Fees, Renovation Costs And Other Expenses!
There are several taxes and other expenses, notary and real estate agent fees for example, that you need to add on to the price of the property – so don’t forget to include these in your calculations. The tax regime in Italy is a little different to that in the United States so you should certainly do your research or ask the real estate agent for a complete breakdown of the expected fees and taxes that you’ll need to pay.
You should also try to get a good idea of how much you might have to pay in the future in terms of property maintenance, condominium fees and even parking charges. Fundamentally, you should know about all the unavoidable costs that will be associated with the purchase and include these in your calculations before you buy a property.
Ask your estate agent for a property report which will detail all of these extra costs, taxes and fees. If your estate agent cannot provide you with this then it should be a major red flag and you may want to find a new estate agent!
Hire An Italian Real Estate Lawyer.
You do not have to hire a lawyer to buy a property in Italy. But I strongly recommend that you do. The property I purchased in Volterra was only Euro 55,000. A relatively small buy. The first move I made even before settling on where I wanted to buy a property was to hire an Italian law firm that specializes in real estate. I paid approximately Euro 4000 (which I paid in installments). They took care of everything!! Please contact me at email@example.com if you want to get in touch with this law firm or want more details.
They did the due diligence, translated documents in Italian to English, negotiated the price with the sellers agent, negotiated the initial deposit and payment schedule and in general coordinated with the seller and notary. I could not attend the “closing” and they even represented me at the closing (I had to issue a power of attorney). After closing, they mailed all the documents and the keys to my address in Philadelphia.
Carefully Compare The Market.
It can be all too easy to get caught up in the moment and fall in love with a property and end up paying way over the market rate! Always keep cool and do plenty of market comparisons. In Italy, there is usually a lot more leeway for negotiating the price of the property which means it’s essential that you have a good handle on the market so you can haggle the price down to a fair rate.
Many people buy property with an expectation that it will go up in value and although this is often the case, at times it’s not. The lesson to be learned is that if you are buying the house and you need it to increase in value then you could be putting yourself in a very precarious financial position. Of course, if the property does go up in value, which looks likely in Italy at this time, then it will be a great help for you; however, as they say, don’t bet the entire farm on it!
Inheritance And Pre-Emption Rights.
Unlike the United States and a few other developing nations, Italy has complicated inheritance laws. So it is possible that the property has more than one owner or others claiming their rights to the property. In other cases, particularly if you are buying land, you have to also check for pre-emption rights (current tenant, relatives of the owner and/or neighbors may have first right of refusal).
In both cases it is important to clearly identify the registered owners and that the individuals who have the right of fist refusal have indeed been offered the property. This is one of the key reasons why you have to have a lawyer involved during the property buying process.
Inspect The Property Before You Buy It.
There has been a growing trend in recent years where people rely on virtual, online, tours and pictures of a property to make a decision as to whether or not to buy it. Now this can be useful when it comes to narrowing down your options and particularly so if you are buying a property from overseas, however, whenever possible you should inspect the property in person before you sign any contracts or agree to purchase it!
Seeing the property in person will give you a better impression of what it would be like to live there and whether there are any issues that you should be aware of. You should also take a property surveyor with you, when possible, to inspect the house with you because their professional experience will be worth its weight in gold!
When you are inspecting the property you should be checking for things that might need repairs and have been hidden by the décor! Other things to look out for include faulty electrics, damp and even noisy or antisocial neighbors.
Inside the property you should be checking for:
- Faulty electrics, guttering or poor construction work.
- Toilets and sinks – ensure there are no plumbing issues.
- Rotten or broken window frames.
- Damp or mold.
All of these issues can be expensive to resolve and so if you find any major problems with the property you can ask for a reduction in the selling price or just give the property a miss and look elsewhere!
Always Walk Around The Outside Of The Property.
It’s essential to inspect the inside of a potential property but it’s just as important to walk around the outside and get a feel for the neighborhood. Remember, your neighbors and the surroundings will have a huge impact on your life in the property so you can’t leave this out.
There are many things you should be checking for outside the property, which include, but are not limited to:
- Try to get a general feel for the area. Are the streets well maintained? Is there a nearby bin collection point – which could be noisy in the early mornings? Does it feel safe?
- If you can, try to visit the area at different times of day to get an understanding of what it’s like in the morning, at night and even in the middle of the day. Is it incredibly loud and busy during rush hour?
- Always check for any potential subsidence issues – for example, are there any large trees growing near to the house whose roots might be damaging the foundations? Are there cracks in the supporting walls?
- What is the parking situation for your property? Do you need to buy a permit or does the property have its own dedicated parking bay?
- Is the area in a flood or earthquake risk zone? If so, has the property been built to withstand these natural threats? You can ask the estate agent about this but you can also inspect the property for yourself or with a property surveyor.
It’s not always possible to visit a potential property several times but if you can then it’s certainly worth it before you make a large investment.
Is The Property Furnished?
When you buy a new property in Italy it is usually unfurnished. Generally, the property will be completely gutted, including light fittings, the kitchen appliances and even, in some cases, the toilets, sinks and shower units! This means that you will have to replace all these items so you should always include these costs in your calculations. If you have your own furniture in the US, then you should include the cost of shipping them to Italy in the purchase because this can easily run into thousands of dollars.
Don’t Borrow More Than You Can Afford.
When you’re looking at taking out a loan you should be careful not to borrow too much. Generally speaking, you should try to avoid borrowing more than 25-50% of your annual income because otherwise repayments, including interest, can start to spiral out of control and create real problems for you.
The Bank of Italy advises that you don’t take out a loan of more than 30% of your income, which is a pretty safe figure to work from.
The Pitfalls Of The Italian Property Market.
Buying a new property is an exciting time in life however you should try not to get carried away and do the financial calculations carefully. For instance, if you are thinking about buying a property it may work out better to rent a home instead of buying one. Always take your time when making a serious decision such as buying a new property.
Remember, that buying a new house is going to impact your life for many years to come. Make sure that you get some professional legal help during the purchasing process and always plan as far ahead as you can to avoid any nasty surprises in the future. Nonetheless, if you plan well, thoroughly inspect the property before making a purchase and don’t borrow more than you can afford, then the process should be smooth and you’ll end up with the property of your dreams!
Very helpful article