7 Vital Tips When Buying Property In Italy
Nearly 45 million people visiting each year is proof that Italy's appeal to the outside world remains timeless.
The same goes for investing in its real estate. With the relative strength of other world currencies against the euro, allied to the fact that Italy has avoided the real estate boom and bust of countries such as Ireland and Spain, there has rarely been a better time to buy a home in Italy.
Here are seven crucial pointers:
1) Research various areas beforehand:
One in three visitors to Italy comes to Tuscany, making it by far and away the country's most popular region with tourists. And its most expensive.
If you're shopping on a budget, you would do well to consider the rest of Italy's 20 regions, most of which are far less expensive, especially when you head south to regions such as Calabria and Sicily. Another plus: the weather's far more reliable down there as well.
For example, prices in Sicily are down by nearly a third over the past five years. One suggestion would be to take a look at a website such as www.where-to-buy-in-italy.com
2) Know what you can afford:
As mentioned above, the Italian real estate market has not plunged in the same way that some others in Europe have.
Some four or five years ago there was a much-publicised scheme to sell €1 homes in the Sicilian town of Salemi. However, that was a one-off. As we had to painstakingly explain to one US customer recently, just as $60,000 wouldn’t buy you a three-bedroom condo in Upper Manhattan, it is unlikely to in the heart of Venice or Rome either. There are some fantastic deals to be found. Just don’t expect them everywhere.
3) Get a good agent:
By law all estate agents must have indemnity insurance and be registered with a chamber of commerce. The realtor’s website and letterhead should indicate they are members of either the AICI (Italian Association of Estate Agents), FIMAA (Federation of Mediators and Agents) or FIAIP (Federation of Professional Estate Agents). When buying in a foreign country it's vital to find professionals you can trust, so this is one occasion to be grateful for Italy's exacting red tape.
4) Get legal representation:
Whatever expenses you want to skimp on in this process, make sure a lawyer is not one of them. Far too many buyers still sign papers they do not understand and are then locked into a binding legal commitment.
It also means a number of crucial checks that a good lawyer would carry out instead go ignored. (For example, is the property clear of title? Legally constructed? Clear of any remaining debts/mortgages?)
Try to hire a reputable, independent English-speaking lawyer who comes recommended. Or use an Italian lawyers’ directory such as hg.org
5) Know the lowdown on the buying procedure:
After a price is decided upon the buyer makes a proposta irrevocabile di acquisto with a downpayment of some 5% to reserve it for two weeks. If the purchaser’s surveyor and/or lawyer are happy with things so far both sides sign a compromesso, in which they both decide on a completion schedule.
A second payment is paid, taking the buyer's total downpayment to around 30%. Defaulting carries serious repercussions. The buyer may forfeit all monies paid while the seller, if at fault, may have to pay back double the deposit. The next step is to sign the final deed of sale in a notary’s office, who scrutinises all documents and lodges them with the Land Registry.
The buyer pays the balance, usually by bank draft from an Italian bank. He will need to have obtained a fiscal code from tax authorities to apply for a bank account..
6) Don't forget fees, taxes and other add-on expenses:
Expect around 13% extra on the price of a newly constructed home and about 8% on second-hand homes.
That breaks down at -- very roughly speaking -- 3% to the realtor, US$210-280/hour in legal fees, US$700-2,100 for a surveyor and US$2,800-7,000 for the notary.
For new-builds, 4% VAT is payable if within a year and a half the buyer registers for Italian residency. Failing which, it is charged at 10%. For older properties the buyer pays 3% of the cadastral value if residency is registered for within 18 months. Failing which, the charge goes up to 10% of cadastral value. Cadastral value is assigned by the Land Registry based on factors such as location, property size, etc and is far less than the property price.
7) Don't forget either that you're buying in euros
Most people would never embark on a large-scale purchase of any kind without knowing the final cost. Yet far too many buyers make the same mistake in agreeing to buy a house in Italy with no idea how much the euro value comes to in their own currency.
This is where a specialist forex firm is indispensable. They can fix a specific exchange rate several months ahead, giving you peace of mind.
Yet ignoring currency movements can prove expensive. For example, between the middle of 2011 and 2012, for a US citizen set on a €500,000 purchase, the gulf between the top and bottom of that cycle would be in excess of US$120,000.
On no accounts use your high street banking service, no matter how long you have banked there or – much worse – an airport exchange office.