How difficult is the property purchase process in Italy?
There are no restrictions on foreign ownership in Italy.
Any money remitted from outside Italy for purchasing property, should be officially documented to ensure that the proceeds of any resale can be repatriated.
The first step to purchasing property in Italy is to hire a real estate attorney, to protect your interests. Although the real estate transfer process is a regulated process, it is potentially biased against the buyer. Keep in mind also that Italian law provides for pre-contractual liability. In the event that you feel aggrieved by the seller’s unfair behavior, you can file charges to be reimbursed for expenses.
Once you have chosen the property, make an offer. You must pay 1% of the purchase price as a gesture of good faith. Unfortunately, an offer of purchase is only binding on the buyer; the seller may still consider other offers. It is best to specify a time limit in the offer document, so as not to be left hanging by the seller.
The preliminary contract
If the seller accepts, the deal becomes binding on both parties. A preliminary contract or a compromesso is then drawn up by the seller, his attorney, or real estate agent, containing the sale price, the amount to be paid as deposit, the completion date, the land boundaries and details of the property, and any other relevant clauses (i.e. water rights and rights of passage).
Upon signing of the compromesso, the deposit is raised to 10% to 20% of the sale price, depending on what has been agreed. In the event that you decide not to pursue the purchase, the compromesso will be forfeited or the seller may seek legal action to enforce the purchase. On the other hand, if the seller backs out, he will be liable to pay double the amount you have given as deposit.
The notary performs due diligence
Closing usually takes six to eight weeks. The notaio or notary public has the responsibility of performing due diligence – although he is chosen by the seller, he acts for both parties. When the title search has been conducted to your satisfaction, pay the final balance and sign the deed of sale or rogito (witnessed by the notaio). This requires you to present a valid identification document, and your tax code.
The notaio will issue you a copy of the deed and present copies to the tax office and Land Registry. The necessary government duties must be paid for the sale to be officially registered. Registration protects the property from third parties charging any other interests against it. The notaio will also ensure that the utilities have been transferred to your name, and inform the local police of the change of ownership within 48 hours of signing the deed, in compliance with anti-mafia laws.
It takes an average of 15 days to complete all the four procedures needed to register a property in Italy.
Footnotes to Transaction Costs Table
The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.
For old properties, registration tax is 3% for those buying their main home, under law 1089/39. The home must be located in your present or futurecomune of residence (or in the comune where you have or plan to have your main place of business) and it must not be classified as a ‘luxury’ home.
The registration tax for nonresidents and those buying second homes is 7%, so if you’re planning to become a resident in Italy, do so 18 months before buying your home. The tax is calculated on the declared value of the property and not on the purchase price.
Registration tax on the purchase of building land is 8%. Registration tax on the purchase of agricultural land is 10%.
Land Registry Tax:
Land registry tax is payable on all property transactions. Resident buyers of their first home pay a fixed fee of €168, whether the property is an old property or newly-built. Buyers of second homes and nonresidents pay 1% of the declared price of the property.
1% or a fixed fee of €168 for new properties. Fixed fee of €168 also applies if the property is their main or only residence.
Land Registry Tax (imposta catastale)
Land registry tax is payable on all property transactions. Resident buyers of their first home pay a fixed fee of €129.11, whether the property is an old property or newly-built. Buyers of second homes and nonresidents pay 1% of the declared price of the property.
Buyers of new properties do not pay registration tax and instead are liable to pay Value Added Tax (VAT), which ranges from 4% to 22%.
VAT is levied at 4% for first-home resident buyers, at 10% for second-home and nonresident buyers, and at 22% on luxury homes with a rating of A1 in the Property Register. New properties are defined as those dwellings sold within five years of completion of construction or restoration.
The VAT rate will be increased to 24% in 2016, and then to 25% to 2017, and then to 25.50% in 2018.
Notary fees generally range from 1% to 2.5% of the declared value of the property. The cost of a notary is based on a property price list prepared by the Bar Association and varies according to the town council (and is subject to 22% VAT).
The notary fee is payable when you sign the final contract. There are widely varying estimates and everything is up for negotiation, but €2,000 for a property costing €50,000 up to €3,500 for property costing €500,000 might be typical, including the cost of the fee of the conveyancer (geometra) which is levied depending on work, and can itself vary from €500 to €3,000.
Conveyancing is usually performed by a lawyer (avvocato) and the legal fees are usually around 1% to 2% of the declared price of the property. Legal fees are subject to 22% VAT.
A preliminary contract or a compromesso is drawn up by the seller, his attorney, or real estate agent. Hence, the buyer may opt out of paying the legal fees. The buyer is in any case protected by the public notary. The public notary is much more important than generally believed, he is obliged to check carefully all documents and if they are not 100% correct, no contract at all, so the buyer is very protected.
The standard agency fee, regardless of the type of property (commercial, residential, or land sales), is between 3% and 8%, and is usually shared between buyer and seller. The agency fee is payable at the signing of the preliminary contract.
Thank’s to Global Property Guide