Italy - Buying Property and How it Works

Many people believe that the process to purchase Italian real estate is dogged with red tape and confusion – and while the buying process does differ greatly from the British and American systems for example, in reality if you follow the guidelines laid out in this article ‘Buying Property in Italy- How it Works’ you shouldn’t go far wrong.

The first thing a property investor needs to do is determine which geographic areas of the nation best fulfil their requirements for a property bearing in mind the investor’s proposed method of profit – be that rental to tourists, rental to students, rental to professionals and executives or resale to holiday home hunters or those looking to move to Italy full time for example.  Things to consider are the accessibility of the property, whether there are already or proposed to be nearby airports offering cheap flights from low cost carriers etc.

Due diligence should be conducted on a region before visiting it and then followed up; facts and figures and expectations and realities should then be confirmed by a visit to the region.  The next stage is then of course finding property to match an investor’s objectives.  There are three main ways to go about this – one, use an estate agent, two use an independent property finding service and three go it alone.

The advantages and disadvantages of each approach are fairly simple – estate agents charge the buyer about 6% of the purchase price for their services and only have a limited supply of property on their books, the independent property finders charge a fee and aren’t regulated and going it alone can result in all sorts of legal wrangling if you get it wrong!

The choice is up to the individual but if one chooses an estate agent ensure that they are professionally qualified and registered with their local chamber of commerce and that they can show you what’s called the seller’s mandate for any property you are interested in as this mandate gives the estate agent the right to market the property for sale. 

To find a good estate agent one should shop around, ask others in the area who they would recommend and make sure you feel comfortable with anyone you use.

If you use an independent service again take recommendations and know from the outset that they are not necessarily qualified nor will they probably know the background to any property they find for you meaning that you and your solicitor will have to closely check the title deeds, the right of the vendor to sell, local planning restrictions and also that there are no outstanding debts or mortgages on the property.

Going it alone and asking round a region for properties for sale will generally produce a whole host of choice – but then the buyer should consider making subtle enquires from neighbours and the local council about the vendor’s reasons for selling to try and determine whether there are plans to build a motorway nearby or whether the vendor has financial difficulties for example…after all forewarned is forearmed!

The next step is to speak to a mortgage lender specialising in the provision of international finance in Italy.  Barclays Bank for example has a presence in Italy and a great wealth of knowledge of both the local Italian property market and the provision of mortgages to overseas buyers.  They can give preliminary information and advice to a buyer thus giving the buyer a fair idea of the amount of funds he will have to work with, click here to contact Barclays or to find out more about their services in Italy.

Next it is essential to get a really good lawyer on side – they typically charge upwards of 4 - 6% of the purchase price as well (be prepared to negotiate) but they are worth their weight in gold.  Again – get recommendations from those who have already invested in property in Italy.  If you don’t speak Italian, ideally find a bilingual lawyer or get a good translator on board.  In Italy there is just so much on the legal side that can go wrong so considering acting without the aid of a solicitor is tantamount to insanity!

The property investor’s lawyer will not only conduct the following checks but he will be the buyer’s best friend when it comes to getting through all the red tape involved in a property transaction process.  Checks they should include in their service are ensuring that the property has no debts against it or mortgages that aren’t going to be settled upon completion of the sale transaction – because these debts will remain attached to the property and become the problem of the new buyer – examine the boundaries and ensure that they are as stated on the title deeds.  Make sure the vendor has the absolute right to sell and that any restoration work carried out on the property to date has the proper paper work to go with it.

The next step is the signing of a conditional reservation contract when the buyer will pay a few thousand Euros to have the property withdrawn from the market for between a fortnight and a month to allow the buyer time to get the building surveyed and to ensure that any plans that they have for its renovation or change of use will be accepted by the local authorities where applicable.  If during this period anything is found to be a problem with the property that has not previously been disclosed by the vendor or the estate agent then the buyer can withdraw from the sale and be refunded their money – if however they pull out for another reason they will lose their deposit.

A local surveyor and a Geometra should be called in as they are experts not only on real estate but they know the local area and authorities and can advise about whether the investor’s plans for the property can be made to come to fruition and what the likely costs involved will be.  Armed and happy with this information the sale can proceed to the signing of the conditional preliminary contract which is called a Compromesso in Italian.  This contract can be conditional to planning being granted for major changes for example and if the buyer withdraws after signing this they will lose the deposit they pay upon signing it which is between 10 and 30% of the sale price – however if the vendor pulls out they have to pay the buyer back double the deposit paid.

At this stage the buyer should go back to their mortgage company and arrange for their desired mortgage or property finance solution to be organised…once the funds are in place the buyer and seller can sign the final contract or Rogito in front of a notary, the funds and deeds are transferred and taxes and final fees become payable.  Likely fees and taxes will include purchase tax which is 10% of the declared Land Registry value for non-residents and 3% for residents, notary fees which are 2.5% of the declared Land Registry value, estate agency fees where applicable and Bolli or stamp duty which is 1% of the declared Land Registry value.

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