How to Buy a House in Italy - A Short Guide to Purchase Process
How to Buy a House in Italy - A Short Guide to Purchase Process
Basically, purchasing property in Italy consists of these three steps: purchase offer, preliminary agreement ("compromesso" in Italian) and finally the deed of purchase ("rogito" in Italian). Only the last of these steps is strictly mandatory, because it is the source of the transcription of property change at the Land Register ("Registro Immobiliare" or "Catasto"). Anyway, the preliminary agreement ("compromesso") is largely used, as it is a private agreement stating the price and the other conditions (e.g. the payment plan), committing the parties until the price is fully paid and the final deed can be done. The following description is intended to supply minimal information to orientate a prospective buyer. it is advisable to have the assistance of a lawyer or a notary through every step of the process.
The Fiscal Code
To accomplish the process, you will need the "codice fiscale" This is a personal identification code which can easily be obtained at every local office of the Tax Agency ("Agenzia delle Entrate"). The "codice fiscale" is needed for the "rogito", but it is also required to open a bank account, to activate the various utilities (electricity, telephone, gas, water etc.) and to pay the taxes on the house (ICI and waste tax).
Important Checks Before Buying
It is a good idea to check the property at the Land Register, before to make a formal offer or to sign the "compromesso". This is intended to verify that the vendor has the title rights to sell the house and that there are not mortgage or other constraints on the property. You should also verify (a surveyor can do that) that the dwelling is compliant to building regulations. For a good estimate of the expenses required, you should consider the additional costs of buying (taxes, intermediation fee, notary fee etc.) and the costs of running the house, especially the condominium expenses, which may be considerable and that the vendor must document to the buyer. All these costs are better detailed later.
Purchase Offer
The main purpose of the purchase offer is to show to the vendor your serious intention to buy the house and to get from him a clear response (acceptance or refusal). The buyer makes the offer to the vendor declaring his willingness to buy the house at a certain price until a certain date, if the vendor accepts it, he cannot sell the house to anyone else. Since the purchase offer is not a revocable commitment to buy, the best thing is to have the assistance of a lawyer or a notary before signing it. The agent or the vendor may push to have a deposit, but indeed the buyer is not required to pay any sum at the purchase offer. Anyway, if a deposit is paid, it must be entirely refunded if the vendor does not accept the offer.
Preliminary Agreement ("compromesso")
The preliminary agreement is a private contract between the buyer and the vendor which states all the terms and conditions of the sale: the price, the payment plan, the date of the "rogito", all particulars of the property (servitude etc) and other particular conditions which may apply to the sale. Signing the agreement, the buyer pays a deposit (called "caparra") usually equalling 10% of the agreed price. If he withdraws, he will loose the deposit. If the seller withdraws, he will pay twice the amount of the deposit.
The Deed of Purchase ("rogito")
This is the contract which completes the sale. It has a public form. Both parties (the buyer and the vendor) sign the contract in the presence of a notary. The "rogito" is done only when the agreed price is paid: usually, the balance is paid at the moment of the deed. As praxis, the notary is chosen by the buyer, since he pays the fee. The notary has to ensure the identity of the parts and the legality of the deed. He also collects the taxes (see later), registers the deed (within twenty days) and transcribes it at the Land Register.
Costs and Taxes
Among the costs of buying, you should consider:
Estate agent fee (usually 3% of the price plus VAT 20%).
Notary fee (quite variable, indicatively between 1,500 and 3,500 Euros or more, depending on the house price and other conditions).
VAT (10% of the price) if the house is bought from the company which built or restructured it.
Registration Tax ("tassa di registro"): 168 Euros if the house is bought from the company, 7% of cadastral value (i.e. the value the house is registered: usually it is much less than the market value) if the house is bought from a private owner.
Mortgage Tax ("imposta ipotecaria"): 168 Euros if the house is bought from a company, 2% of cadastral value if the house is bought from a private owner.
Cadastral Tax ("imposta catastale"): 168 Euros if the house is bought from a company, 1% of cadastral value if the house is bought from a private owner.
In conclusion, if you buy the house from the company which built or restructured it, you pay 10% VAT, calculated on the declared price of the house (i.e. the value written on the "rogito"), plus 504 Euros for the other taxes (Registration, Mortgage, Cadastral). If you buy the house from a private owner, you do not pay VAT but a total of 10% on the cadastral value of the house for Registration, Mortgage, Cadastral taxes. To be more exact, the law let you choice between paying on the declared price or on the cadastral value, which is generally much less than the market price. This is intended to avoid having the parties declare a price lower than true to save money on taxes.
Among the costs of running the house, you should consider, in addition to the expenses for utilities:
Local Tax on the Properties (ICI: "Imposta Comunale sugli Immobili"). This is paid to the Municipality where the house is situated. It is payable in two parts, in June and December. It is a percentage of the "house value". The "house value" is defined as equal to the cadastral rent ("rendita catastale") multiplied by 100. The Municipality has the faculty to fix the rate (called "aliquota ICI") in a range of 4 to 7 x mille. For example: if the "aliquota ICI" is 7 x mille and cadastral rent is 600 Euros, the house is valued at 60,000 Euros and the ICI tax to pay is 420 Euros (i.e. 7 x mille of 60.000 Euros).
Waste Tax: it covers the cost of collecting garbage and depends on the surface (SQM) of the house and the number of resident people. For a 100 SQM house with four people, you can expect something as 300 Euros/year.
Condominium expenses: they are the yearly expenses for the condominium common services (lights, garden, lifts, cleaning etc.). The vendor should give evidence of the amount of these expenses to the buyer. He also has to show having paid tose amounts for the current and the past year. If the vendor has not paid, the buyer can be asked to pay in his place.
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