Steps in the sale process

From pre-contract to registration of ownership - these are the steps in the sale process

When we decide to embark on the adventure called real estate sale, whether we are a buyer or a seller, it is important to know that it is not a simple process. Most often, it is a matter of numerous steps that involve documents drawn up by experts, several visits to a notary public, and if the transaction is financed by a bank loan, things become even more complex and lengthy. The safest option is to leave this process to experts, and in the article that follows you can read what the sales process entails, from the pre-contract to the registration in the land register.

What is a pre-contract and what is its purpose?

A pre-contract is not the same as the “main” sales contract. Real estate sales require time and certain steps in which a bank is involved for most buyers. A pre-contract is a way to reserve the property and ensure that both the buyer and the seller are serious about their intentions. With the pre-contract, you commit to signing the main sales contract.

When concluding a pre-contract, the buyer is obliged to pay the agreed deposit to the seller's account. The deposit is agreed as a withdrawal fee and obliges the buyer to purchase the property after the conclusion of the sales contract.

The pre-contract contains information about the property, about the buyer and the seller, a statement by the seller that he is the owner of the property and that it is not encumbered with registered or unregistered encumbrances or rights in favor of third parties that dispute, limit or reduce the buyer's right, then the agreed price and the amount of the deposit, and the date by which the main contract will be signed. It is important to be realistic about deadlines, especially if the purchase is made with a bank loan, so check the date on the pre-contract and discuss it with the bank, i.e. find out how long the process will take until the loan is approved and the main contract is signed.

Unlike the sales contract, the pre-contract does not need to be certified by a notary public, but it has legal force even without it.

Sales contract

The sales contract is sometimes referred to as the “main contract” in colloquial language.

On the date specified in the pre-contract or earlier, the seller and the buyer conclude a real estate sales contract and the buyer pays the seller the remainder of the sale price. According to the Law on Obligations, a real estate sales contract must be concluded in writing and must be certified by a notary public.

The real estate sales contract, in addition to everything stated in the pre-contract, most often includes the date of handing over the property to the buyer as well as the seller's guarantee that there are no rights of third parties on the property. If the buyer is buying the property with a bank loan, the contract will have to be solemnized beforehand by a notary public, and the bank will register a mortgage on the property.

The sales contract is certified in several copies by a notary public. One copy of the contract remains with the seller, the buyer and the notary public. One is submitted to the land registry department of the competent municipal court with the proposal for registration of ownership, one to the tax administration when reporting real estate sales tax and one you submit to the bank if you are buying the property with a loan.

It is important to emphasize that notaries public certify the signatures on the contract, but do not enter into the content and validity of the contract itself, so it is of utmost importance that the contract is drawn up by experts. The case in which the notary public checks the form and content of the document is called solemnization of the contract.

If you are buying the property with a bank loan, the contract will need to be solemnized by a notary public.

Solemnization of the sales contract

Solemnization of the contract (or other document) is the procedure for confirming the contract at a notary public. Although at first glance it seems that this is a procedure very similar to the certification of signatures at a notary public, there is a big difference. In order for a document, i.e. a contract that has been concluded in writing, to be solemnized, the notary public must check whether the contract has been concluded in the prescribed form and explain to the participants the meaning, consequences and all legal effects that the contract carries.

Solemnization of a loan agreement is generally required for housing loans, while for most other loans only signature certification is sufficient. An enforcement clause is usually included in this type of contract, which gives the contract the credibility of an enforceable instrument. Based on the enforceable instrument, the creditor can initiate enforcement proceedings if the contractual provisions have been violated. As soon as the loan agreement is solemnized, the notary public will submit a proposal for registration of the bank in the encumbrance of the property in question. The registration of the mortgage is carried out as a matter of urgency, which takes three to five working days. After the mortgage is visible on the title deed, the bank pays the funds to the seller's account. The seller gives the buyer a tabular statement for registration of ownership after receiving the entire amount of the agreed purchase price, and the buyer becomes a collateral debtor and the new owner of the property.

Tabular statement and registration of ownership

The right of ownership of real estate based on the sales contract is not acquired automatically, but by registration in the land register based on the sales contract and the tabular statement. The tabular statement is a document by which the seller declares that the property has been paid in full and that he allows the registration of the right of ownership in the land register to the buyer.

The seller must issue a tabular statement to the buyer if the buyer has fulfilled his obligations, i.e. paid the agreed price. Therefore, with the tabular statement, the seller authorizes the buyer to obtain registration of the right of ownership in his favor and in his name without any further questions and approvals.

By registering the right of ownership of the property in the land register, the buyer becomes the new owner of the property and acquires the right to dispose of it, possess it, use it, use it and exclude every third party from it, and thus completes the procedure of buying and selling real estate.

Real estate transfer tax

The purchase of an apartment or house must be reported within 30 days of the occurrence of the tax obligation, i.e. the signing of the sales contract, to the Tax Administration branch in the area where the property is located. The real estate sales tax rate is three percent of the market value of the property at the time of its acquisition, and it is paid by the buyer. In certain cases, the buyer is exempt from paying real estate tax, and find out a comprehensive guide on tax obligations related to real estate HERE.

You don't have to go through all the steps of buying and selling real estate alone, contact the Regent team and be sure that you are in the hands of professionals.