The decision to buy a house is one of the most important and complex decisions you can make.
One of the first questions you will ponder is whether it is better to buy a house from a private individual or directly from a builder. Both options have advantages and disadvantages involving costs, modes, procedures and taxation. In this article, we will take a look at the main differences to help you make an informed choice.
1. Differences in Costs
Buying from a Private Individual
- purchase price: generally, the purchase price of a house from a private individual is lower than that of a new house. This is because second-hand houses may be in need of renovation or improvement;
- registration tax: buying from a private individual involves the payment of a registration tax based on the land registry value of the property:
– first home: the tax is 2% of the land registry value, with a minimum of EUR 1,000.
– second home: the tax rises to 9% of the land registry value; - notary fees: these fees vary depending on the value of the property and location, generally ranging between 1% and 2% of the purchase price;
- real estate agency fees: if an agency is used for the purchase, a commission of between 2% and 3% of the sales price will be charged.
Buying from a Builder
- purchase price: new houses are usually more expensive, reflecting the modern construction technology and energy efficiency incorporated into the construction;
- VAT (Value Added Tax): buying from a manufacturer entails the application of VAT, which varies
– first home: the VAT rate is 4%;
– second home: the VAT rate is 10%;
– Luxury real estate: for luxury dwellings, the rate can go up to 22%. - additional costs: there may be extra costs for any customisations requested by the buyer;
- no intermediaries: as no real estate agents are involved, there are no commissions to pay for brokerage.
2. Differences in Modes
Buying from a Private Individual
- direct negotiation: negotiations take place directly with the vendor, allowing for a margin of negotiation;
- property inspection: a technical assessment of the property must be performed to identify any defects or renovation needs;
- preliminary agreement (compromesso): a preliminary contract is signed with details of the price and terms of sale;
- default risks: it is vital to take appropriate legal measures to protect yourself.
Buying from a Builder
- purchase “on paper”: you can often buy a property still under construction, based on the plans and blueprints available, and with the possibility of customisation;
- sales contract: includes warranties such as the ten-year warranty against structural defects;
- interim (IPC) payments: payments staggered according to the progress of construction;
- delivery times: these may vary depending on the completion of the work, requiring good planning.
3. Differences in Procedures
Buying from a Private Individual
- visiting and evaluating the property: inspection of the property to assess its condition;
- purchase offer: submission of a formal offer to the seller;
- preliminary agreement: signing of the preliminary contract and payment of a deposit;
- notarial deed: notarial deed for the transfer of ownership.
Buying from a Builder
- reserving the property: initial deposit to secure the purchase;
- preliminary contract: signing of a detailed contract with information on materials, finishes and timing;
- IPC payments: staggered payments according to the progress of the work;
- completion of sale and handover of keys: notarial deed upon completion.
4. Taxation differences
Buying from a Private Individual
- registration tax: main tax cost. The tax is 2% for a first home and 9% for a second home, calculated on the land registry value;
- mortgage and land registry taxes: fixed at EUR 50 each for your first home. For a second home, these taxes may be higher;
- mortgage interest deductions: for your first home 19% of the interest paid on the mortgage can be deducted up to a maximum of EUR 4,000.
Buying from a Builder
- VAT: replaces registration tax. VAT is 4% for a first home and 10% for a second home, and 22% for luxury properties;
- mortgage and land registry tax: if you buy from a builder, these taxes are a fixed amount, at EUR 200 each;
- tax deductions: these may be available for the purchase of energy-efficient buildings or for renovations that meet ecological criteria.
The choice between buying from a private individual or a builder depends on many factors, including costs, payment methods, and taxation.
Buying from a private individual might be cheaper in terms of price and registration fees, but can involve risks and requires a thorough inspection of the property. On the other hand, buying from a manufacturer provides more security, customisation possibilities and warranties, but at a higher initial cost.
To make a decision and to have peace of mind during the entire buying process, we always recommend seeking assistance from a real estate advisor. An experienced professional can not only guide you through the bureaucratic and tax complexities, but also give you the security of making a sound investment with no unwanted surprises.
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