1. Introduction

Once the financing has been approved and the notarized purchase agreement has been signed, many buyers assume that the most important financial steps have been completed.

In reality, a number of additional costs and payments still follow.

These may include the real estate agent’s commission, real estate transfer tax, notary and land registry fees, financing-related costs, renovation expenses and the first ongoing costs of the property.

It is therefore important not only to calculate the purchase price, but also to understand when the individual costs arise.

2. The Notarized Purchase Agreement as the Starting Point

In Germany, the purchase of real estate generally requires a notarized purchase agreement.

The notary coordinates important legal steps following the signing of the agreement. These may include registration of the priority notice in the land register, communication with authorities, preparation of the transfer of ownership and, where financing is involved, registration of the bank’s land charge.

The purchase price is normally not paid immediately at the notary appointment. The notary first confirms that the contractual conditions for payment have been fulfilled.

3. Real Estate Agent’s Commission

If an estate agent was involved in the transaction, the commission generally becomes payable in connection with the successful conclusion of the purchase agreement.

The amount depends on the contractual arrangement and the type of property.

The commission should therefore be included in the buyer’s liquidity planning from the beginning.

4. Real Estate Transfer Tax

After the purchase agreement has been notarized, the transaction is reported to the responsible tax office.

The tax office then issues the real estate transfer tax assessment.

The tax rate depends on the federal state in which the property is located. In Berlin, the current rate is 6% of the relevant consideration.

For example, if a property is purchased for €500,000 and the full purchase price is subject to real estate transfer tax, the tax would amount to €30,000.

Payment of this tax is also important for the later registration of ownership in the land register.

5. Notary and Land Registry Costs

Additional costs arise for the notary and the land registry.

These may relate to:

the purchase agreement,
the priority notice,
registration of the land charge,
transfer of ownership,
and the deletion or amendment of existing entries.

The individual invoices may arrive at different times.

As a result, buyers should maintain sufficient liquidity even after payment of the purchase price.

6. Disbursement of the Bank Loan

If the purchase is financed, the bank will normally release the loan only after the agreed conditions have been fulfilled.

One important element is usually the registration or secured registration of the land charge in favour of the bank.

Depending on the financing agreement, the buyer may also have to use part of the agreed equity before the bank releases the loan.

If the loan is not drawn down within the agreed period, commitment interest may also become relevant.

7. Handover of the Property

The transfer of possession, benefits and burdens is an important date.

From this point onward, the buyer usually bears the ongoing economic costs of the property.

These may include:

service charges,
property tax,
insurance,
heating and operating costs,
and condominium fees.

The date of economic handover and the date of final registration in the land register are not necessarily identical.

8. Renovation and Modernization After Purchase

Many properties require renovation immediately after acquisition.

From a tax perspective, however, the treatment depends heavily on whether the property is used by the owner or rented to a third party.

The distinction between maintenance, modernization and construction-related expenditure can also be important.

Therefore, larger renovation projects should ideally be considered from a tax perspective before the work begins.

9. Tax Benefits for Owner-Occupied Property

For an owner-occupied home, normal acquisition and financing costs are generally private expenses.

However, certain tax benefits may still be available.

Under Section 35a of the German Income Tax Act, certain craftsmen’s services for renovation, maintenance and modernization may qualify for a direct reduction of income tax.

The tax reduction amounts to 20% of the eligible labour costs, subject to a maximum tax reduction of €1,200 per year.

Material costs are generally not included.

Certain energy-related renovation measures may qualify for a separate tax benefit under Section 35c EStG if the statutory requirements are met.

10. Wage Tax Reduction During the Year

Employees do not always have to wait until the annual income tax return to benefit from certain expected tax deductions.

Under certain circumstances, a tax allowance can be applied for and included in the electronic wage tax data, known as ELStAM.

This can reduce monthly wage tax deductions.

Whether this is possible and useful depends on the type and amount of the expected expenses and on the individual tax situation.

11. Practical Example: Timeline After the Purchase

A typical sequence may look as follows:

Notarized purchase agreement
→ estate agent’s invoice
→ registration of priority notice
→ real estate transfer tax assessment
→ registration of financing security
→ notice that the purchase price is due
→ payment of purchase price
→ handover of the property
→ renovation or modernization
→ final registration of ownership.

The exact sequence may vary depending on the transaction.