Guide to buying a property in the Czech Republic

Post date: Oct 31, 2013 5:28:34 PM

Guide to buying a property in the Czech Republic

We in Conbiz help investors who are thinking of buying a real estate property in the Czech Republic. In order to make the decision easier for new investors in the Czech Republic we have prepared a detailed guide with comprehensive information that will help you to understand what lies ahead of you.

Reading the guide and carying out the following stages will ensure that the procedure of buying a property in the Czech Republic will be as smooth as possible.

Finding a house or a plot in the Czech Republic

There are several websites where you can find a site, a plot of land, a house, or an apartment. The main websites are: Reality and Sreality; they both also have a basic site in English, however some of the descriptions of the properties can be unclear, so it pays to learn a few words and general terms in Czech. There are also many general web sites, such as Reality iDNES or Prague Real Estate which have details of various properties, as well as the websites of private real estate agencies.

You can also do a search in Czech Google using key words such as reality Česká Republika, reality Praha, nemovitosti, or pozemky. Use of the word Byty (apartment) also sometimes works, but this term is too general and the data received from Google are mostly irrelevant. The advantage of searching using Czech terms is the focus on those companies which operate in the Czech market. The nature of the Czech market is that it is possible to find the same property registered with several different agencies, usually with different prices and descriptions and this can sometimes be confusing.

We want to warn you about the prices advertised in the websites. Real estate agents say that most of the prices advertised are much higher than the actual prices and the lowest of these prices are slightly higher than the market prices. We recommend taking 10% off the advertised price in order to reach the actual price of the same property in the market. This lack of precision derives from the fact that the Czech vendors do not take correct advice or carry out accurate appraisals before beginning to advertise the property. If you are unfamiliar with the Czech market it is a good idea to hire the services of a consultant who is aware of your concerns and as such will be able to guide you in the thicket of information on the web. This will save you money and time in the long term and will give you peace of mind in the short term.

Regarding the location that will give you the best return on your investment, it should be remembered that if you buy a property in classic Prague in an area surrounded with classic Prague buildings you are buying a property in the center of things, as tourism to the area (one of the developing branches in the Czech Republic) never ceases. This is always an attractive choice; it can almost certainly be assumed that the property will at least maintain its value in comparison with other places.

Outside Prague's historical city center, there are additional factors which have an impact on the value of the property that it is worth taking into account such as access and the return on the property. It is also worth mentioning international schools (for instance it will be easy to let apartments in Nebušice because of the proximity to Prague's international school), the clean air of the parks (such as Průhonice), or even just the added value which comes with a prestigious address such as Hanspaulka in Prague 6.

Land registration in the Czech Republic

Assuming you want to buy a residential property, the first thing worth doing is to acquire a Land Registry Office (Výpis z Katastru nemovitostí) declaration.‎ ‎This step is carried out in order to ensure that the person who is selling the property to you is the legal owner. Only the property's legal owner has the right to sell it, although there are certain cases where agents, lawyers, or third parties acting in the owner's name can close a deal on their behalf. Obviously you don't want to find yourself unable to move to your new house after handing over payment and therefore it is important to check this issue well. The declaration also shows whether there are loans or encumbrances on the house which could be transfered to the new house owners. Usually the previous owners pay these loans after receiving payment for the property.

Fortunately all you have to do in order to acquire a full declaration is to visit Czech POINT.‎ ‎This can be found in most post office branches in the Czech Republic. The cost of the declaration is 100 Czech korunas and the person asking for the declaration is asked to provide the supplier with proof of the identity number, area of land registration, proof of ownership number (LV), plot number, and the property's address. By the way, any notary can do this, and he does not need to show an identity card. The cost is according to page, and some of the declarations have more than one page.

If you want to receive a site map of the property's location from the authorities, this can be obtained from the municipality in which the property is situated. Another option is to use this site.‎ ‎You just need to enter the street name and the name of the city in the Czech Republic in the upper left box in the site.

Alternatively, to receive short ownership declarations and site pictures its a good idea to go into the land registry office website which offers free services; you just have to enter the name of the town and the plot number of the property, and the property ownership will appear immediately.

Czech property appraiser's report

Land registry answers the question of land ownership, but what about the state of the property purchased? House owners are not required to supply an information package about the property as is customary in many countries in Europe. However, it is possible and even desirable to acquire a professional appraisal (znalecký posudek) of the property. The report includes an abstract of the house's situation, its building materials and the property's real value, which is not identical to the property's market value. An example of a request for a appraiser's report can be found here.

One last document, necessary in the case of a new building, is a building permit. (kolaudace)‎ ‎The decision on the building permit for the building is necessary in the event of structural changes. Information on the subject can be found here.

As well as the appraiser's report, it's definitely worth talking to the property's owner about its condition, especially if it is old. You should ask about heating, insulation, temperatures, and plumbing. This information should be asked for in writing. It is highly recommended to ask for all the building's previous documentation, plans, building permits and any change that has been made to the property. In conclusion, the time you check the property should be chosen carefully especially in the cheaper apartment buildings as sometiomes valuable information is revealed which can cause the whole deal to collapse. For instance, most checks take place during the day when the neighbors are out. But when you come to check the property in the evening, after work hours, there are instances where you can hear the neighbors drinking their tea on the other side of the wall.

Mortgages in the Czech Republic

Mortages in the Czech Republic – for Czech nationals

Taking out a mortgage from a Czech bank comes with good news and bad news. The good news is that the big banks (ČSOB, Česká spořitelna, Komerční banka, UniCredit) sometimes offer Czech nationals a mortgage of 100% of the apartment's estimated value. Estimated is the key word. The property's value will be estimated by the bank, so that it oculd be that you won't receive the full sum the buyer is asking for. On the other hand, the mortgage can be used for other things such as renovation or furniture.

Mortages in the Czech Republic – for foreign nationals

On the question of whether a foreigner entitled to a mortgage, the answer is – it depends on the bank. The Česká Spořitelna bank states that it is necessary for a candidate to have permanent or temporary citizenship. By comparison, the ČSOB bank says that a giving a mortgage to foreigners will be examined on an individual basis for every candidate. The Raiffeisenbank on the other hand will give 90% of the property's value but only to candidates who have been living in the Czech Republic for more than two years. A condition of receiving any mortgage is proof of a steady source of income. This can be achieved among other ways by means of setting up a company in the Czech Republic in your name.

This website or this one can be used to compare mortgage options. If you want to work with a mortgage consultant, you can download a list of consultants who belong to the association of mortgage agents, Asociace Hypotečních Makléřů, here.‎ ‎

As part of the consultancy process in Conbiz, we can put you in contact with a reliable, accredited consultant who will handle the entire process of applying for a mortgage. The issue of the mortgage consultant's reliability is very important, as in the Czech Republic the consutant receives a commission from the bank, so that in many cases the consultants feel more committed to those who pay them than to their clients.

Payment for property bought in the Czech Republic

When the time comes to pay for the property, it is a good idea to transfer the sum through a third party: a real estate office, notary or lawyer. When handling larger sums in complex business deals, opening a trust account with a lawyer is recommended. The simple reason for this is that registration in the Land Registry until full transfer of ownership to the new owner takes 30 days. All the payments need to be in accordance with the written agreements and as part of the purchasing price; notaries and most lawyers have insurance for such deposits, so that the money is guaranteed according to Czech law. However, very few agencies have such insurance. Release of money to the vendor takes place automatically a few days after he presents a new copy of the ownership showing that the new ownership of the property has been registered and that all the prior conditions in the agreement have been fulfilled.

Getting an expert opinion

Apart from supervising the deal, a lawyer can be important and even essential in various parts of the process. The lawyer can help in wording or checking the contract (rezervační smlouva) or in the purchasing agreementkupní smlouva) ‎). Hourly Lawyer's fees can range from 1000 korunas (about NIS 200) to 5000 korunas (NIS 1000). The cost of these services should be clarified in advance. We at Conbiz can recommend experienced, professional lawyers who speak Hebrew or English as needed.

With layers, for standard sales deals we recommend agreeing on a fixed fee for the entire transaction.

Other payments

Real estate agent's/agency's commission

Before entering any deal it's a good idea to check all anticipated costs. In certain properties the agency will demand payment of more then 6% of the price of the transaction. This should be noted in the property details or at the time of initial contact with the agency. If you have instructed the agent to act in your name, an agreement on payment will be generally necessary; in these cases every case is different, but usually the payment stands at 1% to 2% of every sale. Paying an agent in such a case has many advantages. The agent has to work for you only, and only your personal interest concerns him. He is required to negotiate for better terms and sometimes will even bargain and manage to reduce the price. When renting it is usual in the Czech Republic (as in Israel) to pay an arbitration fee of the sum of one month's rent.

Payment to a notary, bank charges, and paying the property registration fee.

At the time of the transaction, it is possible that you will be asked to help pay the notary's fee or bank charge. Usually the agreed compromise is to pay 50/50. The property registartion fee is low and is usually covered by the agency, but this should be checked in advance.

Paying the appraiser

It is reasonable to assume that there will be further payments on bank appraisals and surveys of the property. If the property is old, it is preferable to carry out a short survey of the building by a construction engineer, an experienced architect, or a builder, who can tell you quickly and clearly whether they foresee problems or extraordinary costs, and afterwards if you want to go ahead, you can carry out a full, comprehensive survey to evaluated the expected costs.

Taxes on the property

The vendor pays a tax of 3%, but in cases where he does not pay, this tax is passed on to the buyer. In order to avoid this, 3% of the final cost is deposited by the vendor until the stage where he shows evidence of payment.‎ ‎

Conclusion – buying a property in the Czech Republic is easy!

Generally, the process of buying a property, house, apartment, or plot of land in the Czech Republic is fairly simple. The main issues are the language gaps and unfamiliarity with the Czech system as all the necessary information is accessible to people who speak the language.

If you are interested in investing in buying a property in the Czech republic, we in Conbiz will guide you in the process of searching for, finding and buying a property.‎ ‎

For further details please contact us here.