8 tips on buying a home in Italy
Given Italy’s unwavering attraction that pulls in 40 million visitors annually; its centuries of culture and tradition; and the relative strength of the US dollar and other top global currencies against the euro, there has scarcely been a more ideal moment to buy real estate in Italy.
Indeed, many real estate experts forecast that demand for real estate in Italy, in particular from overseas buyers, to stay buoyant over the forthcoming 12 months.
So, if you intend to acquire a holiday home in Italy, here is a selection of basic guidelines to abide by:
1) DO YOUR GEOGRAPHICAL RESEARCH: Tuscany is overseas buyers’ favourite stretch of the country, attracting nearly 35 per cent of people who come here. As a consequence it is also its dearest.
There are other areas such as the south, which are far less expensive and also boast the same majestic landscapes and azure-blue seas. As an example, the Sicilian housing market fell by approximately 20-30 per cent since the start of the 2007-08 financial crisis.
Try various locations to see what areas you like best. Make sure you are within reasonable distance from local amenities, unless you deliberately want to be in splendid isolation. One tip is to take a look at a website such as where-to-buy-in-italy.com.
2) WHAT CAN YOU AFFORD? Despite the current world financial backdrop, the Italian real estate industry has not fallen apart like its Spanish counterpart.
A couple of years ago there was a much publicised offer to sell one-Euro homes in the Sicilian town of Salemi. But that was a one-off. Because the country did not go through the real estate boom of the first decade of the century, its prices did not suffer the same kind of plummet when the crisis hit.
As we had to tell one US client last year, just as US$65,000 wouldn’t get you a two-bedroom property in Upper East Side Manhattan, it won’t in the centre of Venice either. There are great deals to be had. But don’t expect them everywhere.
3) GET A RELIABLE AGENT: Italian law says all real estate agents must have a licence, qualification and the appropriate insurance and be registered with a chamber of commerce.
Their their website and prove they are signed up to either the AICI (Italian Association of Estate Agents), FIMAA (Federation of Mediators and Agents) or FIAIP (Federation of Professional Estate Agents). When investing abroad it's important to avoid being ripped off, so this is one occasion to be grateful thankful for Italy's scrupulous red tape.
4) SEEK LEGAL ADVICE: Despite an unfamiliar legal system in an unfamiliar language, some foreign buyers cut corners by blustering their way through the process without a lawyer (avvocato). The dangers are countless.
First, many sign papers they do not understand and are then bound to an irrevocable legal commitment. Second, it means a number of vital checks that a good lawyer would carry out instead go ignored.
They include ensuring the vendor has a registered title and is legally authorised to sell. Where a property is jointly owned by a number of family members, all must agree to the sale. And the property must have proper planning permission.
Also, Italian law means any loans, mortgages, utility bills, etc, relating to the house pass to the new owner, so a lawyer must ascertain no such charges remain. Try to hire a reputable, independent English-speaking avvocato who comes recommended. Or use a lawyers’ directory such as hg.org.
5) GET TO KNOW THE PROCESS: Once a price is settled on the purchaser makes a proposta irrevocabile di acquisto with a downpayment of some 5% to reserve it for around 15 days. The next stage, once the buyer’s surveyor and/or lawyer gives the green light, sees both sides sign a compromesso, in which a timescale to complete is decided.
A further sum is paid, taking the buyer's total downpayment to around 30%. Defaulting carries serious repercussions. The buyer may forfeit all monies paid while the seller, if at fault, may have to pay back double the deposit.
The following step is to sign the final deed of sale (atto di vendita) in the presence of a notary (notaio), who examines all paperwork and lodges them with the Land Registry. The buyer pays the balance, usually by bank draft from an Italian bank. Thus he will need to have obtained a fiscal code from tax authorities so he can apply for a bank account.
6) KNOW YOUR ADDITIONAL COSTS: Fees, taxes and commissions amount to an extra 7%-10% on top of the price of resale properties and 12-15% for new-builds.
Usual add-on costs might be around US$250 an hour to a lawyer, up to $2,000 for a surveyor, anything from US$2,750 to US$7,500 for a notary and 3% to the estate agent.
On new-builds, there is 4% VAT if within 18 months you register for official Italian residency – a relatively straightforward process.
Otherwise, 10%. For other properties 3% of the cadastral value is charged if the buyer takes out residency within a year and a half. If not, the levy rises to 10%. Cadastral value is decided by the Land Registry based on variables such as floor area, number of rooms, etc. and is far less than the property price.
7) TAKE CARE OF THE CURRENCY DIFFERENCE: You would not think making a significant purchase in your country without ascertaining the total price. However countless investors commit the same blunder in agreeing to acquire an Italian property with no idea what the price in euros equates to in their own currency.
This is where a specialist foreign exchange dealership is your best friend. It means you can secure a specific exchange rate half a year ahead, giving you peace of mind.
Yet ignoring foreign exchange ups and downs can be costly. For example, between the middle of 2011 and 2012, for a US citizen set on a Euro 500,000 property, the difference between the top and bottom of that cycle would top US$122,000. On no accounts use your high street bank, regardless of how long you have been a customer or – much worse – a currency exchange office at an airport.
8) MAKE AN EFFORT TO GIVE THE LANGUAGE A SHOT: Arm yourself with some useful Italian words. Be aware that unlike North-West Europe, more than 7 in 10 Italians speak no English, among the lowest figures on the continent. Don’t be afraid to make a fool of yourself as your efforts, no matter how clumsy, will be warmly received by locals.