Selling a house or flat is generally no small undertaking. Owners without property experience or a commercial background should therefore use the services of an estate agent. The agent not only handles the sale, but also deals with matters such as setting the price and marketing the property concerned. In doing so, the agent also needs support from their client, because the success of the sale depends significantly on the information and documents that the seller provides.
What information must sellers provide?
A seller can, of course, generally assume that a prospective buyer will want to obtain information for themselves and will request the documents they require. If the seller initially waits, however, they must expect the sales process to take longer. There is also a risk that a transaction will fall through because the buyer has found another property in the meantime. Apart from the possible disadvantages a delayed sale can cause the seller, there are also legal obligations to provide documents. For example, the relevant energy performance certificate must always be available for a property. If the buyer is unable to inspect it, the seller may face a fine. Under Germany’s 2009 Energy Saving Ordinance, the competent building supervisory authority can impose a fine of up to 15,000 euros in this case.
What are the most important sources of information for the buyer?
One of the most important sources of information when buying a property is undoubtedly the relevant extract from the land register. The land register records who actually owns a plot of land. It also shows whether the property is encumbered by a mortgage or land charge and whether any other encumbrances affect it. Examining Section II of the land register is particularly important when selling a property. A neighbour’s right of way to the property behind it, a right to lay a water pipe or restrictions under neighbour law on developing the land are important factors that may influence a prospective buyer’s decision. The owner should provide the estate agent with all necessary information so that interested buyers can be properly informed. The building file for a house, planning permission and other documents, for example concerning any listed-building protection that may apply, are also very important sources of information for a buyer.
What is the purpose of a valuation report?
IVD West also recommends obtaining a valuation report from an estate agent, valuer or surveyor. This report gives the seller confidence when setting the price. For the buyer, it provides important guidance on the property’s value and condition. Banks also use valuation reports when deciding whether to finance a property. However, the fair value or market value established in the report is not always the figure used to finance the property. Banks generally apply deductions to determine the property’s mortgage lending value. The bank also needs the current land-register extract for this purpose.
Which documents do banks request?
In addition to the documents mentioned above, banks’ lending departments also require evidence of building and fire insurance and, where applicable, rental income, as well as current photographs of the property. If available, the relevant construction documents, including planning permission, construction plans and the building specification, are also helpful when seeking finance. For blocks of flats, detailed information about the tenancies is often required as well. If the loan is to finance the purchase of a condominium flat, a copy of the declaration of division, the current budget and the owners’ association’s latest service-charge statement must generally also be submitted.
Why is it so important to inspect the declaration of division?
Buyers and sellers of flats alike often underestimate the importance of the declaration of division. In practice, the document governing rights and obligations within a condominium owners’ association is frequently not read, even though buyers of condominium flats have to confirm that they have taken note of it before signing the contract. Buyers who do not read the declaration of division take a significant risk. The document may contain numerous unbalanced provisions, such as an unfair allocation formula or questionable arrangements for costs. Some stipulations frequently favour the interests of individual flat owners, and important rules governing relations between individual owners, the management of common property or special rights of use are often missing. If, for example, certain special rights of use are listed only in the purchase contract, the rooms or areas remain common property and cannot be acquired by the buyer.
The immediate surroundings matter too
Besides the documents required for a successful sale, there are various records that may increase the property’s value. These include copies of tenancy agreements providing for stepped or index-linked rents. Evidence of modernisation or recent repairs that have significantly increased the value can also be worthwhile. In addition, sellers should remember that the value of their property is strongly influenced by its immediate surroundings. During sales negotiations, it is very helpful if the development of the particular residential location can be documented well, especially where infrastructure projects or the recent arrival of shops or cultural institutions have substantially enhanced the neighbourhood. This is precisely where an estate agent can help. The agent will always supplement the property details in the sales brochure with an assessment of the residential location.
Checklist: which documents should be available when selling a property?
- Land-register extract
- Planning permission
- Building specification
- Construction plans
- Valuation report
- Energy performance certificate (required by law)
- Floor plans (for blocks of flats)
- Evidence of rental income
- Copies of sample tenancy agreements
- Evidence of fire and building insurance
- Declaration of division (for condominium flats)
- Evidence of modernisation and repairs that increase value
- Description of the immediate surroundings