If you are looking for a modern property or want to plan it according to your taste, a new-build property is the right choice. In 2020, 306,376 apartments were completed in Germany.
However, there are a few things to consider when buying a new build in Germany - especially if the construction is still under development. This also applies to home financing. In this article, we explain what you need to know about buying a new build.
Buying a new build from a German developer
You usually buy a new apartment or a new house directly from the builder or the project developer. The advantage of this is that you save the commission for the real estate agent. This has a positive effect on the amount of purchase costs. The German developer takes over the complete planning and supervises the implementation of the construction.
Buying a new building in Germany before completion - know the risks
Since the housing market is competitive in many places, there is also a shortage of new apartments. As a result – most properties are sold out completely before the building project is even completed. Consequently, there is not even a showcase apartment. The customer can only see a mock-up, a scale model of the house or apartment, and the architect's plans and designs, and must then decide for or against the purchase.
There are risks involved. Buyers know nothing about the building materials and how thoroughly the construction work is done. If in doubt, mistakes must be corrected afterward. In the case of an old building, however, a surveyor can make a good estimate of the structure and expected costs. Of course, a new building also has advantages like modern equipment.
Reading tip: 4 mistakes you should avoid with your mortgage.
Buying from a German real estate developer
To protect yourself as much as possible, you should pay attention to the following points. These are also explicitly recommended by homeowners' associations.
Have the developer send you the building and service description at least 14 days before the notarization, and go through it carefully. If you are unsure, have it additionally checked by an expert such as a lawyer for real estate law.
Have the purchase contract sent to you at least 14 days before notarization and check it carefully. Pay particular attention to whether the points of the construction and service description are included. The 14-day period is regulated by law (§ 17 Absatz 2 Satz 2a BeurkG). You must receive the contract at least two weeks before the day of the signing.
Check the declaration of division and the division plan carefully. Can the information also be found in the land register and purchase agreement?
Check the creditworthiness of the developer. The online insolvency databases will help you with that. It is best to have the developer show you additional reference projects that he has already realized. This way you can check his reliability to a certain extent.
The payment should not be made all at once, but according to the progress of the construction work. If a construction phase is completed, the developer receives a part of the purchase price.
An independent building inspection by TÜV or Dekra is an advantage for you. Find out whether the developer is planning this.
Bring your own building consultant or surveyor to the final inspection to directly record any defects.
Special requests or your own contributions must be recorded in the developer contract.
You should also contractually stipulate that you will receive all relevant documents such as the soil survey, the energy certificate, building application plans, etc. when construction actually begins. After all, as a buyer, you are not only buying an apartment, but you are part of the entire residential complex.
Take care of the length of your warranty. For some developers is this a negotiable point.
Make sure that the developer has a building permit at all and that the extract from the land register is up-to-date.
Check the neighborhood and building site to get a better idea of your future home.
In the contract should be a special clause that clarifies a delayed building penalty. You can negotiate a sum per day per square meter or the developer has to pay you the occurred damage (e.g. rent for a flat because you can't move in your property and commitment fees from the bank).
Financing of a new build in Germany
Unlike with an existing building, you do not pay the purchase price all at once, but in installments. You agree with the seller on when what amount is due. Usually, the payment is divided according to construction phases.
This is good for both sides. The developer receives money even before completion, and the buyer only pays if something is actually moving along and progressing on the construction. This also protects you from the insolvency of the construction companies – since if they don't build, they don't get paid.
Payment by installments is a step-by-step business. If sections are completed, payment follows. How much of the purchase price is due and when, for example, is regulated by the Brokers' and Developers' Ordinance. Here you will find an overview. The installments are also a matter of negotiation.
Consider commitment fees in your mortgage
Since you do not pay the purchase price all at once, you will need the loan from the bank in installments. This is possible. However, if the bank lends you money, it cannot use it for any other purpose. This is the case after signing the financing agreement. In return, you pay interest.
But the interest-only becomes due once the bank has paid out the full amount of the loan. This means that the bank will not receive any interest payments from you until the project is completed, and the loan is paid out. To compensate for this, the bank charges you a fee on the unpaid loan: the so-called commitment fees.
The good thing about it is that you can fix a provision-free period in your mortgage contract. It is between six and 24 months. Be sure to pay attention to this period in your mortgage. If the construction takes longer, you must pay the bank's claim. Weigh well how long the commitment-free period should be. You can readmore about commitment fees here.