Purchasing a property is a significant financial decision that requires careful planning and attention. The purchase agreement is the central legal element in this process. Often dismissed as a mere formality, errors in the real estate purchase agreement can have serious consequences. We outline some mistakes in real estate purchase agreements and offer tips on how to avoid them.
Unawareness of When a Legally Binding Purchase Agreement Is Formed
Many prospective buyers are unaware that in Austria, a legally binding purchase agreement is not only formed upon the notarized signing of the contract at a lawyer's or notary's office but already when the buyer and seller agree on the property and the price. This agreement can be made orally or in writing. Therefore, an offer submitted by a potential buyer to the seller or real estate agent is usually already legally binding unless it is expressly presented as a non-binding offer or made subject to conditions. If the seller accepts the offer, a valid purchase agreement is already created. The notarization of signatures is merely a formality required for the land registry application.
When making an offer, remember to include points that are absolutely necessary for you (e.g., required renovations, financing contingencies). Only make a binding offer when you are truly certain. It is best to have the land registry status explained to you beforehand. If you need a loan, a permit from the land transfer authority, or other formalities, declare appropriate conditions. These should be properly formulated to reflect your interests.
Failure to Read and Understand the Purchase Agreement
When you receive the purchase agreement from the drafting attorney (or notary), read it thoroughly and ask questions if there is something you do not understand. Also, compare the draft contract with the accepted offer, if there is one, and verify that all essential points are included. If the seller has given you additional assurances (whether orally or by email), ensure these are also included in the purchase agreement.
Unclear Contract Terms
A common mistake in real estate purchase agreements is unclear or incomprehensible terms. This can later lead to misunderstandings or legal problems. Have the purchase agreement drafted or reviewed by a law firm that specializes in real estate law and that you trust. Ensure that all agreements are clearly and understandably formulated and that no open questions remain.
Neglecting Incidental Costs
Many buyers focus exclusively on the purchase price of the property and overlook additional incidental costs such as notary fees, real estate transfer tax, and broker's commission. Calculate all anticipated incidental costs in advance and include them in your budget. If in doubt, seek professional advice to accurately account for all costs.
Overlooking Conditions, Deadlines, etc.
Often, a real estate purchase agreement contains specific conditions, such as the deposit of earnest money by a certain date. If these conditions apply to you, make sure that you can fulfill them. For example, if you, as a foreigner, require a permit from the land transfer authority, inform yourself in advance about the likelihood of obtaining it. Always familiarize yourself with the legal consequences should conditions not be fulfilled in a timely manner.
This point naturally also applies to the seller. If you are selling to a foreigner, you should appropriately account for the time required to obtain a permit from the land transfer authority and protect yourself in case the buyer does not fulfill the condition in time.
Insufficient Contract Terms
There are certain points that a real estate purchase agreement should definitely include. Pay particular attention to warranty clauses (specifying for which defects the seller is liable and for how long) and rights of withdrawal.
Special Risks for Foreign Buyers
Purchasing real estate is complex, and even locals make these typical mistakes in real estate purchase agreements. However, it is even more complicated for foreign buyers. The offer, all purchase agreement documents, and any necessary official permits for foreigners are drafted in German. It is strongly recommended to prepare the offer for a property bilingually from the outset and, of course, to draft the purchase agreement in both languages. If this is not done, the mistakes described above are almost inevitable. Please see our article for more details regarding risks for foreigners.
Conclusion
Purchasing a property is complex and associated with many potential pitfalls. By avoiding the above-mentioned mistakes real estate purchase agreements and seeking advice from professionals, you can ensure that your contract is solid and legally secure. Careful preparation and review of all contract details are the keys to a successful real estate purchase.
Do You Have Further Questions in Real Estate Law?
Do you have further questions about purchasing real estate or wish to have your real estate purchase agreement reviewed or drafted by us? We are experts in this field and are happy to advise you. Of course, we offer these services in English and can also prepare bilingual documents for you. You can reach our law firm at office@geuer.at or by phone at +43-1-4380072. We look forward to your inquiry.