What costs are there in a real estate transaction and who pays for them?

It might seem like I'm going to state the obvious here, but actually it's one of the most asked questions in real estate. There always lies some difficulty in; what will the seller pay for and what will the buyer pay for. It's always good to be well informed in advance. Please know that this article is applicable on Flemish real estate transactions.

I want to sell my property; what costs do I need to take into account?

In general: delivery costs

We can filter all the costs in one word: the delivery costs. Meaning; all the costs that need to be made in order to comply with the informartion obligation towards a potential buyer. Primarly, I'm about the energy performance certificate and the electrical inspection. An additional document is the inspection report from the heating system, which is obligatory if your house or apartmentbuilding has an oil tank. Nevertheless, a gas boiler should be inspected every 2 years too. In apartment buildings, your oil tank will be communal and therefor the cost will be included in your monthly costs paid to the syndic.

Notary fees

The notary should provide the seller with some important legal documents as well. Often is said that the buyer pays for the notary fees, which is true but this does not mean that the seller won't have any bill coming from his notary. I've already explained that it's very common that buyer and seller choose their own notary and mostly the seller's notary already has a file from the property from the previous purchase. But some documents also need to be renewed. Als a realtor, I'm often given authorization to ask for those documents via the notary, and then we always inform our client that the notary's office will charge a small cost. I'm talking about documents like; the title of ownership, documents from the land registers, a soil certificate, urban planning documents.... There can also be charged a fee for the draw up of the mutual sales agreement.

Little side note for a special situation: drawing up a basic deed. To explain this I'll give a practical example; the seller owns a small-scale building with 5 apartments, he now wants to sell them as individual properties. Because the building is now being divided, a basic deed must be drawn up that describes each apartment as a separate entity and with a separate land registry number. Unless something else can be agreed upon with the buyer before an agreement has been concluded.

Syndic fees

At this point, -if we're talking apartments- we do not yet fulfill our information obligation towards the potential buyer because we don't have any info regarding the association of the co-owernship. The syndic needs to be contacted via the realtor or the notary, upon which he'll reply with a letter that provides us with the necessary (financial)information concerning the association. This includes information about; state of the reserve/working capital, any arrears, information about major structural changes, information about current legal disputes ....

Ad costs

If you opt for a realtor, all these costs are included in the commission fee (3% on the sales price + 21% VAT) of the realtor's office. The photos will be taken for you and the advertisement will be published on different websites. He ensures that the process will run smoothly so that you no longer have to worry. Only the final decision (and the signature) is yours to be taken.

Mortgage and early repayment loan Did you take on a -still ongoing- loan to buy this property ? Then you pay a cost for the early repayment of this loan because this sale causes the bank to miss out on interest, it's a so-called "reinvestment fee". Please also mind that even if the loan has already been paid off, a mortgage on a house often runs for 30 years, so you will also have to pay a fee for the release of this mortgage.

Taxes Let's be fair: overdue taxes will always find their way back to you ... But I want to mention the property tax in specific because this one will still have to be (partially) paid by the seller because he was the owner of the property on the first January on the year in which the deed passed. In concrete terms; this means that the assessment note will still reach the seller, but on the day of the deed the notary will make a pro rata account of the part that the buyer has to pay (counting from the day he becomes the owner) and this piece will be returned to the seller with the final sale. Side note for this sneaky one: the capital gains tax. If you bought the property less than 5 years ago, a capital gains tax will be levied on the capital gain realized on the previous purchase price. This is not levied on the sale of the property that serves as your primary residence. The capital gain tax is calculated at a rate of 16.5% (built good) or 33% (unbuilt good) and the tax base is the purchase price (plus the notary fees, the costs for works by registered contractors and 5% added value per year) subtracted from the current selling price. P.S; if you have inherited a property, and this has been indicated in the estate, additional inheritance rights may have to be paid if a higher sales price was realized.

I want to buy a property, what are those "buyer's costs"?

Authentic deed and registration

The property will (of course) be purchased at the agreed sales price, plus the buyer's costs. But how do we define them? In a nutshell: everything that must confirm the final purchase. In particular: the drawing up of the authentic deed (+ 21% VAT because notary fees) and the transfer thereof to the registration's office (the registration taxes).

Mortgage credit and mortgage mandate If you're taking on a loan in order to finance your transaction there will be, aside from your bank costs, fees for drawing up the mortgage deed (+ 21% VAT) and the registration of it (fixed amount). The same principle applies to taking out a mortgage on the property. New construction real estate With new construction properties there will be additional costs that must have already been stipulated in advance by the promoter. Think of: the allotment deed, the connection of the utilities, measurement wages .... And also 21% VAT will be levied on the purchase price. In some cases, the purchase price is split into land share and construction share. Then 10% (or 6%) registration is levied on the part of the land and 21% VAT on the construction itself.

Future costs We all know that when it comes to investing in real estate, it never stops. But there are some specific things you should keep in mind as a future cost like energy-saving measures for optimizing the energy score. Most importantly, you should know that there could be costs to make the electrical installation compliant with the AREI standards. Because it's mandatory for the seller to have an inspection document drawn up, but the installation must not be brought to full conformity by him. Only if there are life-threatening infringements, the seller must still incur costs, otherwise the buyer has an obligation to repair the infringements and have the installation re-inspected within 18 months of the deed.

So, I tried to be as short and thorough as possible. I did not go into details but I'm always here for questions. And BTW; you will receive a full overview from your notary some time before the deed. But like always: better be prepared!

All the best and a good weekend!