CZECH POINT ® 101 You’re in good hands whether buying, selling or managing property in the Czech Republic. ____________________________________________________________________ How to determine your property purchase costs Before you start it is important to know how much the transaction costs are. This can make an incredible difference in your investment calculations. For example, in Austria, you can typically count with 9 to 12% of your property price as the transaction costs whether buying or selling. So if you are buying a 200,000 EUR property you can count with 20,000 EUR in transaction costs. Transaction costs like these don’t encourage ‘flipping’ do they? What about in Czech Republic? Let’s go through the expenses related to a purchase. 1. Real estate fees – 2.5% to 5% depending on which agency (plus VAT) The way the commission is calculated in pricing changes in the different areas of Czech Republic. In Brno it is additional to the price advertised and paid by the buyer. In Prague it is typically included in the advertised price. You don’t see it but it’s there! Real estate commission handling differs in Prague and Brno. 2. Legal fees – 20,000 CZK to 55,000 CZK (plus VAT) What your total legal costs will amount to depends a lot on, first of all, which city you are buying in. In Prague and Brno it will be difficult to find a good lawyer (especially an English speaking one) for under 2,000 CZK/hr plus VAT. The total number of hours will depend on how complicated the purchase is. If you include a reservation agreement, future purchase contract and purchase contract along with liens for a mortgage, the hours really start to stack up. You may wonder why these costs are not covered by the real estate fee but you really cannot rely on real estate companies to protect your interests as a buyer. To proceed based on due diligence performed by a real estate company is unadvisable. -1____________________________________________________________________ CZECH POINT® 101, s.r.o. , IČO: 26957264, Pompova 299/35, Brno – Komárov, 617 00 Czech Republic: +420 774 440 999 www.czechpoint101.com CZECH POINT ® 101 You’re in good hands whether buying, selling or managing property in the Czech Republic. ____________________________________________________________________ 3. Escrow fees – roughly 1% of purchase price Escrows are a critical part of the purchase process and a buyer should never sidestep this trying to save costs. We put together this YouTube video not long ago explaining the function of escrows in the Czech Republic. There are some variables with this cost depending on whether you get the escrow done at a notary office (the most expensive), a bank (middle of the road), or through a lawyer (cheapest). Sometimes a real estate office may offer to perform this function. Even if it is free, do not agree to this. The only legal recompense to the theft of purchase money is a painful years long process through the courts. You can sometimes split the escrow costs with the seller but typically the purpose of them is to protect the buyer so often they will refuse to help with this cost. 4. Additional fees If you don’t trust your level of Czech you will need a translation of the contracts to be signed which could run you as high as 10,000 CZK for a good, State recognized translator and translations of all contracts. If you are not present to sign everything directly there can also be an extra fee for the lawyer or someone else to represent you in signing the contracts via a power of attorney. The fees at the Land Registry have gone up to 1000 CZK now for registering the contract. This is typically split with the seller. A rule of thumb for purchase costs in Czech Republic is 6 to 8% of the purchase price. The lower end applies to expensive properties and the higher end of that range to cheaper properties. -2____________________________________________________________________ CZECH POINT® 101, s.r.o. , IČO: 26957264, Pompova 299/35, Brno – Komárov, 617 00 Czech Republic: +420 774 440 999 www.czechpoint101.com