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Process of Buying a Property

The number of real estate transactions has been steadily declining in recent years. Compared to the transactions in 2021, an 18% decrease can be observed according to data from the Hungarian Central Statistical Office (KSH). In the first quarter of 2023, only 14,000 transactions were recorded in the real estate market, which is merely one-third of the first quarter of the previous year. However, this trend does not affect all property types equally. High-quality, modern, and trend-renovated properties continue to be in demand, as rising energy prices have placed these properties in the spotlight.

Despite the declining number of transactions, the process of buying a property has not significantly changed over the past few years. There are key steps that should be taken into consideration when purchasing real estate.

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The Process of Buying a Property

Whether purchasing property for residential or investment purposes, the process of buying a property can be divided into four main stages:

  1. Preparations Before Buying
  2. Selecting the Right Property
  3. The Purchase
  4. Post-Purchase Tasks

Preparations Before Buying a Property

Defining the Type and Features of the Property
Start by creating a simple checklist that includes all the parameters of the ideal property. At a minimum, consider the following:

  • Type of property: (brick apartment, panel apartment, detached house, townhouse)
  • Style of property: (well-separated rooms, open spaces, layout)
  • Number of rooms
  • Utility spaces: (e.g., pantry, separate garage, walk-in closet, additional storage)
  • Number of bathrooms
  • Extra requirements: (list any additional features you want in your future property)

Choosing the Neighborhood
Select and rank multiple neighborhoods based on priority. For example, decide whether you prefer Buda or Pest, and narrow down to a specific location. Even the most beautifully renovated property won’t feel right if the surrounding area doesn’t meet your expectations.

Telecommunication Services
Research the availability of telecom providers in your chosen area. Reliable internet is particularly important if you work fully or partially from home. Unstable connections can make it difficult to work effectively, even in your dream home.

Creditworthiness
If taking out a mortgage, several factors need to be considered:

  • How much mortgage are you eligible for?
  • Who will be the co-borrower?
  • Where will the required down payment come from?
  • What documents are needed for the loan application?
  • What is the loan processing time?

Note: While the number of disbursed mortgages has decreased compared to previous years (only 93,057 home loans were issued in 2022, a 23.3% decrease from the prior year), it’s still important to be prepared for the application process.

State Subsidies
Investigate the availability of government subsidies. Identify which ones you qualify for and understand the conditions for eligibility.

Going Solo or Using a Real Estate Agency
Decide whether to work alone or with a real estate agency. While not mandatory, involving a professional agent can be highly beneficial.

  • Agents can assist with many aspects of the buying process.
  • The buyer doesn’t usually pay the agency’s commission.
  • Agents are often skilled negotiators and familiar with seller expectations, potentially securing a better deal.

Selecting the Right Property

Once you’ve identified a suitable property, you’ll need the help of experts to ensure it truly meets your requirements. Here’s who to involve:

Technical Inspector, Structural Engineer, and Other Specialists

  • Professionals can identify hidden issues that may not be apparent to non-experts.
  • Both old and new properties may require thorough inspection.

Lawyer or Specialist in Real Estate Law

A personal lawyer is recommended to oversee the buying process and protect your interests. The lawyer’s responsibilities include:

  • Obtaining the property deed to confirm ownership and check for liens.
  • Acquiring foundational documents and operational regulations for condominiums.
  • Requesting references from the developer for newly built properties.
  • Checking preemption rights and managing related tasks.
  • Reviewing any usufruct rights, ensuring they are addressed appropriately.
  • Collecting the energy performance certificate and proof of zero utility debt.
  • Preparing the purchase contract and guiding the signing process.

Appraiser

  • It’s advisable to have the property appraised by the bank in advance, especially if the down payment is close to the minimum required.
  • Appraisals determine the loan amount the bank is willing to offer based on the property’s market value.
  • Keep in mind that the appraisal may not always reflect the property’s true market value, as it considers current demand and other factors.

With the right preparation and professional support, you can make a well-informed decision when purchasing your property.

The Purchase

During the purchase process, it is up to us, as buyers, to make an offer on the property. If an agreement is reached between the buyer and the seller following negotiations, we can move on to clarify further details, such as:

  • The amount of the deposit or down payment
  • The payment schedule
  • The deadline for taking possession of the property

Once an agreement is in place, our lawyer will draft the property sales contract, which includes all relevant details about the property and the terms of the transaction.

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The Purchase Process

The property purchase process includes the preparation of a handover protocol. This document details:

  • Any defects in the property
  • Serial numbers of utility meters
  • Current readings of utility meters

The protocol must be signed by two witnesses. Once completed, the property handover and key collection can take place.

The handover protocol is crucial because, under the Civil Code, the seller can be held liable for warranty claims for up to five years for pre-existing defects, even if these were not disclosed to the buyer.

Important!
The purchase may be voided for several reasons, such as:

  • If the property is under litigation
  • If the data on the title deed differ from what was presented by the seller

It is the lawyer’s responsibility to verify these aspects.

After the Purchase

Although the property is officially ours after the handover, there are several tasks that still need to be completed:

Renovation

It is rare for a property to require no renovations before moving in. At a minimum, a fresh coat of paint might be needed, but in some cases, full-scale renovations may be necessary. Service providers should be engaged for these tasks.

Moving

Organizing the move is essential, as it involves relocating an entire household of belongings to the new home.

Land Registry Administration

While this is typically handled by the lawyer managing the transaction, it is advisable to later verify that the title registration has been correctly processed.

Utility Transfers

Ownership changes for utilities such as water, gas, electricity, internet, phone, and TV must be reported within 15 days of the transaction. This process requires the sales contract, a recent title deed showing the new owner, and the handover protocol.

Security Measures

The first priority is to replace locks. Additionally, arranging home insurance is essential. For mortgage buyers, this is mandatory, but it is also highly recommended for cash buyers. Choose an insurance plan that suits your circumstances and the property’s characteristics, rather than just the cheapest option.

Post-Purchase Costs

These include:

  • Legal fees
  • Moving expenses
  • Renovation costs
  • Land registry fees

The most significant cost is typically the property acquisition tax, which is 4% of the purchase price. However, exemptions apply:

  • If you sold a previous property and its value is not less than the purchased property, no tax is owed.
  • If the sold property is of lower value, the tax is calculated only on the difference.
  • First-time buyers under 35 can benefit from additional tax relief.

It is important to note that the land registry office will send the registration decision to the lawyer, who will forward it to the parties. The tax authority (NAV) determines and issues the acquisition tax. Registration by the Land Registry takes up to 60 days, or 30 days for expedited cases.

The Kenway team offers comprehensive assistance throughout the property purchasing process, ensuring smooth and hassle-free transactions.