Sat11172018

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Back You are here: Home Property Buying, Selling, Renting Buyers Guide

Buyers Guide

Buying property in Bulgaria is much easier than one might think, generally only taking three or four weeks. Once you’ve found your property this guide will help you through the purchasing maze.

Get an independent lawyer

Get your own independent lawyer who will look after your interests. Your lawyer will be invaluable throughout the purchase process and you will be able to rely on them correctly checking the contracts, ownership history, land use plans and all other necessary documentation. They will also help you with planning permissions and residency permits.



Preliminary contract

Your lawyer will undertake all the legal checks to confirm valid ownership of the property and make sure there are no outstanding debts or charges on it.

At this point you should sign the preliminary contract. You can be in Bulgaria to sign the preliminary contract yourself or you may assign Power of Attorney to someone to do this on your behalf.

It is important that this contract is correct as it determines the whole basis of the sale/purchase. Estate agents often draw up this contract but it is still advisable to get your lawyer to check it over

Translation

Additionally, don’t rely on a rough translation. The document should be translated into written English for you by a registered translator, who will ensure you understand the contract and the translator will also sign to say that their translation is correct.

Deposit

The deposit is payable on signing of the preliminary contract, which is normally 10%. For off-plan purchases, the deposit will usually be higher than this, often 30%, with future staged payments agreed within the contract.

We highly recommend that you never pay any deposit money without having the preliminary contract in place and signed by both parties.

Setting up a Bulgarian company

At the time of writing foreigners are not able to directly buy land. (This will inevitably change because of EU law and indeed this change has alredy been adopted in the Constitution but it has not been provided for as yet in the Ownership Act. What this means is that in theory you should have the right to directly purchase land from 1 January 2007 but in practice the rules are not yet in place).

Therefore, in order to purchase land or a property with land you need to set up a Bulgarian company. If you are buying an apartment this is not usually necessary as you will most likely not be buying the land on which the development is built.

Setting up a Bulgarian company is common practise and is easy and inexpensive. Your lawyer should be able to do the whole thing for you and they can complete all the paperwork on your behalf if you have given them a Power of Attorney to do so.

The costs vary depending upon the rate your lawyer charges, but it should be somewhere in the region of 500 euros. The information you will need to provide will be the name of the company, the address, name of each shareholder and how much stake they have in the company. Setting up and establishing the company will take a couple of weeks.

Completion

For the signing of the final deeds (completion), you will need to make sure the balance of funds is available in Bulgaria. Remember to transfer sufficient funds to cover not only the purchase but costs and fees.

On the actual day, you will meet with the vendor and their lawyer at the public notary office of the municipality in which your property is situated. You may find it useful to take a registered translator with you so that you can be sure you understand. If you cannot be in Bulgaria, then your lawyer may sign on your behalf if you have given Power of Attorney.

The notary authenticates the buyer and seller are who they say they are, checks the paperwork and that the transaction is all correct. The vendor and seller sign the final deeds, which are also signed by the notary and translator. At this moment the balance of funds is due.

Do not be too surprised if you are then asked by the vendor to go with him directly to your bank and hand him the cash for the property - Bulgaria is still very much a cash based society!

Registering the purchase

The notary will register the deeds with the land registry authorities.

One important thing which is often overlooked if you do not use your own independent lawyer is that you need to register your purchase with the tax authorities. Your lawyer will do this for you as part of their service but if you have used the estate agency alone, check that they do this.

A second registration is also needed which is frequently forgotten by those who buy apartments, particularly as holiday homes. Most buyers are aware that if you buy a property as a Bulgarian company you need to register with Bulstat authorities. However, even if you buy as an individual you must still register with Bulstat and obtain a Bulstat number, which serves as your Personal Identification Number. This needs to be done within 7 days from completion. You only need to do this when you make your first property purchase. You do not need to do this if you have a Bulgarian company nor if you already have a personal identification number from obtaining a residency permit.


Under declaring the price

You’ll often hear from agents and even notaries that the regular practice is to put a lower price in the deeds in order to cut costs. This is not only illegal but when you come to sell the property you’ll be faced with a bigger capital gains tax bill. Don’t be tempted by those who tell you this kind of practice is normal or above board, it is not.

Banking and money

It’s not difficult to open a bank account in Bulgaria but be prepared for some paperwork and a bit of patience.

One of the problems buyers can face is that Sterling is not fixed against the leva or euro. If the exchange goes against you, you might find yourself having to suddenly find a few more thousand pounds at the last moment. It is worth contacting a currency exchange broker to see how they can help you avoid any nasty last minute surprises. They will also usually transfer money cheaper than the banks or even at no cost at all.


Buying costs

Rule of thumb - allow 6 to 7% of the purchase price in overall costs.

In the main estate agents charge 3% of the price as their commission. Your lawyer will probably charge 1% but often have a minimum fee. When signing the final deed you need to allow for municipal tax, notary fees and registration of the title deeds - around 3%. Your lawyer will be able to confirm all costs to you.



Before you even begin

The first thing is to set your budget. How much can you really afford? Don’t forget to include taxes, commissions, lawyer fees and other extras so that you don’t have any nasty surprises! Setting your budget will often help you decide which parts of Bulgaria to look at.

One of the hardest decisions is where to buy in Bulgaria. Everywhere is so attractive with such reasonable prices, confusion often sets in. One way of dealing with this is to ask yourselves questions about exactly what you are looking for.

This sounds really obvious, but by doing this you’ll save yourself lots of time when you eventually visit Bulgaria to start looking ... and you will have a much better idea of what you really want

Do remember that prices are still rising so by the time you visit and get to deciding on a purchase, prices may have gone up. Build in a contingency amount to cover this. If you’re looking at older houses, think about how much any renovation or other works will cost before you start on purchasing. And don’t forget about furnishing the property.

Finance

If you need financing, now is the time to get this in place so that the money is available when you are ready to purchase. With properties in demand, there would be little worse than finding your dream home only to discover that a mortgage application will take eight weeks and you lose the property.

A note about buying off plan property and financing. Before you sign any preliminary contract ensure you can obtain financing. Do not believe the agent who says "of course you'll get a mortgage". Check this with potential lenders and get an agreement in principle in writing. If you sign the preliminary conract before you have checked out financing ensure there is a clause in it stating that the purchase is dependent upon receiving the mortgage. If you do not have your financing organised or have just gone blindly ahead and signed a prelim contract, you could be left in a position where you are either short of funds or cannot complete the purchase at all, thus losing your deposit.

Once you’ve decided on a property you’ll need to pay a deposit so make sure that money is available straight away.

To finance your property purchase you are most likely either going to take a mortgage in Bulgaria or re-mortgage your UK home. Many purchasers prefer to re-mortgage in the UK as they are familiar with that system and the interest rates are lower.

For mortgages in Bulgaria there are now several banks offering mortgages. Overall, they generally offer 70 - 80% of the property value over a period of 20 years but this can depend upon the area in which the property is located. In certain areas, the banks have a maximum amount per sq.m ratio. It can take 12 weeks to organise a Bulgarian mortgage so make sure you apply in good time.

If you are raising a mortgage be aware of the problem of under-declaring on the deeds which can cause problems in raising finance for your purchase.


 

Estate agents

The property boom in Bulgaria has seen an equal boom in the number of agents popping up. Estate agents are completely unregulated in Bulgaria and this should be borne in mind. Many of these new agents have no experience whatsoever in real estate, building or construction, or the purchase process for foreigners.

Find an established company; longevity says something, most companies go out of business quickly if they are dishonest or incompetent. The internet is a marvellous thing but don’t base your decision about an agent on their website alone (or what you read on forums about them); ask for customer references and see if those people were happy with the service.

Even if the agent is part of the British Bulgarian Chamber of Commerce or another association, this is no proof of anything much as many of these associations are just paid for memberships.

Having said this, most of the agents in Bulgaria provide a service which goes much further than any agent in the UK. A good Bulgarian agent really can help with everything and will even take you shopping, sort out translators, put you in touch with reliable builders, etc.., generally being worth their weight in gold.

A word about fees. Generally, agents take a commission from both the buyer and the seller (usually 3% from each). This may seem a very high commission to UK purchasers. However, with the amount of kms covered, higher social charges than the UK and the job a good agent performs it is a reasonable amount.

Be careful with UK agents operating with Bulgarian properties. Many are entirely reputable but there are some which set up only to provide leads to the Bulgarian agent and know little about the Bulgarian property market and the purchase procedure. In many cases, they are sharing the commission with the Bulgarian counterpart but there are some who are charging a commission on top.

It is your choice, you may feel more comfortable dealing with a UK company, but do your research thoroughly nonetheless.

Five Top Tips to Ensure Success:

1. Get your own independent lawyer who will look after your interests, not those of the estate agent
2. Declare the correct price in the deeds, this will save you paying extra tax if you ever come to sell
3. Don’t rely on a ‘rough’ translation. The legal documents pertaining to your purchase should be translated by a registered translator who signs them to say they are correct
4. Don’t get fixated with properties you see on the internet, they may not be suitable, or even for sale, when you eventually get to Bulgaria
5. Set your budget, not forgetting to include all taxes, commissions, lawyers fees, etc., and stick to it!