Hungary has a very well-defined set of procedures for property purchase. In comparison to Britain (but in common with much of the rest of continental Europe), these procedures are remarkably simple and quite foolproof.

The role of the estate agent

In principle, the estate agent has to do relatively little, apart from selling the property to you. In pratice, most estate agents do a fair amount of work:

Co-ordinate the paperwork in respect of the seller - this is usually quite simple, as all property in Hungary is registered, so the proof of ownership is in the hands of the public registry, unlike some rural properties in, for example, Spain.

Refer you to a lawyer who speaks your language. The lawyer (more about this below) will prepare a contract of sale, usually in both your mother tongue and in Hungarian.

For non-EU citizens only ensure that permission for the sale will be forthcoming from the local authorities. This is normally a formality (I have not heard of any instances where this has been refused), and must be granted, in the first instance, from the local mayor, and also from the county authorities (who almost always take the word of the local town hall).

Arrange all transfers of utilities (electricity, gas, water, etc) into your name. This requires a reasonably good knowledge of the Hungarian language, although, with globalisation also prevalent in Hungary, many of the utility companies can handle English and German customers with relative ease.

The estate agents are normally qualified. They have to pass a number of examinations in order to carry out property valuations. Due to the language barrier, most of the qualified estate agents are Hungarian, although a growing number of foreign-owned (mainly Austrian) businesses employ a qualified Hungarian person.

Property purchased directly from the owner

Some properties on the website are being advertised directly by the owner and not via an estate agent. It is possible to buy directly from the owner of a property, but we would highly recommend that a lawyer is used. What you cannot do is visit a property with an estate agent then go directly to the owner to try and organise a directly sale and the owner will have a contract with the agent.

The role of the lawyer

There is no requirement to employ a lawyer, However, most lawyers are well-versed in the procedures of property transfer, and they also undertake all of the property registration work.

In most cases, the lawyer will require two or three days' notice to prepare the contract (you must be present for the signature of the contract, and you must have your passport with you); the actual signature session takes about 30 minutes. You must also have notarised copies of your passport to attach to the documents, check with the lawyer how many copies you will need. The lawyers costs are very much dependent on the lawyer used. You can expect to pay a minimum of between Ft 100,000 (€ 400) and Ft 275,000 (€ 1,100) with a percentage of 1-2% of the purchase price for higher-priced properties for this service, although this can be quite a lot higher in Budapest.

The lawyer will normally hold the agreed purchase price in escrow until the permission of the local authorities for the purchase has been granted.

All the paperwork will then be passed through to the Registry office to be recorded. The fee for the registration is about Ft 8,000 (Euro 32) per registered number (most properties are on a single number but some are split into 2 or more numbers) and includes the registry extract that is attached to your contract of sale. There will also be a small amount of bank charges for the dispersement of funds which is dependent on the amount being transfered.

For some reason there has been some scare mungering put about regarding property owned by "families" as opposed to an individual. This situation in Hungary is the same as exists in Spain and France where the law on inheritance gives equal shares to surviving family members. In order to realise the inheritance they decide to sell the property and distribute the money equitably. The only effect that this has on the buyer is that there may be a bit of a crowd when it comes to signing the paperwork at the lawyers. Some families appoint a single signatory to represent them all so that this does not happen. It is part of the lawyers responsibilities to organise all the necessary paperwork from the sellers in advance of the signing.

The property is now yours

... but you have to pay a relatively small amount of tax. Usually, within 4 - 6 months of property registration, the local tax inspector will visit the property, armed with a copy of the sales contract which you signed at the lawyer's office, in order to assess that the price shown on the contract is realistic. In other words, did you actually pay Ft 20,000,000 (€ 80,000) but only showed Ft 10,000,000 (€ 40,000) on the contract of sale ?

Once they have inspected the property (they are very experienced in assessing property values) and having agreed the value, they will calculate the property transfer tax on the spot. Transfer tax for a house is at the rate of 2% for the first Ft 4,000,000, and 6% for the rest of the value. Therefore, taking the example of a Ft 20,000,000 house above, the transfer tax would amount to Ft 1,040,000 (€ 4,160). Land attracts a tax of 10% and assessment of the land portion of the property is made.

Tip: If you buy an old farmhouse, and start work on the renovation immediately (i.e., before the tax inspector's visit), take plenty of photographs before starting work, and also during the renovation work. A heap of rubble next to the house speaks volumes! Keep any invoices for materials, etc (do not show the tax inspector any invoices which have no VAT) used during the renovation work.

When buying building land you need to check what the tax situtation is on that particular plot as some have limits on the build completion time which affects the rate of tax. Normal time is 3 years but if you have started within that time an extra year for completion is not usually a problem. So check first !

Conclusion

If you do not know the buying process in Hungary use a qualified Hungarian estate agent, or if you are buying directly from the property owner, get a lawyer who speaks your language or has staff who does; stick to the rules; and you are unlikely to have any problems.

(All Forint values mentioned in this article have beem converted into the Euro at the rate of 1€=HUF 250. Please refer to the current exchange rate for a more exact calculation)