10 Key Tips When Buying Real Estate In Italy

In 2009, Britain’s prestigious Royal Institution of Chartered Surveyors singled out Italy as one of the best places to invest in real estate because its property market, not undermined by cheap credit, has avoided the boom and bust seen elsewhere in Europe and the US.

As Rupert Fawcett, Italy specialist at global realtors Knight Frank, explained: “Property prices in Italy have always held.” In marked contrast, average US plunged a record 18.2% in the 12 months to November 2008, with Las Vegas values falling by more than twice that figure.

Changes in the Italian tax regime have cut buying costs by 10-15%, meaning there has scarcely been a better time to invest in the Italy real estate market. Yet as with any property deal, there are commonsense guidelines to follow to make sure buying your dream home doesn't become a nightmare. Here are the 10 most important:

1) GET TO KNOW ITALY
Most overseas investors still flock in their droves to pricy Tuscany. Instead, try other regions such as Puglia, Sicily and Calabria, all with spectacular beaches and landscapes but far cheaper than Tuscany. Before taking the plunge, spend a weekend in a couple of areas to get a feel for them and find out how close train stations, stores, restaurants, etc are.

2) FIND A GOOD REALTOR
This is one occasion to be grateful for Italian red tape. All realtors must be professionally licensed and qualified, insured and registered at a Chambers of Commerce. Check their website and letterheads to ensure they belong to one of the following respected organisations: FIAIP (Federation of Professional Estate Agents), FIMAA (Federation of Mediators and Agents) or AICI (Italian Association of Estate Agents).

3) SET A REALISTIC BUDGET
The appeal of regions such as Tuscany is undeniable, thanks to its picturesque countryside and art cities such as Siena, Florence and Pisa. But Tuscany isn’t cheap and Euro 75,000 isn’t going to get you that farmhouse in 10 acres, unless you’re happy to take on a restoration project. Another tip: when buying in Italy, don’t bank on negotiating swingeing 40-50% discounts. Around 10% is the norm.

4) KNOW WHAT'S RIGHT FOR YOU
Frances Mayes’ bestseller Under The Tuscan Sun inspired thousands of overseas buyers to try converting an Italian ruin into their dream home. Great in theory, but be prepared for the hard work and finance it entails. Budget up to Euro 1,000-1,500 per sq m for a complete restoration. Whether you go for a fixer-upper or not, avoid taking on more space/land/facilities than you need. A villa with pool set in 10 acres sounds idyllic – but bear in mind the maintenance it will require.

5) KNOW THE PROCESS
The first stage sees the buyer make an offer with a deposit of some 5% of the agreed purchase price. If his surveyor and/or lawyer cite no problems, stage two sees both parties sign a sales contract (compromesso) and agree a timetable. The buyer pays a further deposit, bringing his total deposit to around 30%. Pulling out at this stage carries severe financial penalties for both sides.
The third stage is the final deed of sale (atto di vendita), signed in the office of a notary, who examines all documentation and lodges it with the Land Registry. If one party does not speak Italian, the deed must be translated. The buyer also settles in full with the seller via payment from an Italian bank. For this, he will need to have obtained a fiscal code from the tax office to permit him to apply for a bank account.

6) USE A LAWYER
Far too many foreign buyers still blithely sign the first piece of paper waved in front of them – then find them have agreed to a legal commitment they cannot get out of. So hire a reputable, independent English-speaking lawyer with experience of the Italian property purchase system. Are there outstanding loans, mortgages or third-party claims on the property? Are there plans to build a nearby highway? Does the property have proper planning permission? These are all vital checks a good lawyer will carry out.

7) KNOW YOUR ADD-ON COSTS
Fees and taxes will usually add 7%-10% to the cost of a resale property and 12-15% for a newly-built property. Typical add-on costs may include around 3% to the the realtor, Euro 500-1500 for a surveyor, Euro 150-200 per hour for a lawyer and up to Euro 5,000 for a notary.
For newly built properties, 4% VAT is levied if within a year and a half the buyer registers for Italian residency, a fairly simple procedure. Otherwise the buyer pays VAT at 10%.
For previously inhabited properties, the buyer pays 3% of the "cadastral value" if residency is registered for within a year and a half, otherwise 10% of the cadastral value is payable. Cadastral value is decided by the Land Registry based on factors such as number of rooms, location, floor area, etc. It is usually less than 50% of purchase price.

8) USE A FOREIGN CURRENCY SPECIALIST
Over the course of 2009, the Sterling-Euro exchange rate veered between a high of £1/Euro 1.185 and a low of £1/1.059 over the course of 2009. Therefore, a Euro 750,000 home would have cost a UK-based buyer £77,250 more at the bottom of the market compared to its peak. Hence, the importance of using a specialist currency exchange firm, who can set rates for future transactions and guard against currency changes. They also offer much better rates than a bank that can add up to a £30,000 difference on a £750,000 transaction.

9) MAXIMISE YOUR RENTAL POTENTIAL
Will your property primarily be a holiday/retirement home or do you plan to rent it out at some stage? If the latter, proximity to transport hubs is vital. Aim for a maximum 90 minutes from the nearest international airport. In cities, bear in mind how close your property is to public transport as not all holidaymakers will have a car. Unsurprisingly, properties near the beach not only rent better, they also keep their value because of restrictions on additional construction near the coast.

10) SPEAK SOME ITALIAN
Make an effort to learn some Italian, even if you only plan on using your new home for a couple of weeks of the year. As a rule of thumb the further south you go, the less likely it is that people will speak a foreign language, And your efforts, no matter how rudimentary, will endear you to Italians.

By: Adriana Giglioli

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Adriana Giglioli writes for property in Italy specialists Homes and Villas Abroad, who showcase 2,500 homes in Italy. Her other specialist areas include Calabria property and Sicily property.