Buying a house in Germany: the order decides the price.

The house purchase in eight steps

A house purchase in Germany runs in eight steps, and only the first three are largely in your hands. From the draft contract onwards the notary, the tax office and the land registry set the pace. Anyone who takes the early steps in the wrong order cannot make up for it later.

1. Budget and equity. What you can carry each month and how much of it comes from your own funds.
2. Financing confirmation. An assessment of which purchase price your figures can finance, before you search.
3. Search and viewings. With a clear price range and the documents a bank will want to see later.
4. Reservation, if wanted. An arrangement with the agent that does not bind the seller.
5. Loan commitment and loan agreement. Specific to the property, with the bank's own valuation.
6. Draft purchase contract. From the notary, as a rule two weeks before the appointment.
7. Notary appointment. Notarisation of the contract and creation of the land charge for the bank.
8. Completion. Priority notice, land transfer tax, payment of the price, handover and transfer of ownership.

Budget and financing confirmation come before viewings

Most guides put financing fourth, after the search and the reservation. From a broker's point of view that is the most expensive order. Without a financing confirmation you cannot respond bindingly to a good property, and in Frankfurt, Hanau or Offenbach sellers with several interested parties often decide by who can prove the purchase.

Two figures come first. The first is your equity, and of that first the part that covers the incidental purchase costs. Land transfer tax, notary, land registry and, where applicable, the agent have no counterpart in the mortgage lending value and are therefore normally paid from your own funds. How high they are in Hesse and in Bavaria is covered in the guide to incidental purchase costs. The second figure is the monthly instalment that remains affordable after the fixed-rate period ends.

Together they give a price range. A financing confirmation on this basis is not yet a loan commitment, because the bank only values the specific property later. It does show that income, equity and documents have been checked. How much equity makes sense is covered in the guide to equity, how the bank sets the value in the guide to the mortgage lending value. ME Finance prepares this assessment as part of a German mortgage before a property is chosen.

Reservation: what it binds and what it does not

A reservation in a German house purchase is almost always an arrangement with the agent, not with the owner. It obliges the agent not to offer the property to anyone else for an agreed period. It does not bind the seller, who can still sell to someone else.

For that reason the Federal Court of Justice ruled in case I ZR 113/22 that a reservation fee agreed in an agent's standard terms is invalid, because the agent provides no service of value in return. This does not apply to genuinely negotiated individual agreements. A reservation that really bound the seller would itself require notarisation under § 311b BGB.

For the order this means: a reservation buys time, but no certainty. Anyone who only starts on the financing during that time spends it on a step that could have been done already. If the financing confirmation is in place, the reservation period is enough for the bank to value the property.

Loan commitment and loan agreement before the notary appointment

By signing at the notary you commit to paying the purchase price, whether or not your loan is in place. An ordinary purchase contract contains no right of withdrawal if the financing fails. The binding loan commitment therefore belongs before the notary appointment, not after it.

For the commitment the bank values the specific property. It needs the listing, land register extract, cadastral map, living area calculation, year of construction or building description and, for flats, the declaration of division and the latest minutes of the owners' meetings. The earlier these documents are available, the shorter this step.

You usually sign the loan agreement shortly before the notary appointment. From a contractually agreed date the bank charges interest on the loan not yet drawn, even if the price is paid weeks later. How to plan for this is covered in the guide to commitment interest.

Draft purchase contract: two weeks to review

The draft purchase contract is the moment the house purchase passes from the agent to the notary. When a consumer buys, the notary must make the intended text available in advance. Under § 17 (2a) of the Notarisation Act this should, as a rule, happen two weeks before notarisation.

These two weeks are review time, not waiting time. From a financing perspective four points in the draft matter most: the purchase price and its split between land, building and furnishings sold with it, the conditions for payment, the handover date and the power of attorney to create the land charge. If price or furnishings value differ from what the bank valued, the financing has to be adjusted before the appointment, not after.

The notary appointment: what happens on the day

At the notary appointment the purchase contract is notarised. Under § 311b BGB a contract for the purchase of land is not valid without notarisation. The notary reads out and explains the contract and usually also records the conveyance, the agreement on the transfer of ownership, which under § 925 BGB must be declared with both parties present at the same time.

Often on the same day, sometimes shortly afterwards, the land charge for your bank is created. It is the collateral without which no loan is paid out. The seller grants a power of attorney for this in the purchase contract, because they are still the owner at that point. How the notary's invoice is made up and when it falls due is covered in the guide to notary fees when buying a house.

After the notary appointment: priority notice, tax, due date

After the notary appointment three strands run in parallel: securing your claim in the land register, the land transfer tax at the tax office and the conditions for paying the price. None of them depends on you, but all of them require the money to be ready.

The priority notice protects you

The notary applies for a priority notice (Auflassungsvormerkung) in your favour. Under § 883 BGB any later disposal of the property is invalid to the extent that it would defeat your claim. The seller can then no longer validly sell the house to someone else or encumber it further. That is why you pay the price only once the priority notice is registered.

The land transfer tax arrives by assessment

The notary reports the purchase to the tax office, which assesses the land transfer tax. Under § 15 of the Land Transfer Tax Act it is due one month after the assessment is issued. In the Rhine-Main region the amount depends on the side of the Main: Hesse charges 6 percent, Bavaria and therefore Aschaffenburg 3.5 percent. Exemptions and the Hessengeld are explained in the guide to land transfer tax in Hesse.

The due notice triggers payment

You pay the price when the notary writes that all conditions in the contract are met. Typical ones are the registered priority notice, the documents for deleting the seller's old land charges and, where required, the municipality's waiver of its right of pre-emption. Why deleting old rights is part of delivering the property free of encumbrances is covered in the guide to deleting a land charge. The due notice starts the payment period in the contract. Now the bank pays out the loan and your equity share of the price is transferred.

Handover and land register: the last step

Once the price is received, possession usually passes as set out in the purchase contract: keys, meter readings, handover report. You are not yet the owner in the legal sense. That happens only with the transfer in the land register.

The notary applies for the transfer once two proofs are available: payment of the price, confirmed by the seller, and the tax office's clearance certificate. Under § 22 of the Land Transfer Tax Act the buyer may not be entered as owner without it, and the certificate is issued only once the tax is paid. Your bank's land charge is registered in the agreed rank at the latest now. The land registry fees are part of the incidental purchase costs.

Where the process gets stuck

How long completion takes is decided at a few points. The statutory deadlines are fixed, delays almost always arise where documents are missing or the financing was started too late.

• Rejection after the reservation. If the bank declines after the property is reserved, there is no time for a second attempt. What is possible after a rejection and why serial applications do harm is covered in financing rejected.
• Old property not yet sold. Anyone paying the price from the sale of their current home needs bridge financing for the gap, and it has to be in place before the notary appointment.
• Documents for the valuation. A missing living area calculation or missing minutes of the owners' meetings delay the commitment by weeks.
• Release of encumbrances on the seller's side. As long as the seller's bank does not supply the deletion documents, the notary sends no due notice.

For flats two points are added: the declaration of division may require the property manager to approve the sale, and the bank checks the minutes for upcoming refurbishments. Both lengthen the process of buying a flat if they only come to light after the draft.

What buyers should take away

• A house purchase has eight steps, and the first three decide the pace of all the others.
• Financing confirmation before viewings, binding commitment before the notary appointment. Not the other way round.
• A reservation does not bind the seller. A standard-form reservation fee is invalid.
• Two deadlines are statutory: two weeks for the draft contract, one month until the land transfer tax is due.
• You become owner only with the transfer in the land register, which requires price and tax to be paid.

ME Finance is not a bank and sells no product of its own. We settle the financing before you view the first property and see it through to payout. Describe your project through the non-binding enquiry.